by Acuaccounts | Feb 28, 2023 | accounting, cash flow, tax
Effective cash flow management is critical in today’s uncertain economic climate. By maintaining operational consistency, efficient accounting, and regularly monitoring cash flow, businesses can identify potential problems before they occur. Offering early payment discounts, negotiating payment terms, and improving operational efficiency can also improve cash flow. Additionally, using cash flow management software can aid in expense tracking, forecasting, and problem identification.
This article will delve into three financing options for B2B and B2C businesses. Firstly, the Buy Now Pay Later (BNPL) service, allows customers to purchase products or services and pay for them at a later date. Secondly, Invoice Factoring permits businesses to sell their unpaid invoices to a third party for immediate cash. Lastly, we will review offering financing to customers through B2B finance as an effective way to attract and retain customers while assisting them in managing their cash flow.
Buy Now Pay Later (BNPL): Offer delayed payment options to your customers
Providing flexible payment options can help small businesses set themselves apart from their competitors, lessen payment friction, and drive sales; especially when customers may require additional time to make payments.
Buy Now Pay Later (BNPL) services offer customers a way to make purchases without immediate payment. However, these services also come with fees for merchants, automatically deducted from the sum the BNPL lender remits to the merchant, similar to merchant arrangements between credit card companies and retailers.
Typically, the BNPL vendor will take a percentage of the retail transaction, ranging from 2% to 8%, and bill it directly to the merchant. One of the most popular BNPL providers in the UK, Klarna, offers payment plans including Pay in 4, Pay in 30 days, and Financing; with flat fees and percentage fees varying by location. Klarna charges a £0.30 transaction fee and variable fees between 3.29% and 5.99% of the transaction total. PayPal charges 2.9% plus a £0.30 flat fee per transaction, with the popular Pay in 3 Option included in the current PayPal rate.
Compared to payment processor Stripe’s 1.4% plus a £0.20 flat fee per transaction for European cards, it becomes evident that a business should thoroughly evaluate its pricing and cost structure before offering BNPL.
Despite the fees, BNPL services can be a good choice for all B2C businesses, especially new businesses that have yet to build trust or those with high shopping cart abandonment rates. However, it may not be a good option for B2C businesses with an average ticket size of £1,000 or higher, or those with lower profit margins. Furthermore, being denied credit by a BNPL payment provider after a soft credit check could harm the reputation of the business.
Invoice Factoring: Sell your invoice to a third-party
Invoice factoring is a financial service that can help businesses manage their cash flow by allowing them to receive payment for their outstanding invoices upfront. In the UK, invoice factoring providers typically charge a fee ranging between 0.5% to 5% of the invoice value.
The factoring company typically pays around 80-90% of the invoice amount upfront, with the remaining balance paid once the customer has paid the invoice in full. The factoring company will charge a fee for their services, which covers the cost of the factoring company managing the invoice and collecting payment from the customer.
Invoice factoring can be especially beneficial to B2B companies with long payment cycles or experiencing cash flow challenges. Companies can receive the funds needed to meet their obligations, pay bills, and grow their business without waiting for customers to pay their invoices.
However, it is critical for businesses to carefully evaluate the costs of invoice factoring and ensure that it is the right financing option for their particular needs.
B2B Finance: Offer Financing to your customer
Small business owners can attract and retain customers by offering flexible payment options, such as financing alternatives, which can be particularly convenient for business-to-business (B2B) transactions. By providing financing options, businesses can close deals and increase sales.
UK business owners have two options for offering financing services: either manage the financing themselves or partner with a third-party financing company to handle credit operations on their behalf. If a business chooses to work with a third-party financing company, it’s crucial to evaluate its customer service, credit rating requirements, and finance thresholds carefully to ensure the partner operates to their standards and helps the business achieve its goals.
Businesses wanting to provide financing services directly must register with the Financial Conduct Authority (FCA), regardless of the lending method used; like hire purchase options or credit facilities. The FCA registration process is relatively straightforward and can be completed online, but organisations must comply with the FCA’s strict rules and regulations to prevent the revocation of their finance license.
How to implement new financing options in your business and manage cash flow
In conclusion, managing cash flow is crucial for businesses, especially during uncertain economic times. Offering flexible payment options such as Buy Now Pay Later services, invoice factoring, and B2B financing can help organisations improve their cash flow while attracting and retaining customers.
However, it’s essential to carefully evaluate the costs and benefits of each financing option before making a decision. As a leading provider of accounting services, our team at AcuAccounts can assist in evaluating financing options and creating effective cash flow management strategies. Contact us today at info@acuaccounts.com or call us directly on 0203 907 9027 to learn more about our services and how we can help your business thrive.
by Acuaccounts | Jan 23, 2023 | accounting
With less than 10 days left until the self-assessment deadline of 31st January 2023, it is vital to understand the key dates and potential relief options for filing and paying taxes via self-assessment.
This article will cover the most important questions surrounding self-assessment, including the filing and payment deadlines, potential relief options for those who may not be able to meet the deadlines, and how AcuAccounts can support individuals in filing for self-assessment.
Regardless of whether you are a first-time filer or a seasoned pro, it is necessary to stay informed and remain on top of your UK tax obligations.
What is self-assessment in the UK and what is the deadline?
Self-assessment is a process that individuals in the UK use to report their income and taxes to HM Revenue & Customs (HMRC). The process can be overwhelming, especially for those new to it. Self-assessment generally applies to everyone, except for employees on payroll earning less than £100,000 a year.
The self-assessment tax deadline of 31st January 2023, applies to the period between 6th April 2021 and 5th April 2022. Individuals must file for self-assessment and pay any taxes owed for the income earned during this period by 31st January 2023.
If an individual has never submitted a self-assessment tax return before, they had to register for self-assessment by 5th October 2022. The deadline to submit the paper tax return was 31st October 2022. The 31st January 2023 deadline only applies if the self-assessment is filed online. The tax owed must be paid by 31st January 2023.
One option open to taxpayers who cannot meet the deadline for self-assessment is to request an extension on the deadline to file their return by contacting HMRC. A valid reason for the extension will be required. Another option is to apply for a Time to Pay arrangement with HMRC, which allows taxpayers to pay any taxes owed in instalments rather than in one lump sum.
Who needs to file for self-assessment in the UK?
Self-assessment applies to anyone self-employed, a company director, or a person who has income from other sources such as rental properties or investments.
Individuals falling into one of the following categories will need to file for self-assessment:
- Self-employed individuals
- Company directors
- Individuals with income from rental properties over £2,500
- Individuals with income from investments over £10,000 before tax
- Individuals with foreign income
- Individuals with income from trusts, settlements, or estates
- Individuals with capital gains
- Individuals with taxable income over £100,000
- Individuals with income over a certain threshold from savings or investments
- Individuals who receive child benefits and have an income over £50,000
Please note that directors of a company on payroll receiving a salary will have their taxes deducted through Pay As You Earn (PAYE) and may not need to file for self-assessment unless they have other income sources that fall into the categories mentioned above. However, we recommend consulting with an accountant before making a decision to not file.
The government website offers a helpful tool to determine if you need to file for self-assessment at https://www.gov.uk/check-if-you-need-tax-return
For more information, feel free to speak to our team at info@acuaccounts.com or call us directly on 0203 907 9027.
What documentation is needed for filing for UK self-assessment?
When completing a self-assessment tax return, individuals must have all necessary information and documentation showing details of income and any business or income-related expenses.
Before starting the process, individuals should ensure they have the following:
- Ten-digit Unique Taxpayer Reference (UTR)
- National Insurance number
- Details of any untaxed income from the tax year, including income from self-employment, dividends, and interest on shares
- Records of any expenses relating to self-employment
- Any contributions to charity or pensions that might be eligible for tax relief
- P60 or other records showing income that tax has been paid already
What are common mistakes when filing for self-assessment?
A common mistake that people make when filing their self-assessment tax return is claiming for expenses that are not allowed. It is critical to consider that only expenses “wholly and exclusively” for business use can be claimed.
Additionally, not keeping accurate records is another mistake that people make, in addition to not understanding their tax code and not including PAYE income. To check the tax code for the current year, you can visit the official website of HMRC, https://www.gov.uk/check-income-tax-current-year.
Furthermore, a common oversight is not claiming for all the expenses an individual is entitled to and not taking advantage of all the tax relief allowances, such as Personal Allowance, Marriage Allowance, Home Office Allowance, Trading Allowance and more. For example, if an individual is self-employed and uses their car for business, they can claim mileage expenses. Similarly, landlords can claim the cost of repairs and maintenance on their rental properties.
Self-assessment can be confusing and overwhelming for many business directors, entrepreneurs and self-employed. However, by understanding the basics of self-assessment and common mistakes to avoid, they can ensure that they are reporting their income and taxes correctly. Individuals must register for self-assessment, submit on time, and prepare all the necessary information and documentation. Additionally, they must be mindful of what expenses they can rightfully claim and how to make the most of tax-free allowances.
Do you have questions about your self-assessment? Any concerns about how to manage your taxes and business in 2023 or do you need help to submit your self-assessment tax return?
Have a look at our services and feel free to contact us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Dec 21, 2022 | accounting, latest news, r&d credits, self assessment, selfemployed, tax return
The 2022 Autumn Statement by chancellor Jeremy Hunt reversed several policies introduced with the previous mini-budget by his predecessor Kwasi Kwarteng, as well as changing several thresholds that apply to businesses and the self-employed.
The autumn budget freezes the VAT threshold for businesses at £85,000, which with the current price rises will likely make VAT registration mandatory for more small businesses. Similarly, the personal tax allowance freeze at £12,570 was extended from 2026 to 2028, which with rising wages will move more people into higher tax brackets.
Reduced thresholds and allowances in 2023, 2024 and beyond
Two annual tax-free allowances that frequently apply to company owners and directors will be reduced in 2023-24: the dividend allowance and capital gains tax allowance.
The dividend allowance applies to directors paying themselves partially or entirely in dividends. The tax-free amount will be cut from £2,000 to £1,000 in 2023-24, then to £500 in 2024-25. The capital gains tax allowance, that applies for example, for sales of business assets will be cut from £12,300 to £6,000 in 2023-24, then to £3,000 in 2024-25.
Changes to business rates and energy bills for businesses
From 1 April 2023, business rates will be updated to reflect changes in property values since the previous evaluation in 2017. To support changes in business rates, the UK government has disclosed a targeted support package worth £13.6 billion over five years.
Furthermore, the Energy Bill Relief Scheme for businesses will remain in place until 31 March 2023. The government will introduce more targeted support on energy bills for the most vulnerable businesses from April 2023.
Increase in national living wage and reduction in research and development tax relief
The government has announced that the national living wage will increase from 1 April 2023, from the current rate of £9.50 per hour to £10.42 per hour for employees aged 23 and over. The UK minimum hourly wage for employees aged 21 to 22 will increase from £9.18 to £10.18, and the rate for employees aged 18 to 20 will increase from £6.83 to £7.49.
Research and development tax relief supports companies carrying out R&D projects related to their trade or business sector. However, in an effort to reduce fraud, the rate for small businesses will be reduced to 86 per cent, and the credit rate will be reduced to 10 per cent. The rate of the separate research and development expenditure credit will increase from 13 per cent to 20 per cent.
How to file your self-assessment correctly in 2023
With the self-assessment deadline less than a month and a half away, we review who needs to file for self-assessment and how it works.
You need to file for self-assessment in the UK in 2023 if any of the following apply:
- you have earned more than £1,000 from self-employment income
- you have earned from than £2,500 from renting property
- you have earned more than £2,500 in untaxed income like tips or commissions
- you have earned more than £10,000 from savings or investments
- you are a company director
- your taxable income was over £100,000
- you have earned income abroad that you need to pay tax on, or you live abroad but have an income in the UK
- you owe capital gains tax on profits from selling things like shares or a second home
- additional conditions as outlined on the government website
You can find the full list of conditions for self-assessment and check if you need to file a self-assessment tax return at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
To file a self-assessment tax return, you will need to gather the following information:
- your National Insurance Number and your ten-digit Unique Taxpayer Reference (UTR)
- detailed information about any untaxed income from the tax year, including your income from self-employment, dividends and interest on shares
- records of any expenses relating to your self-employment
- any contributions to charity or pensions eligible for tax relief
- your P60 or any other records showing any income you received and have already paid tax on
For any questions on how to prepare the information about your untaxed income, what can and cannot be expensed, or to book a full self-assessment service feel free to get in touch with our team at info@acuaccounts.com or on 0203 907 9027.
Keep track of your monthly and yearly tax and payment deadlines in 2023
In the UK, there are several important tax deadlines for businesses throughout the year.
Here are some of the key deadlines for the calendar year 2023:
- Self-Assessment Tax Return deadline: 31 January 2023 for the tax year that started on 6 April 2021 and ended on the 5 April 2022
- VAT Return deadline: Every 7th of the month following the end of the VAT period
- Corporation Tax Return deadline: 9 months and 1 day after the end of the company accounting period
- Payroll deadlines: Real Time Information (RTI) submissions must be made to HMRC on or before the date that payment is made to the employee
Review the monthly and quarterly tax deadlines in 2023:
Monthly Tax Deadlines
- On the 1st of the month: Corporation Tax payment for the tax year ending nine months prior (for example on January 1 2023 the Corporation Tax payment for tax year ending 31 March 2022 will be due)
- Every 7th of the month: VAT return submission and payment (online) if your business payment cycle is month-end
- Every 21st of the month: PAYE, NIC and CIS payment (electronic) for month-end 5 January 2022 and quarter-end 5 January 2022
Quarterly Tax Deadlines
- Due on the 21st of every three months: PAYE, NIC and CIS payment (electronic) if your company pays quarterly
Do you have questions about the recent updates and changes from the Autumn Statement? Any concerns about how to manage your taxes and business in 2023 or do you need help to submit your self assessment tax return?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Sep 26, 2022 | accounting
The chancellor Kwasi Kwarteng announced his mini-budget on 23rd September. This rapidly followed the announcement of the energy bill relief scheme for businesses that will subsidise energy bills by at least 50 per cent for businesses, charities, and public sector organisations for six months, starting from 1 October 2022.
As part of his mini-budget, the chancellor announced several tax cuts and tax measures including changes to income tax, corporation tax, and stamp duty, as well as new investment zones, investment schemes, VAT-free shopping, and more.
Changes to corporation tax and the annual investment allowance
The mini-budget scraps the planned increase in corporation tax (CT) to 25% for profits over £250,000. Corporation tax will stay at 19% for all businesses for the foreseeable future. In addition, the planned increase to diverted profits tax to 31% will no longer take place, instead remaining at 25% to maintain its current six percentage point differential with the main CT rate.
Furthermore, the bank corporation tax surcharge will remain at 8% instead of dropping to 3%, and the bank surcharge allowance increases from £25m to £100m, as planned.
The annual investment allowance (AIA) will remain at £1m, rather than falling to £200,000, which should help businesses to have more certainty within the investment landscape.
Changes to income tax and national insurance
From April 2023, the basic rate of income tax will be cut from 20% to 19%. At the same time, the 45% top rate of tax, which currently applies to earnings above £150,000 and was brought in after the financial crisis, will be scrapped. High earners will pay the 40% tax rate on those earnings.
Meanwhile, national insurance contributions will be cut by 1.25% from November this year. The health and social care levy due to come in from April 2023, has also been withdrawn.
In addition, the government is reversing the 1.25% increase in dividend tax rates from April 2023.
How the mini-budget affects the IR35 off-payroll working rules
The Chancellor also announced that the government will repeal the 2017 and 2021 reforms to the IR35 off-payroll working rules, stating that the reforms to off-payroll working had added unnecessary complexity and cost for many businesses.
The IR35 reform had made it complex for contractors and independent workers to be hired by companies. Small companies had so far remained exempt, but the reform had already expanded from the public sector to medium and large businesses in 2021.
Contractors in the UK have welcomed the repeal of IR35 from April 2023. Instead of IR35, the original rules will be reinstated, and contractors will be responsible for assessing their own taxes. However, a clear and robust roadmap for reversing IR35 reform in the public and private sectors is now needed to ease the transition.
Mini-budget and changes to stamp duty
The cut to stamp duty aims to increase residential property investment and boost spending in other areas. The cut to stamp duty will double the nil rate band to £250,000, while first-time buyers will pay no SDLT up to £425,000 (up from £333,000) and can claim relief on properties valued up to £625,000.
Investment zones and investment schemes
Locations within 38 local authorities in England will benefit from new investment zones designed to receive time-limited tax benefits, accelerated development, and wider support for local growth.
In addition, the Seed Enterprise Investment Scheme (SEIS) will become available to more companies from April 2023. The gross asset limit will increase from £250,000 to £350,000. Presently, to benefit, a company must not have been trading for more than two years. This will be increased to three years. The annual investor limit will also double to £200,000.
The Company Share Option Plan (CSOP) limit will double from £30,000 to £60,000. The government has also announced it remains supportive of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) and is considering extending the schemes beyond their current 2025 sunset date.
Want to find out how the mini-budget will impact your business finances?
Get in touch at info@acuaccounts.com and book a consultation with our team. You can also call us directly on 0203 907 9027.
by Acuaccounts | Aug 21, 2022 | accounting, pension
Retirement may be the last thing on the mind of entrepreneurs, company owners and directors, especially when you are running and scaling a business.
However, knowing the ins and outs of the UK’s pension system allows you to provide the best solution for your employees and their future while planning what is best for you, your businesses, your taxes – and your potential exit strategy.
The three types of pension in the UK
If you live, work, are self-employed or run a business in the UK, the three main ways to build a pension are as follows:
- State pension
- Workplace pension
- Personal pension
The State Pension is a regular payment from the government most individuals can claim when they reach the State Pension age. The amount received will depend on an individual’s National Insurance record. Ten qualifying years on their National Insurance record are needed to receive any State Pension, and 35 qualifying years are needed to get the full new State Pension, currently £185.15 per week.
For most people, the state pension is only one part of their retirement income and will be supplemented by a workplace pension, a personal pension – or both.
The workplace pension scheme automatically applies to most employees and employers with a few exceptions, for example, company directors.
As a business owner or company director employing people, you must make pension contributions for all staff who:
- Are aged between 22 and the State Pension age
- Earn at least £10,000 a year
- Usually, work in the UK (this includes people who are based in the UK but travel abroad for work)
Most workplace pensions in the UK are so-called defined contribution pension schemes. The pension money is deposited into investments by a pension provider like Nest, which offers a no-cost pension scheme for small businesses starting from just one employee. Most pension providers will allow for options of low, medium or high-risk investments.
From April 2019, the minimum workplace contributions are as follows on all earnings between £6,240 and £50,270 a year before tax:
- 3% for the employer
- 5% for the employee
- 1% tax relief
For example, if an employee’s contribution is £40 per salary month, the employer’s contribution will be £30. With an additional £10 in tax relief, £80 in total are added to the pension pot.
In a defined benefit scheme, the amount an employee will receive will depend on the pension scheme rules and not on how much money is deposited into the pot. The defined benefit scheme is also called the“final salary” or “career average” pension scheme.
Personal pensions are usually arranged by employees themselves. However, some companies and workplaces may decide to offer them as an added benefit, and the schemes can be of particular interest to investors.
UK pension options for directors
Company directors are exempt from automatic enrolment. Nevertheless, if you are a company director, you can decide to opt into automatic enrolment if the earnings and age criteria outlined above apply.
Should your company only employ directors, your business can set up a new workplace pension and enrol its directors. The business can then claim tax relief not only on the contributions made as an individual but also on contributions made through the business.
Company directors can contribute up to £40,000 per year or 100% of their salaried earnings (dividends not included), whichever is lower, to a pension fund and still receive tax relief. The lifetime allowance for pension savings is £1,073,100.
Any type of pension contribution for company directors is tax efficient. Pension contributions count as business expenses and in addition to the 19% Corporation Tax relief on premiums, no employer NI contributions are due on any limited pension contributions made via a limited company.
In addition to the 19% Corporation Tax relief on premiums, there will also be no employer NI contributions on any limited pension contributions you make via your limited company.
Small Self Administered Schemes (SSAS) are suitable for the controlling directors of companies and operate as an occupational pension scheme offering its members flexibility and control over the investment policy and underlying assets.
The SSAS is a pension scheme set up under a trust with fewer than 12 members and overseen by the Pensions Regulator. SSAS pensions offer the same tax benefits as other occupational pension schemes, and most assets and investments within the scheme have no tax liability. SSAS can lend money to the employer provided the loan does not exceed 50% of the net value of the scheme’s assets, and they can borrow to invest or to pay a member’s benefits as long as borrowings do not exceed 50% of the scheme’s assets.
Executive Pension Plans (EPPs) are contribution plans provided by the employer and run by a life assurance company. Employees are not liable to income tax or National Insurance contributions (NICs) on payments made to an EPP.
UK pension options for the self-employed
The self-employed are entitled to the State Pension based on their National Insurance record. The self-employed are also eligible for the same tax breaks as employees if they contribute to a personal pension.
Setting up a personal pension as a self-employed person allows an individual to make contributions or ad hoc payments into a self-employed retirement. The provider will claim tax relief and add it to the pension pot.
Do you have questions about pensions for business? Any concerns about managing your pension requirements or those of your employees?
Have a look at our services and feel free to get in touch. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027
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