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Many people aspire to be self-employed, and if you are an individual running your own business, you are considered a “Sole Traders.” There are many benefits to being a sole trader, such as the ability to set your own schedule and achieve a good work-life balance. Additionally, you get to keep all of your business’s profits after taxes. But you are personally responsible for any losses and ensuring that you pay the correct amount of income tax and national insurance. It is crucial to know how much tax you are required to pay and complete an annual self-assessment tax return as a sole trader. Registering for self-assessment is easy, but it is essential to do so each tax year. As a sole trader, you are also responsible for paying your own national insurance contributions. Recent research has indicated that over 75% of UK sole traders are uncertain about the tax and VAT thresholds that apply to them. This lack of knowledge could be costing them too. A survey of 800 sole traders conducted by Account-Ease revealed several gaps in the financial knowledge of small businesses in the UK. We are here to fill those gaps for you, allowing you to focus on running your business. 3 in 4 sole traders are unsure of the amount they would need to earn to pay a higher tax rate of 40% (£50,271) Less than 1 in 10 (9%) know what could happen if they didn’t pay their tax bill 1 in 50 thought nothing would happen if they did not pay their tax bill Which sole traders are the least informed? Based on the survey findings, lawyers appear to have the highest knowledge regarding when they should pay a higher income tax rate. While retailers are the least informed, with only 13% providing the correct answer. Furthermore, the survey revealed that only 31% of sole traders are aware of the deadline for submitting a self-assessment tax form. With legal professionals being the most knowledgeable, as 42% of them knew about the January 31st deadline. Sole traders are not obligated to pay corporation tax, unlike limited liability companies. However, 73% of sole traders mistakenly believe that they are required to pay this tax. Sole traders pay most tax since records began Over the last two decades, there has been a notable surge in the number of individuals starting their own businesses and working as full-time self-employed professionals. As a result, sole traders are now paying the highest amount of tax ever recorded. In January 2023, the self-employed sector paid a record high of £22 billion in income tax. Marking a one-third increase from the previous year. Looking after your finances The survey also revealed that 18% of sole traders have not made any pension contributions or saved for their future. The East of England had the lowest percentage of sole traders with pension schemes, with only 55% having one. Meanwhile, those in London and Wales were the most financially astute, with 92% having a pension pot. Additionally, 21% of sole traders admitted to having no safety net saved for at least three months. Which is concerning given the current economic crisis. Although Welsh sole traders were found to be the most informed regarding pensions, they were the least likely to save. With one in three not having any funds put aside. Regarding reinvestment, restaurants were the most likely to allocate at least 20% of their income back into their business. On the other hand, those in education were the least likely, with 25% not reinvesting. Account-Ease offers a comprehensive accounting service for small businesses, with personalized assistance from dedicated accountants. They understand that every business has different needs, and provide tailored support to help clients save for the future. Take care of their finances, and achieve a work-life balance. With Account-Ease on board, business owners can focus on running their business with peace of mind that their finances are being handled by experienced professionals. Joining Account-Ease If you’re looking for a forward-thinking, tech-savvy accountant, switching to Account-Ease is so easy. We have vast experience working with businesses in a diverse range of industries and sectors. From tech start-ups to established SMEs, contractors, freelancers and locums – we’re able to support a wide range of small businesses and SMEs. Our pricing is transparent with no hidden fees or surprises. Our sole trader accountancy package is just £50 + VAT per month. Ready to join Account-Ease? Contact Us Now

When an economic downturn occurs, there are various steps you can take to protect your business and ensure it survives. This guide outlines your options. Understand your finances During an economic downturn, it’s crucial to have a comprehensive understanding of your company’s financial status. This entails knowing your cash reserves and whether they are sufficient to maintain operations during challenging times.   To achieve this, you should prepare a cash flow projection that shows how much money you anticipate receiving and spending. Being able to anticipate and track changes in your cash position will allow you to plan for future cash requirements and make informed decisions.   Continuously reviewing your company’s finances and budget during a downturn is essential. You should keep a close eye on the performance of your activities and make adjustments to your forecasts as needed.   Additionally, an accountant can provide valuable assistance in managing your cash flow, including preparing a cash flow forecast, guiding you through the process, or providing a critical evaluation of your existing forecast and the assumptions behind it. Review costs During challenging economic conditions. It can be an excellent opportunity to analyse your expenses and identify areas where you can reduce costs. To achieve this, you should consider all your costs, including raw materials, energy supplies, software and magazine subscriptions, travel expenses, insurance, internet and phone bills. Once you have identified your expenses, you can start looking for ways to cut those costs. This may include contacting suppliers and negotiating a better deal, using business service price comparison websites to find cheaper prices, cancelling unnecessary subscriptions, and switching from physical to online meetings. By taking these steps to reduce costs, you can potentially save a significant amount of money, which can help your business weather the challenging economic conditions and emerge stronger in the long run. Focus on key performance indicators Key performance indicators (KPIs) are a valuable tool for monitoring your business’s success, especially during challenging economic times. By tracking your performance against predetermined metrics. You can ensure that your operations stay on course and that you achieve the success you desire. Setting targets that are closely linked to your business goals and objectives can also help you identify potential issues before they become major problems. KPIs can be financial or non-financial and can cover a broad range of areas, including increasing the number of customers, improving sales revenue, boosting customer satisfaction levels, and enhancing profitability. By monitoring these critical areas, you can gain insight into where you are succeeding and where you need to focus your efforts to achieve your desired outcomes. Putting up prices During an economic downturn, it might seem counterintuitive to raise your prices; however, it can be one way to safeguard your business. There are ways to implement price increases without alienating your customer base. One strategy is to segment your clients and determine which are less likely to be sensitive to price increases. These could be individuals with significant disposable income or new customers who have not yet developed a strong price sensitivity. Another critical factor is honesty and transparency with your customers about the reason for price increases. By being open about the reasons behind the price rise. You can encourage customer loyalty, particularly if you emphasize factors that they particularly appreciate, such as exceptional customer service, added-value products or services, and fast or free delivery. It’s also important to note that raising prices should be considered carefully and strategically. A steep price hike could lead to a loss of customers, and it’s essential to assess the potential risks and benefits before making any significant changes to your pricing strategy. Supporting employees During difficult economic times, it’s common for employees to experience anxiety and worry, which can lead to decreased productivity and other issues that could negatively impact your business. One strategy to mitigate these concerns is to be honest and transparent with your staff about any cost-cutting measures that need to be taken due to the economic situation. By keeping your employees informed, you can help them understand the reasons behind any changes and alleviate any undue stress. It’s also important to involve your staff in decision-making processes and to listen to their feedback and ideas. By encouraging employee participation. You can tap into their knowledge and expertise and identify potential solutions that may not have been considered otherwise. By taking these steps to address employee concerns and involve them in the decision-making process. You can help maintain employee morale and productivity, even during challenging economic times. This can ultimately benefit your business by allowing you to continue operating at a high level, even in the face of adversity. Stay on top of invoices During challenging economic times. It’s especially critical to ensure you’re receiving payment for your products or services in a timely manner. Unpaid invoices can have a significant negative impact on your cash flow and may even jeopardize the survival of your business. To mitigate this risk, it’s essential to monitor your customer invoices closely and ensure you’re being paid promptly. If payment is not received on time, it’s important to take steps to get the bill settled by contacting the customer and asking why payment has not been made. Additionally, there are several steps you can take to ensure prompt payment. For example, it’s crucial to issue accurate invoices that contain all the necessary information. Such as the invoice number, date, and itemized charges. You should also make it easy for customers to pay by offering various payment options, such as online payment or automated recurring billing. Maintaining strong and friendly relationships with your clients is also crucial to ensuring timely payment. By building a positive relationship with your clients, you can improve communication and reduce the likelihood of payment delays. Overall, taking proactive steps to monitor customer invoices and encourage prompt payment can help protect your business during challenging economic times and ensure that you maintain a healthy cash flow. Access business funding and support During

As we prepare for the start of a new tax year, many self-employed freelancers, contractors, sole traders, and small businesses across the UK are eagerly anticipating the Spring Budget. Chancellor Jeremy Hunt recently delivered his highly anticipated budget, which he dubbed “a budget for growth.” UK Economy Outlook In general, the UK economy’s outlook for 2023-24 is promising. With a focus on reducing debt, halving inflation, and creating prosperity with a purpose. The primary takeaway from the budget announcement that is most significant for small businesses is that the UK is expected to avoid a technical recession in 2023. This aligns with the priorities of getting the economy back on track. Hunt stated that “we are following the plan, and the plan is working.” Stability and Normality Jeremy Hunt is only the second of the last five chancellors to have held the iconic red box outside Number 11 for the Spring Budget announcement. With an average tenure of just nine months, the previous five chancellors have caused U-turns and uncertainty. This figure is in stark contrast to the previous five chancellors who were in office for a total of 26 years. Hunt aimed to reassure the UK of stability and normality, stating that “we are proving the doubters wrong.” Government’s Financial Goals Despite being the only G7 economy that is still smaller than it was before the Covid-19 pandemic, the UK economy grew by 4% last year. The Treasury’s recent announcements contain numerous reasons for optimism, and Hunt asserts that the UK economy is on the “right track.” The UK government is on track to achieve its goal of reducing underlying debt to 92.4% of GDP by next year. With the figure expected to decrease annually until 2027-28. In addition, Hunt announced that underlying debt in three years will be lower than it was in the autumn of last year. Budget Priorities Hunt’s budget was divided into three priorities: providing help with the cost of living crisis, reducing debt, and growing the economy. Inflation Rate As we head into the 2023-24 tax year, it’s worth noting that the inflation rate is expected to fall to 2.9% from 10.7%. This is excellent news for everyone, as it will help mitigate the rise in prices.   In conclusion, the Spring Budget announcement contains several reasons for optimism. The UK economy’s outlook is positive, and the government is taking steps to reduce debt and inflation while promoting economic growth. Priority 1 – help with cost of living crisis reduce debt – Priority 2 Priority 3 – grow the economy Let’s take a look at what will affect you going into the 2023-24 tax year… Inflation is set to fall to 2.9% by the end of the year Great news for everyone is that the rate of price rises, or inflation, is forecast to fall to 2.9% from 10.7%. Economy forecast to grow by 1.8% next year After this year the UK economy will grow in every single year of the forecast period. By 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027. Energy bill support The Energy Price Guarantee will remain at £2,500 for the typical household for the next three months. This means that the average family will save a further £160 on top of the support measures already in place. Small Business Investment increased to £1m The Annual Investment Allowance has increased to £1m for small businesses. Meaning 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits. This new policy aims to see full capital expensing for the next 3 years. With an intention to make it permanent as soon as responsibly possible. This means every £1 a company invests in IT equipment. Plant or machinery can be deducted in full and immediately from taxable profits. Tax boost for smaller and medium businesses The chancellor has announced that small or medium-sized businesses will be able to claim a credit worth £27 for every £100 they spend if they spend 40% or more of their total expenditure on Research and Development. 12 new Investment Zones The government said the scheme, which is backed by £80m of investment over five years in each of the new high-growth zones. Is designed to accelerate research and development in the UK’s “most budding industries”. They will be spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland. Corporation tax to increase to 25% Corporation tax for businesses is to increase from 19% to 25%. Firms which make a profit of more than £250,000 will pay 25% tax on their profits from April. Extending a cut to fuel duty To help households under pressure from living costs. Fuel duty will remain frozen and the 5p reduction will be maintained for a further year. This will save the average motorist £100 next year. “Returnerships” for Over 50s wanting to re-enter the workplace 3.5m people of pre-retirement age but over 50 are not working. Jeremy Hunt claimed that “Older people are the most skilled and experienced people we have” and “no country can thrive if it turns its back on such a wealth of talent and ability”. A new apprenticeship scheme for over 50s that want to return to work called “returnerships”. Pension Taxes The chancellor has abolished lifetime allowance on amount workers can save in pensions without paying tax. Hunt says he will increase the pensions annual tax-free allowance from £40,000 to £60,000 and will abolish the Lifetime Allowance – previously set at £1.07m. Free childcare for working parents To help parents get back to work, starting from April 2024. Every child over 9 months will receive 30 hours of free childcare per week. Government will pay the costs upfront and increase funding by 30% per year. Incentives of £600 for those that move into the childcare profession. On top

As tax season approaches in the UK, many individuals and businesses find themselves struggling to complete their Self Assessment tax returns. However, with the help of HMRC’s digital assistant, the process can become much more manageable. In this blog post, we will take a more in-depth look at the HMRC digital assistant and how it can assist you in completing your Self Assessment tax return. What is HMRC digital assistant? The HMRC digital assistant is a chatbot designed to assist individuals and businesses with any questions they may have related to their Self Assessment tax return. It utilizes artificial intelligence to understand natural language and provide accurate information and advice to the user. Whether you are registering for Self Assessment, filling out your tax return, or paying your tax bill, the digital assistant can help guide you through the process. How to access HMRC digital assistant? Accessing HMRC’s digital assistant is a straightforward process. You can access it through the HMRC website, where it is available 24/7. Once you are on the website, click on the “Help and contact” link on the homepage and select “Chat with us” to start your conversation. The digital assistant is available to assist you with any questions or concerns you may have related to your Self Assessment tax return. What can HMRC digital assistant help you with? The HMRC digital assistant is designed to assist with a broad range of topics related to Self Assessment tax returns. Here are a few examples of how the digital assistant can assist you: Registering for Self Assessment: If you are self-employed, a landlord, or a freelancer, you may be required to register for Self Assessment. The digital assistant can guide you through the registration process and help you understand whether you need to register or not. Filling out your tax return: The digital assistant can help guide you through the process of filling out your tax return. It can answer questions about which expenses you can claim, how to calculate your tax bill, and how to submit your tax return. Paying your tax bill: If you owe tax, the digital assistant can help you understand how to pay your tax bill. It can explain the different payment methods available and help you set up a payment plan if necessary. Deadlines: The digital assistant can help you keep track of important deadlines related to your Self Assessment tax return. It can remind you when your tax return is due, when your tax bill needs to be paid, and when to file your tax return if you are submitting a paper form. You Can Also Read Our Guide: Will the Tax Deadline be Extended Again in 2023? Security: The digital assistant can also help you with security-related questions. It can explain how to keep your personal information safe and how to avoid phishing scams. Why use HMRC digital assistant? There are several reasons why using HMRC digital assistant can be beneficial. First, it is available 24/7, so you can access it anytime you have a question related to your tax return. You do not need to wait for business hours to speak with an HMRC representative. Second, it can save you time. Rather than calling HMRC or searching the HMRC website for answers, you can simply ask the digital assistant. It can provide you with accurate and relevant information quickly, which can save you time and help you complete your tax return faster. Third, it is convenient. You can access the digital assistant from any device with an internet connection. You do not need to download any software or install any apps. Finally, it is free. HMRC digital assistant is a free service provided by the government. You can use it as often as you need to without incurring any charges. What are the limitations of HMRC digital assistant? While HMRC digital assistant is a helpful tool, it does have its limitations. Here are a few of them: It may not be able to answer all your questions: While the digital assistant is designed to assist with a wide range of topics related to Self Assessment tax returns, it may not be able to answer all your questions. If you have a particularly complex question or issue, you may need to speak with an HMRC representative directly. It may not provide personalized advice: The digital assistant provides general information and advice that applies to most people. However, it may not be able to provide personalized advice based on your specific situation. If you need personalized advice, you may need to speak with an HMRC representative or a tax professional. It may not be able to resolve technical issues: If you experience technical issues with the HMRC website or digital assistant, you may need to contact HMRC technical support directly. It may not be suitable for everyone: Some people may prefer to speak with an HMRC representative directly rather than using the digital assistant. Additionally, if you have a disability or accessibility needs, you may require additional support beyond what the digital assistant can provide. Conclusion In conclusion, HMRC digital assistant can be a helpful tool for completing your Self Assessment tax return. It can assist you with a variety of topics related to your tax return, including registering for Self Assessment, filling out your tax return, and paying your tax bill. It is available 24/7, convenient, and free to use. However, it does have its limitations, and it may not be able to answer all your questions or provide personalized advice. If you have a particularly complex question or issue, you may need to speak with an HMRC representative directly. Nonetheless, HMRC digital assistant is a useful resource that can save you time and help you complete your tax return faster.