Navigating Business Costs in the UK: A Comprehensive Guide

by Acuaccounts | Nov 6, 2023 | accounting

The UK’s robust economy, access to global markets, and pro-business policies make it an attractive choice for businesses. However, behind every opportunity lies a series of costs. Navigating the financial landscape of the UK can be complex. 

From choosing a business structure to hiring staff and securing premises, business owners must carefully consider the fixed costs of running a business. In our comprehensive guide, we examine the key costs that new entrepreneurs need to research and prepare for on their journey to building a thriving business in the UK.

The Cost of Running a Limited Company vs. Being Self-Employed in the UK

One initial decision you encounter when establishing a business in the UK is whether to operate as a limited company or as a self-employed individual. 

Limited Company: The limited company structure entails a small one-off registration cost with Companies House and yearly costs such as accountant’s fees for your annual accounts, and ongoing administrative expenses. Furthermore, corporate taxes, including Corporation Tax and VAT are applicable. The VAT registration threshold for businesses in the UK is £85,000.

Self-Employment: Being self-employed offers simplicity in terms of setup, but comes with responsibilities like filing annual self-assessment tax returns, and paying National Insurance contributions (NICs).

The decision between these structures should be based on factors such as your income, growth potential, and your comfort level with personal liability. Consulting an accountant or financial advisor to help you make an informed decision is recommended.

The Cost of Hiring Staff in the UK

Expanding your workforce marks a significant milestone in the growth of any business. However, it’s imperative to have a clear understanding of the associated costs, including:

National Insurance Contributions (NICs): NICs are divided into both employee and employer components. Employers have to pay a 13.8% contribution on any employee earnings exceeding the secondary salary threshold, which is £175/week or £758/month.

Pensions: Employers are also required to provide a workplace pension scheme for eligible employees in line with UK pension regulations. Employers are required to contribute a minimum of 3%, and employees 5% of their salary, resulting in a total minimum contribution of 8%.

Salary Ranges: The average salary for all workers in the UK is £33,402 (up from £31,447 in 2021).

Onboarding Costs: When bringing new staff on board, costs may include background checks, training programmes, and necessary equipment and software. The precise cost of these items can vary based on the role and the specific requirements of your company.

Understanding the costs of employment is crucial for budgeting and complying with UK employment laws.

The Cost of a Physical Business Location in the UK

If your business requires a physical location, you’ll encounter several costs:

Rent: Commercial rents can vary significantly based on location, size, and condition of the premises. Presently, the average commercial rent stands at £1,036 per week.  For example, in London, office space can rent for £50-£100 per square foot per month, while retail space can rent for £200-£500 per square foot per month.

Business Rates: Business rates are local taxes that businesses pay to their council on non-residential properties, determined by the property’s value and location, and typically equate to approximately 50% of annual rent.

Utilities and maintenance include electricity, gas, water, and ongoing maintenance and repairs.

Choosing the right location and negotiating lease terms effectively can help manage these costs.  If you require an office, coworking spaces can be a convenient option because they generally include business rates, utilities and maintenance at a monthly membership.

The Cost of Protecting Your Business in the UK

Protecting your business is a strategic priority.

Insurance is a crucial aspect of safeguarding your company against unexpected events. There are several types of insurance that businesses should consider, including:

• Business Liability Insurance typically covers liability, property, and professional indemnity insurance.
• Employers’ Liability Insurance is specifically designed to shield businesses from claims made by employees who have sustained injuries or illness at work, and it is compulsory for every UK employer.
• Business Interruption Insurance offers coverage for lost profits and additional expenses incurred when a business cannot operate due to an insured event.
• Product Liability Insurance is designed to protect businesses from claims made by customers who have experienced injuries or property damage due to the use of a defective product or service.
• Cyber Liability Insurance safeguards businesses from financial losses and legal claims stemming from data breaches and cyber-attacks.
• Directors’ and Officers’ Liability Insurance protects directors and officers of businesses against personal liability claims arising from their decisions and actions.

Trademarks and Intellectual Property Protection generally involves associated legal and registration fees.

Legal Services include drafting contracts, resolving disputes, and compliance with complex regulations to mitigate potential legal issues and penalties.

Accounting Fees and Annual Tax Filing: In the UK, all limited companies must file annual tax returns and it is recommended that you enlist the services of a qualified accountant.

If you have further questions about managing your business costs in the UK, or if you’d like professional assistance with your accounting and tax needs, don’t hesitate to get in touch with us at info@acuaccounts.com to arrange a consultation. 

You can also call us direct on 0203 907 9027. Our expert team is here to provide you with tailored solutions to ensure your business thrives in the dynamic UK business environment.

Spring Budget 2023: Key Highlights for UK Businesses

by Acuaccounts | Mar 21, 2023 | accounting

The Spring Budget 2023 introduces changes to the UK tax system to encourage businesses and investment. Chancellor Jeremy Hunt aims to make the UK’s tax system globally competitive by introducing capital allowances, supporting research and development, and simplifying taxes for SMEs.

Changes to Capital Allowances and Corporation Tax

In his Spring Budget 2023, the Chancellor announced a corporation tax increase from 19% to 25% for businesses of all sizes starting from 1 April 2023. The government also announced a new policy package that ensures the country’s capital allowances regime continues to be competitive, with two capital allowances worth a combined £27 billion over the next three years, Full Expensing (FE) and the 50% first-year allowance (FYA).

Full Expensing (FE): What it Means for Small Businesses

The government is introducing Full Expensing (FE) from 1 April 2023 to 31 March 2026. This policy allows businesses to deduct 100% of the cost of specific plant and machinery from their profits before tax, resulting in significant tax savings. FE applies to spending on qualifying main rate equipment, including warehousing equipment, tools, construction equipment, machines, vehicles, office equipment, kitchen equipment and more.

A significant advantage of FE is that companies can deduct the entire cost of the asset from their profits immediately rather than over the asset’s lifetime. This results in a 25p tax saving for every £1 invested, similar to the super-deduction. For example, a company investing £10 million in main rate assets will gain a £2.5 million tax saving in year 1.

Moreover, the Chancellor has expressed his long-term ambition to make Full Expensing permanent policy to provide greater certainty to small businesses and encourage investment in plant and machinery.

The 50% First-Year Allowance (FYA) Extension: A Breakdown

Small businesses can benefit from the 50% First-Year Allowance (FYA), which enables them to deduct half the cost of special rate assets, including solar panels and thermal insulation on buildings, from their profits during the year of purchase. Initially set to end on 31 March 2023, the scheme has been extended until 31 March 2026. After the first year, the remaining cost can be written off through Writing Down Allowances (WDAs) at 6% per year. FYA offers faster relief than the default WDAs-only regime at 6% per year, including the first year. The Chancellor is looking to make the 50% FYA permanent.

Research and Development Scheme: How Small Businesses Can Benefit

The UK government is committed to promoting conditions for enterprise to succeed, and the Chancellor’s new R&D scheme for SMEs is a significant part of the strategy. Worth around £500 million per year and set to launch on 1 April 2023, the scheme targets loss-making R&D intensive SMEs and offers an enhanced tax relief of £27 from HMRC for every £100 of R&D investment. 

Furthermore, the scheme expands the scope of qualifying expenditure for R&D reliefs to include data and cloud computing costs and will support the development of digital technologies, life-saving medicines, and modern research methods. In combination with a permanent increase in the R&D Expenditure Credit rate, the scheme is expected to make the UK highly competitive globally for R&D.

Simplification of the Tax System for SMEs: Measures Announced

The government has announced measures to simplify the tax system for small businesses, including a review of the current VAT threshold to ensure its appropriateness for the current economic climate.

Additionally, the government will explore simplifying the VAT system for small businesses, such as implementing a flat rate VAT or cash accounting scheme. A new Small Business Tax Relief scheme has been introduced to provide additional support to small businesses struggling with their tax bills, enabling them to spread their payments over a prolonged period of time.

Finally, the rules around the Employment Allowance will be simplified, making it easier for small businesses to claim. These measures are a welcome relief for small business owners who often find tax compliance complex and time-consuming.

New initiatives introduced to encourage the over 50s back into the workforce

Over the past couple of years, a growing number of workers aged 50 and over have left the workforce. The Spring Budget introduces new initiatives to facilitate their return to work. The measures include new apprenticeships for those aged 50+ and providing mid-life MOTs to assess their financial situation. These initiatives aim to give older workers opportunities to retrain and access support.

Reactions to the Spring Budget 2023 from Business Organisations

The Confederation of British Industry’s (CBI) Interim Director General, Matthew Fell, praised the budget. The CBI had called for measures to support people and productivity – and the government’s actions on boosting childcare provision and supporting occupational health show that the Chancellor is listening to business needs. Fell believes the investment zones and quantum support will drive economic growth across the UK.

Meanwhile, the British Chambers of Commerce (BCC) has said that the measures outlined in the Spring Budget are unlikely to shift the dial on business investment, both within the UK and from overseas. The Director General of the BCC, Shevaun Haviland, welcomed the help on childcare and for over 50s workers – and the plans for full capital expensing, but added that the budget offered little comfort to businesses struggling to survive; considering almost half of UK businesses are expected to struggle with paying their energy bills from April. The BCC also called for the government to reform the business rates system.

Finally, the Federation of Small Businesses (FSB) called the budget a “snub” to small businesses, with FSB National Chair Martin McTague saying that small firms had been “overlooked and undervalued”. The FSB noted that the budget failed to support small firms with energy costs and business rates – showing a lack of understanding of the significant role SMEs must play in economic recovery. The FSB also criticised the ill-designed proposals to help people with health conditions, while measures for the over 50s are considered token efforts at best. However, the FSB welcomed the freeze on fuel duty and boost in draught beer relief, and sees the enhanced R&D tax credit as a significant step towards promoting innovation.

Want to find out how the 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.

How to navigate Self-Assessment in the UK: tips and mistakes to avoid

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.