Blog

Jeremy Hunt announced his first Autumn Statement as Chancellor of the Exchequer to Parliament on 17th November, in a bid to bring economic stability to households, businesses and the financial markets. The Chancellor has pledged to meet the economic challenges facing the country, confirming several changes to fill a £55 billion gap in the UK’s public finances. In our summary, we highlight the key points from the Autumn Statement relevant to you and your business. Business Taxation  Business rates (England only)  From 1st April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. The business rates multipliers will be frozen in 2023-24 and support will be available, worth £13.6 billion over the next five years, as businesses transition to new bills following the revaluation. The relief for retail, hospitality and leisure sectors will be extended and increased, and there will be additional support provided for small businesses. Local Authorities in England will be compensated for the loss of income as a result of these business rates measures and will receive funding for administration and IT costs. Changes to Research & Development rates  Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology. Previously, the rules allowed small and medium companies to: deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction claim a tax credit if the company is loss making, worth up to 14.5% of the surrenderable loss For expenditure after 1st April 2023 the extra deduction will be reduced from 130% to 86% making a total deduction of 186% and the tax credit rate for loss making SMEs will reduce from 14.5% to 10%. For large companies, the research and development credit (RDEC) rate will be increased from 13% to 20%. This also applies to small and medium companies subcontracting to large companies. These changes are to come into effect from 1st April 2023. The Government plans to consult on the design of a single simplified scheme. However, these changes already put both systems on a par with one another where companies are profitable and tax is paid at 19% as the effective rate of relief is a little over 16% in each case.  R&D relief will continue to provide additional free funding and support. National Living Wage increase   The Government will increase the National Living Wage from a current hourly rate of £9.50 to £10.42 for those aged 23 and over from 1st April 2023. The minimum rate for 21 to 22 year olds will increase from £9.18 to £10.18, for 18 to 20 years olds from £6.83 to £7.49 and for apprentices and under 18’s from £4.81 to £5.28. While this is good news for an anticipated two million low paid earners, the impact to small business will be felt in increasing wage bills. VAT thresholds – frozen  The VAT registration and deregistration thresholds will also be frozen at £85,000 and £83,000 respectively for a further period of two years from 1st April 2024. Vehicle excise duty (VED) for electric cars  The Chancellor announced a significant change to the way electrical car taxation works and from April 2025, electric cars, vans and motorcycles will start to pay VED in the same way as petrol and diesel vehicles. Company car tax rates  To give longer term certainty for taxpayers and businesses, the Government is setting rates for Company Car Tax until April 2028. The rates will continue to promote the use of electric vehicles. Percentages for electric and ultra-low emission cars emitting less than 75g of CO2/km will increase by 1% in 2025-26; a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars. Rates for all other vehicles bands will be increased by 1% for 2025-26 up to a maximum of 37% and will then be fixed in 2026-27 and 2027-28. To continue to promote business investment in charging infrastructure, the First Year Allowance (FYA) for electric charge points will be extended until 31st March 2025 for companies and 5th April for non-corporate businesses. Personal Taxation  Tax rates and allowances frozen until April 2028  Rather than opting to increase the headline rates of tax, the Chancellor decided to extend the freeze on a broad number of tax thresholds, and this will cause an effective increase in taxes as inflation pushes more individuals into higher rate bands. The below tax thresholds had already been fixed at their current levels until April 2026, and will now be frozen for a further two years until April 2028: Income tax personal allowance – £12,570 Income tax higher rate threshold – £50,270 The personal allowance and the higher rate income tax threshold for dividend and savings income, applies across the UK. The higher rate income tax threshold for non-savings and non-dividend income (for employment and sole-trader income) will only apply to taxpayers in England, Wales, and Northern Ireland. The Scottish Government is expected to announce tax and spending plans on 15th December. National Insurance rates frozen until April 2028  In July 2022, the NIC primary threshold for employees and the Class 2 Lower Profits Threshold for the self-employed were reduced. They will both now be frozen until April 2028. Employers generally start to pay Class 1 Secondary NICs on their employees’ wages at £9,100. This threshold will also be frozen until April 2028. Where eligible, some companies can claim the Employment Allowance to reduce their employers annual National Insurance liability by up to £5,000. The Government advise that this allowance means 40% of businesses do not pay NICs and will be unaffected by this change. It is expected that the largest employers will contribute the most. The National Insurance thresholds apply across the UK. Dividend allowance reduction  The Government will reduce the dividend allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024. Individuals have a dividend allowance each year which means they only pay tax on any

If you are already self-employed, you will be aware of self-assessments and your self-assessment tax bill. Many find it a stressful part of being self-employed, having to keep on top of incomings and outgoings throughout the year to ensure you submit an accurate assessment. What makes this even more difficult is if you are used to storing this information manually. As the tax return deadline approaches for the 2021 to 2022 tax year on 31st October 2022 for those completed on paper forms, and 31 January 2023 for online returns, HMRC is encouraging customers to plan ahead to give themselves the best chance to complete their Self-Assessment on time. Completing a self-assessment Self-Assessment is the process in which you tell HM Revenue & Customs of your income, gains and relevant expenses for the tax year. You do this by completing a tax return, sending it to HMRC and calculating your tax liability. If you do this online, it will calculate your tax liability automatically. You must send a tax return if, in the last tax year (6 April to 5 April), you were: self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on) a partner in a business partnership You will not usually need to send a return if your only income is from your wages or pension. However, you will need to if you also have untaxed income from: a COVID-19 grant or support payments money from renting out a property tips and commission income from savings, investments and dividends foreign income Making Tax Digital The government’s intention is to update the method of reporting taxable income by April 2024. This will be replaced by a predominantly digital system, known as Making Tax Digital. Making Tax Digital was first announced in the Spring Budget back in 2015 and is designed to transform the UK tax system for individual contractors and self-employed businesses. Its aim is to make the tax system more efficient, effective and easier by introducing digital record-keeping. MTD is to help HMRC to become one of the world’s most digitally advanced tax administrations. From April 2019, most businesses were also required to file their VAT returns on a quarterly basis. With some already doing this every 3 months, it wasn’t a big change, however these now need to be recorded digitally on MTD-compliant tools. From April 2022, all VAT returns now must be stored and submitted digitally no matter your turnover. By Making Tax Digital, HMRC intends to collect £4.8 billion by 2023. An estimated £9.4 billion in tax revenue goes missing due to errors or incorrect submissions, which the government aims to reduce. Thousands of contractors, freelancers and SME owners have kept paper-based records or used Excel spreadsheets in the past to keep track of their expenses or invoices. This can cause mistakes and documents can be lost. Now that we’re at a stage where VAT submissions must be MTD-compliant, Account-Ease can help. What exactly needs to be recorded digitally? Keeping certain information as MTD compliant digital records is now a requirement from HMRC, and they need to be as current as possible by storing and recording each transaction. You will also need to keep the following information as digital records: Business name Place of business VAT registration number Rate of VAT charged Supplies you made and received Their time and value All your records must be stored digitally for six years. The accounting software you use must also be capable of displaying the audit trail between records and VAT returns. What happens if you are non-compliant with MTD? Businesses must comply with MTD or they will face a penalty system. This would be applied to the first VAT return you file, and has been in place since 1st April 2021. This is a default surcharge that lasts for 12 months, another surcharge if you fail to comply again (applied to the VAT due on your latest return). A points-based system if you continue to fail in your compliance. The surcharge is calculated as a percentage of the VAT that’s unpaid by the due date. The percentage for the first late payment is 2% of the outstanding VAT, then will increase to 5%, 10% and 15% for further payments. You can also be fined if your VAT return has errors in it, so it is so important to make sure everything is correct. How can you avoid any errors? At Account-Ease, all of our clients get fully inclusive use of FreeAgent included in their monthly fee. FreeAgent is an award-winning bookkeeping software that is MTD compliant, which is cloud-based meaning you can access it anywhere, any time. Handling financial data, especially online, is something a lot of people worry about. However FreeAgent is completely secure, with all the financial data safely transferring to their backup servers several times an hour. Whether you’re a locum, contractor, sole trader or small business owner, you can submit your digital VAT returns through FreeAgent. Thousands trust FreeAgent daily to track expenses and income easily and quickly. 7 benefits of using FreeAgent & Account-Ease 1)     It’s cloud-based You can access your account any time on any device as long as you have an internet connection. It is comprehensive, meaning you can keep on top of it from your shop, on a site, in the office or at home. 2)     Use it out and about Because of the cloud-based basis of FreeAgent, you can upload receipts and manage your expenses straight away when you’re on the move. 3)     It saves time Many tasks are laborious or repetitive, but with FreeAgent you can automate it using clever inbuilt features, meaning you can focus on the day-to-day tasks of running your business without as many admin distractions. 4)     It’s more efficient for billing Billing and invoicing can be automated and you can track unpaid invoices in real-time, meaning you never miss any payments. You can also set up payment reminders against due dates or expected payments and

An accountant is a key member of any small business team. They are indispensable for keeping up-to-date financial records and providing valuable financial advice and planning at every business stage. Account-Ease is a leading provider of online accounting services for small businesses. We know that every business is unique and we are dedicated to providing personalized, scalable accounting services that help your company grow. Through our customized services and experienced accountants, we seek to help you make profitable decisions. Set achievable business goals and prepare your business for future financial success when you work with Account-Ease. Small Business Cloud Accounting  Get unprecedented flexibility in the ability to successfully manage your business’ finances with small business cloud accounting. Cloud accounting for SME and small business means you can easily access your financial statements, expense reports, and budget analyses online any time that suits you. View your current financial position so you can make timely decisions on behalf of your business and take advantage of opportunities as they arise. Data about your sales, income, and expenses can be live synced directly from your bank and credit union. No need to manually input data into a program on a daily basis. The cloud software allows for multi-user access so you can easily collaborate with managers, employees, and your financial advisors. The fully customizable dashboards and automated reports provide clear and easily digestible snapshots of your cash flow and finances. Lastly, with cloud-based small business accounting programs, security and consistency are paramount. Updates are automatic, there is no program to install on your hardware. Your data is fully backed up and secured at all times. Benefits of Online Accounting for Small Business Accounting for small business is all about helping you stay organized and giving advice so you can make informed business decisions and find innovative ways to grow your company. Our team of experienced ACCAs (Association of Chartered Certified Accountants) work virtually and seamlessly as a member of your team throughout the year. Not just at year-end, to help you retain control of your bottom line. Keep up to date records and financial statements Revenue, business costs, and payroll are just some of the expenses that must be tracked regularly to maintain organization. A dedicated small business accountant can organize all relevant documents regularly, freeing up your valuable time. Manage your cash flow Be prepared for large expenditures, whether it be a business expansion or payroll for a new hire. With the regular record-keeping of an accountant, you can more easily manage your cash flow and not get caught off guard by unexpected expenses. State-of-the-art accounting software A stress-free year-end Year-end can be chaotic when a business has not maintained organized accounting. A small business accountant manages your finances year-round and handles all relevant tax filing and documents, completely taking the stress out of your hands and making your year-end simple. Keep an eye on unnecessary costs It can be hard to discover unnecessary costs and sunken capital without regular SME accounting. An accountant is able to find expenses that could be shrunk and make a big difference to your regular cash flow and investments. Stay on top of accounts payable and accounts receivable Small business is all about relationships. Stay on top of your bills and invoices to never miss a payment and ensure good vendor and client relationships, even at your busiest time. Mitigate risk Missing a single document or deadline when it comes to taxes or accounts receivable can have disastrous consequences. Have peace of mind knowing your small business accountant is keeping your company on track. Make informed business decisions backed by financial data and analysis Know the financial benefits and risks of any new business venture, whether it be moving offices, merging, hiring new staff, or purchasing new equipment. We are trusted by CEOs and managers across United Kingdom. Our Certified Public Accountants have the experience to go beyond basic daily accounting and provide you with personalized solutions. Dedicate your time to what you love – running your business. Let us manage your accounting. What is the Cost of an Accountant for Small Business? The average rates of an accountant for small business varies from company to company, within industries, and depends on the scale of service required. Many small businesses require some level of accounting services but may not have the budget or resources to hire an internal accountant. Businesses with an in-house accountant may see their financial needs grow beyond a single person, but lack the resources to build an accounting department. Virtual accountants for small business are a comprehensive solution. Whether you are a start up with few accounting needs, or an established small business looking for robust advising and accounting services. You can have all your needs met by an experienced team. The fully customizable and scalable online accounting for small business at Account-Ease can save you thousands of dollars per year while giving you access to a full team, comprehensive services, and the ability to grow. Scalable Accounting Packages for Small Business Proper accounting plans allow for a company to increase revenue, manage expenses, exercise sound financial planning, and make informed business decisions. Without well-organized books, a business is at a disadvantage when it comes to all types of financial planning. However, small business owners rarely have the time and resources to dedicate to handling the accounting themselves. May not have the capital or a need to hire a full-time internal accountant. At Account-Ease, we are dedicated to providing clients across United Kingdom with the best customized cloud accounting services. Does your company need a full-time small business accountant? Or do you simply need to fill a few gaps among your existing staff? Whatever your small business needs, we have scalable accounting services that suit you. The services in our accounting packages for small business include: Bookkeeping and financial reporting Preparing annual statements of accounts Preparing and filing all relevant income tax documents Self-Assessment tax return Landlord Accountancy Services Payroll services VAT

Payroll accounting can seem like a bit of a headache, even though taking on employees is a sure sign of business success. Once you start employing and paying other people, there’s a lot to deal with – keeping on top of all the changes in tax, employment law and regulatory issues is a complex and time-consuming task. Year-end becomes a minefield with HMRC knocking on your door for tax returns, alongside the race for P60s. And as you can imagine, it’s a breeding ground for transcription errors and miscalculations. So, this is where QuickBooks payroll UK comes into its own. In this article, we’ll explore some of the benefits QuickBooks payroll UK offers, delving into how it can help you run payroll easily and accurately and best payroll providers in UK. What is a payroll management system and how does it work? A payroll management system, or QuickBooks payroll UK, is exactly what it says on the tin: a system or software that manages your payroll. When we say ‘payroll’, we’re talking about the process by which employers withhold some of their employees’ earnings to pay directly to the government as tax. Payroll software like QuickBooks payroll UK simply makes this process run correctly and easily, processing the data you input; working out how much you owe, to whom and when; and ensuring that all payments are sent to the right entities on time. What does payroll software do? In a nutshell, payroll software will ensure you pay your staff the right amount at the right time. And that’s crucial in holding onto your staff – happy staff means they’ll stick around for longer, which improves your bottom line as well. Payroll software also automates much of the processes involved in payroll accounting, leading to more accurate data and reports. Who needs payroll software? The simple answer is anyone with employees, or who pays themselves as an employee. While it is possible to work out payroll manually, it presents serious costs in terms of time and energy, as a maze of deductions need to be worked out for each individual employee. Since HMRC introduced Real Time Information (RTI) reporting, employers have to submit PAYE information through compatible software every time they pay their employees. This Full Payment Submission needs to happen on or before the day the employee is paid through HMRC online services. Even if your employees don’t need to be registered with HMRC (because they earn less than £118/week) you’ll need to keep records for them. Payroll software like QuickBooks payroll is the best way to do this as it knows what you need to know . 6 key benefits of payroll software You’ll save time and reduce errors Payroll accounting software such as QuickBooks payroll software takes the number crunching out of the process, leaving your payroll administrator to oversee everything. Income tax deductions and National Insurance Contributions (NICs) will all be worked out for you. It can also track absences, expenses, bonuses, holiday pay, overtime, pensions and (of course) hourly pay or salaries. And with the advent of open banking and psd2, payments are faster than ever (and more secure). You’ll stay compliant with government regulations Staying up-to-date with current tax rates and responsibilities can feel like a constant game of catch-up. But there’s no need to worry with payroll software. It tracks all the latest regulations automatically, dealing with issues from GDPR to Workplace Pensions as well. You’ll improve accuracy and simplify the payroll process As with all aspects of your business, manual data entry means the risk of human error and potentially costly mistakes. Under-deductions, late payments, miscalculations – they’re all part and parcel of manual entry. We’ve all done it: hit the space bar mid-spreadsheet on Excel and deleted a formula without even noticing later on. When all the number crunching is handled by your payroll software, that risk is removed. You’ll actually be on top of your record keeping, so it’s much easier to meet your deadlines and make those payments to HMRC in plenty of time, especially with a built-in reminder. Your employees will benefit Some payroll software offers employees access to their own portal. This gives them restricted access to the system and allows them to check details, take a look at their payment history and even book time off. It sorts your stationery and avoids mistakes Employers are required to give each employee a pay slip with the details of their pay and any deductions. Doing this manually increases the risk of any errors made. While automating this means the payroll management system can run payslips automatically, sending out secure and compliant payslips straight to your employees. Make sure the payroll software you choose lets you produce smart, customisable, secure and compliant payslips that can be printed or emailed as well as P60s and payroll reports. It’ll make your year-end easier Automatic tracking, recording and reporting is offered as part of most payroll software. These features make the year end far less stressful for you or your payroll manager – gone are the days of paperwork mountains. It could save you a lot of money in penalties. Payroll places extremely high levels of responsibility on employers, and getting it wrong could potentially be very financially painful. Which Payroll software is right for you? As with any choice concerning your business. You need to carefully explore your options and select the payroll software that’s right for your business needs. Some areas you may want to consider include: Features – As noted above, different systems can do a range of different things. You should think carefully about what sort of features you need – and avoid paying for those that won’t benefit you. Cost-effectiveness – Different systems have different payment structures, and choosing the right one can save you a lot of money in the long term. If you run payroll multiple times a month, for instance, a monthly fee will likely work out cheaper than paying each time you run payroll. Integration – Which other systems does your business use? To get the most out

Independent contractors, consultants, or freelancers are self-employed individuals who work for businesses, usually on a short-term basis. Hiring a contractor enables firms to access specialist skills, knowledge, and experience, without actually taking someone on full time. This is often very appealing. If you’re thinking of becoming a contractor, you’ll need to decide what kind of legal set up your business will have. It’s known as your “legal structure”. The legal structure you choose affects how much tax you’ll pay, your management structure, and what records you’ll need to keep. As with most start-up business, you essentially have three main options: Operate as a sole trader Set up a limited company Create a partnership (you’ll need a friend!) Setting up your contracting business as a sole trader Becoming a sole trader is usually the simplest route into contracting in terms of admin and tax. You don’t need to register with Companies House, so won’t have to file annual accounts with them, and there’s very little admin to get started. As a sole trader, you and your business are, legally speaking, the same thing. There is no distinction between yourself and your business, so you get to keep all the profits after tax. On the flip side of this, any business debts or liabilities are also your responsibility. If your contracting business runs into trouble, all the financial and legal responsibility falls to you to sort out. Paying tax as a sole trader contractor As a sole trader you must register for Self Assessment with HMRC and complete a tax return each year. It’s important to keep accurate records of your business income and expenditure because this will help make sure you pay the right amount of tax (and claim all those expenses!) Keep in mind that you might also need to pay fixed-rate Class 2 National Insurance contributions (NICs), as well as Class 4 National Insurance contributions on any profit you do make. What are the benefits of being a sole trader for contractors? Plenty of contractors prefer being a sole trader because it’s easy to start up, and offers more flexibility. You’ll need to make sure you record your profits and losses (known as bookkeeping), and submit your Self Assessment tax return on time (and pay the bill!). Are there any disadvantages to being a sole trader for a contractor? You are totally responsible for your business, so if there are any debts or other liabilities it’s you that pays them out of your own pocket. This could mean your home or other personal assets are at risk if you don’t have the cash available. You might also find that some contracting agencies won’t work with sole traders, which can have a massive impact on your ability to find work. Operating as a contractor with a limited company Limited companies are completely separate legal entities from their owners and directors. You’re not legally responsible for the company’s debts or liabilities, but this also means any profits belong to the company. In order to begin trading you will need to register as a limited company with Companies House. This is called incorporation – a process which the video below explains in more detail. A limited company needs at least one director to start up, and must submit annual accounts to Companies House. The benefits of running your contracting business as a limited company The beauty of setting up as a limited company is limited liability. It’s more costly and admin-heavy to register, but if anything goes wrong, only assets belonging to the business can be seized – not the personal assets of directors or shareholders. It’s often more tax-efficient too. Many company owners are both directors and shareholders, essentially taking a salary as an employee of the business, and then receiving dividends alongside it. Another benefit for contractors in particular, is that starting a limited company rather than operating as a sole trader can help your business appear more credible. Many contracting agencies won’t work with sole traders, so running your business as a company can help you source more work. It can also be much easier to raise finance, and is likely to be easier to sell up. What are the practicalities of running a company? As company director it’s your responsibility to make sure that the company submits the correct tax returns and accounts to HMRC and Companies House each year. As an individual who is a company director, you’ll also need to complete a Self Assessment tax return. If you don’t normally fill in a tax return, you’ll need to sign up for Self Assessment on the Gov.uk website. Each time you submit your tax return, you’ll need to provide details of the income you receive as a director, as well as any other income you receive. Setting up a partnership Setting up a partnership allows contractors to share the responsibilities, costs, and risks of running a business with other people. It’s a simple and flexible way for two or more people to own and run a business together. You don’t need to register with Companies House, reducing some of the administrative burden. Instead, each partner is self-employed in their own right, and then registers the partnership for Self Assessment. Partnerships have no legal status in the way that limited companies have. They simply act as a way of linking two or more self-employed people together. Though partners can also be a limited company or another partnership! The profits and gains are generally shared between each of the partners, unless a different agreement is set up that says otherwise. Are there any disadvantages of setting up as a partnership? If you go into partnership with someone, you must be absolutely sure you can trust them. Even then – make sure you have an agreement in place before starting up! This is because all debts and liabilities are the responsibility of each partner personally. Creditors can seize personal assets if the partnership runs into difficulties. Even if your partner ran up the debt and you didn’t –

As contractors eagerly await the Medium-Term Fiscal Plan on Monday 31st October, we take a look at the latest on IR35. With potential implications to be unveiled, the plan will fall 5 weeks after the mini-budget 2022, where, surprisingly, the repeal of IR35 reform was announced. It was announced that the IR35 off-payroll legislation would be simplified from 6th April 2023. The rules will revert to the 2016 position with the recent 2017 & 2021 reforms, which were largely unpopular, due to be repealed. This was great news for contractors as they would once again be responsible for determining their own employment status and paying the correct tax and NI contributions, rather than the employer. Ultimately, this change makes it easier for companies to hire contractors which will result in a significant uplift of people moving into self-employment or returning if they had gone back to employment due to the complexity. What has the government said since? Since the announcement of the Government plans to repeal the Off-payroll (IR35 Reforms), there has been confusion across the internet and social media. The most common is that “IR35 has been repealed”. IR35 in its whole form will remain. There is no getting away from that for now, however it is the controversial reforms to IR35 rules that will be scrapped. The changes will come into effect from 6th April 2023, at the start of the new tax year. For now, the IR35 reform’s repeal is set to stay, despite the pressures on the economy and the unstable nature of the government, with many agreeing the passing the responsibility of status back to contractors is the right thing to do. Businesses are often struggling with IR35 issues, which is hindering growth due to a shortage of contractors. But what is the latest with IR35? 5 things you need to know as a business or a contractor 1) If IR35 has not been scrapped, what has? Nothing has been “scrapped” at the moment, and certainly not IR35 in general. The plans are to repeal the Off-payroll working rules (“IR35 Reforms”), which were introduced in 2017 and 2021. The original IR35 rules will remain in place. 2) What will change in April 2023? What causes the most confusion is that the IR35 legislation has changed over the course of time, but is still used to refer to two pieces of employment legislation. The Off-payroll working rules (Chapter 10 of the Income Earnings and Pensions Act) 2003 were introduced into the public sector in 2017. This was then extended to the private sector in 2021 for medium and large companies. The original IR35 rules date back to April 2000. In basic terms, under the original rules, contractors were responsible for deciding where they stood in terms of IR35 status and it was their responsibility to ensure they were paying the correct tax. Under the new rules, hiring firms took on that responsibility for assessment and tax liability. In 2015, it was planned to replace IR35 with the term “off-payroll working”, however Ministers decided this would be a huge burden on small businesses, and the rules only applied to medium and large companies instead. The change in 2023 will be for the new rules, with things reverting to how they were before. Contractors will make their own assessments and deal with their own tax implications, as well as bear the liability if they get it wrong. It’s business as usual until the law officially changes, however companies and contractors should start to get prepared. 3) How exactly should businesses and contractors prepare for any changes? For now, businesses should comply with the Off-payroll working rules. Until the Finance Act is changes by a bill, they remain law. If you are a business who has contractors working for you and operating Outside IR35, they can continue in the same way. Where firms may have implemented a decision to disallow limited company contractors, due to the IR35 burden it has created on the business, it may be time to reconsider reversing that decision. From 6th April, there will be a huge amount of talent that you can now retain. If you are a contractor and you believe you should be operating ‘outside IR35’, you should begin assessing your status. If you need assistance with this, Account-Ease can help. We work with specialists who can support contractors across all industries identify their status and make sure they are paying the correct amount of tax to protect themselves. 4) Will all firms take on contractors again? This will likely be a gradual process where firms lift their blanket bans and allow contractors to work under a limited company again, providing that the contractor is “outside IR35”. Firms that did put a blanket ban in place may decide to work with contractors again as the switch from the old rules to the new rules was pretty easy to navigate, and this should be fairly seamless too. If they decide to engage with contractors again on an “outside IR35” basis, proper assessment will need to be in place though. This is to ensure that contractors meet their compliance, and they cannot be accused of facilitating tax avoidance. In terms of recruitment, agencies will be expected to prove due diligence is taken in the recruitment of contractors, and that everything is above board with an IR35 contractor check. There is also the issue of the transitioning of existing contractors, as they do now have different rights. Companies cannot be seen to have workers finish one week as an on-payroll worker and then return after the weekend as a limited company contractor. The transition needs to be carefully considered and a gradual process, as this is one of the reasons for IR35 being introduced back in 2000. 5) Will I no longer have to use an umbrella company? The IR35 changes won’t make a huge amount of difference to those who choose to use an umbrella company. However, there may be less of a requirement

“AT Monday, the Chancellor announced the biggest package of tax cuts in 50 years. Without even a semblance of an effort to make the public finance numbers add up. Instead, the plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth. This marks such a dramatic change in the direction of economic policy-making that some of the longer. Serving cabinet ministers might be worried about getting whiplash. Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts. He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. And he has avoided scrutiny by presenting a Budget in all but name without accompanying forecasts from the Office for Budget Responsibility. Injecting demand into this high-inflation economy leaves the government pulling in the exact opposite direction to the Bank of England, who are likely to raise rates in response. Early signs are that the markets – who will have to lend the money required to plug the gap in the government’s fiscal plans – aren’t impressed. This is worrying. Government borrowing is set on an upward path. It will reach its third-highest peak since the war, and remain at well over £100 billion, even once the energy support package is withdrawn. Public finances The Government’s costing of the Energy Price Guarantee for households and non-domestic consumers – £60 billion over the next six months. Means that borrowing this year is now on course to climb to £190 billion. At 7.5% of national income this would make it the third-highest peak in borrowing since the Second World War. After the Global Financial Crisis and the COVID-19 pandemic. By 2026-27 we now forecast that borrowing will be over £110 billion – 3.9% of GDP – which is more than £80 billion higher than the £32 billion forecast by the Office for Budget Responsibility in March. Over half of this increase in borrowing is due to the almost £45 billion a year of tax cuts announced by the Chancellor today. Our forecasts make no allowance for any top-up to spending on public service spending which might be required given the myriad pressures they face and the fact that public-sector pay awards will run at a much higher rate than assumed when the spending envelope was set a year ago. We also do not account for the most recent rises in gilt rates: the interest rate on 10-year government bonds is currently running at 0.5 percentage points higher than on just Thursday morning. A sustained increase in the cost of government borrowing of this magnitude would add £5 billion a year to borrowing. Borrowing at the rate we forecast would see debt continuing to rise as a share of national income even after the Energy Price Guarantee has expired. It is possible that economic growth will be higher than expected, either through luck or through concerted policy reforms across government. But on current policies it is more likely that, at some point, today’s tax cuts will need to be paid for by future tax rises or spending cuts. Public sector net borrowing forecast with and without Energy Price Guarantee (EPG) (23 September 2022) Underlying government debt forecast as a percentage of national income (23 September 2022) Tax cuts – the big picture ‘Mini-budget’ is anything but mini. In fact, it represents the biggest tax cut to the planned level of tax of any budget since 1972. Outdoing even Nigel Lawson’s 1988 Budget in which the top rate of income tax was reduced from 60% to 40%. Net permanent tax cuts as a percentage of GDP, relative to previous plans While the tax reductions announced in this budget are substantial. Their impact is only forecast to return the UK tax burden to 2021-22 levels – reflecting the large increases in the tax burden previously forecast for the coming years. This will mean a tax burden that remains at its highest sustained level since the 1950s. UK tax burden as a share of GDP Income tax and National Insurance Chancellor Kwarteng has announced some broad-based tax cuts that will affect tens of millions of people. One tax cut aimed very narrowly at the 600,000 people on the highest incomes. April’s 1.25 percentage point (ppt) increases to the rates of employer, employee and self-employed National Insurance contributions (NICs), and to the rates of income tax on dividends. Will be reversed from 6 November. Workers with annualised earnings above £12,570 gain from the NICs cut. The health and social care levy, which was effectively going to extend that NICs increase to workers aged over the state pension age from next April, will not be implemented. This will cost about £16 billion per year from next year. A 1ppt cut to the basic rate of income tax announced previously by then-Chancellor Rishi Sunak. From 20% to 19%, has also been brought forward by one year to April 2023. Hence income taxpayers will gain for an additional year from a tax cut worth an average of £125 per year for basic-rate taxpayers, and £377 per year for all higher-rate taxpayers. Finally, the 45% additional rate of income tax applying to incomes above £150,000 per year will (for those living outside Scotland) be abolished from April. Instead, the 600,000 people currently paying this additional rate – about 1.1% of adults – will simply pay the standard “higher rate” of 40%. The government says that cutting the top rate from 45% to 40% will cost about £2 billion per year. If no-one increased their declared taxable income in response to the change. We estimate that it would cost about £6 billion per year. Hence, the government is assuming that roughly two-thirds of the mechanical reduction in revenue is recouped due to behavioural responses. That looks like a plausible estimate, but the main thing to emphasise is the large uncertainty

Different set-ups require a different way of running things, so the right choice for one business could be completely different to another, even if they offer the same services within the same sector. When you are first starting out in business, many people believe that being a sole trader is the easiest route to take, at least until the business grows. Some people who find being a sole trader beneficial are freelancers such as personal trainers, photographers, artists and hairdressers, but it depends on the circumstance. What is a Sole Trader? There are 4 main types of business structures in the UK, and each of these has different tax and liability implications: –  Sole trader. –  Partnership. –  Limited liability partnership. –  Limited company. A sole trader is a simple business structure – one individual runs and owns the entire business. They are personally responsible for the success of the business and personally liable for the finances. They keep all of the profits after taxes but they are liable if the business incurs any losses. The sole trader and the owner are seen as one entity in the eyes of the law, meaning they are responsible for any business debts or failures. Although this may sound daunting, there are many advantages to being a sole trader: It works out cheaper to set up The biggest advantage of being a sole trader is when you first start-up, the costs of doing so are significantly lower than if you were setting up as a limited company. Registering as self-employed is free as opposed to registering as a limited company. Setting up is easier than if you were a limited company When you set up as a sole trader, there are fewer legal regulations than if you set up as a limited company, which makes it quicker and easier. You work and get paid as an individual, so the only legality is to tell HMRC that you are self-employed. As long as all of your necessary licences are in place, you can then start trading. You still have to pay tax on your profits but there are fewer compliance burdens than those that work via a limited company. Increased privacy Unlike limited companies, sole traders do not have to upload their personal details to Companies House, meaning you can be private about your accounts, sensitive data and directors information. Companies House is easily accessible to the public, and many sole traders like that their competitors cannot keep tabs on them. Sole traders are protected by HMRC’s taxpayer confidentiality rules. You work for yourself Being your own boss means there are no shareholders or directors to answer to or worry about, and you have full control over how you run your business. You are free to make your own decisions when it comes to the day to day running of the business, with things such as finances, workflow, business strategy and hiring, and the decision making is much quicker. You can also set your own hours and focus on your own long-term goals without having to agree with other people. Above all, it means you get to keep all of your post-tax profits, and do not have to worry about sharing these out to shareholders and directors. You can add your own personality As a sole trader in a lot of industries, your services are not the only thing you offer a customer. Your character, quirks and all, are what sells you too. People buy into you as a person when you work in a customer facing role. Whether you’re a personal trainer or a hairdresser, run an independent shop or you’re a wedding photographer, your personality is what retains customers and is why people recommend you. Larger brands are not able to add their own stamp, which gives you the upper hand. There is less admin Because there is less regulation, it means there is less paperwork. Less paperwork means more time to run your business and less time needed on admin. Add into the mix a good accountant, and you can fully concentrate on what you do best. It’s easy to switch to a limited company If you start out as a sole trader, it is much more flexible to change over to a limited company down the line. To move from sole trader to limited company status, you send an application to Companies House and this can be approved as soon as 3 working days later. If you did things the other way around and started out as a limited company then decided to switch to a sole trader, you would have to dissolve the company first and step down as the director. If you do want to want to shut the business, you will have to do the following: –        Alert HMRC –        Settle any liabilities –        Collect money owed –        Keep or sell any physical assets and equipment –        Distribute any residual money to the owner As a sole trader, you can only sell the assets. However, with a limited company there are a lot more steps to the process, which can be complicated. You can get tax back on losses You are more likely to make a loss in your first 4 years of trading than at any other time, but if losses occur in the early days, you can set these against other income streams. This helps to reduce the amount of tax you pay. Setting up a business is a daunting process, especially if you’re a start-up coming from full-time employment. There are limits and caveats, but there is the option to carry back that loss. Early year loss claims apply in the first four years of trade. In your first years, once you’ve worked out your tax adjusted loss, you might be able to carry that loss to a prior year, where you may have been paying tax at 40%. It is worth speaking to your accountant about this, as they will be able

Completing a self-assessment is the bane of a lot of contractors‘ lives; on top of taking a lot of time, there are often many common mistakes made which can either result in having to start again or receiving a fine. Not all mistakes lead to a penalty but they can lead to more tax being paid than necessary. Made a Mistake on Your Self-Assessment Tax Return? What You Can Do: Making a mistake on your self-assessment tax return form is an easy thing to do. When you spot a mistake after you have filed it, there are things you can do. If you submitted the form online in the last 12 months you can fill out an online amendment form. When logged in to your HMRC online account you can find your submitted self-assessment tax return form. When viewing this form, you will see an option to amend the form. Upon selecting this option, you will see a list of sections and elements of the form available for amendment. You will need to select the appropriate section and then fill out the revised details and re-submit. If you filled out your return on paper, you have 12 months following the October submission (as paper returns have an earlier deadline), to re-download the form and fill it out correctly to send back to HMRC. If you have missed the 12-month window, you will need to write to HMRC explaining your circumstances and the mistake. The change to your form will either result in you needing to pay more tax or receiving a refund. You must make sure to carry out either action as soon as possible. You will have a four-year window to file for and receive the refund starting from the end of the tax year it applies to. HMRC Penalties for Incorrect Returns HMRC can give penalties for incorrect returns. The fine process uses a ‘behaviour based’ system which range from 0 to 100% when assessing a penalty for incorrect returns. A reasonable care penalty of 0% will be applied when the taxpayer discovers a mistake and discloses this to HMRC, then 100% penalties apply when there is a deliberate false return, facts are concealed and the taxpayer only accepts the position following a challenge by HMRC. Steering clear of mistakes and avoid HMRC penalties for incorrect returns is essential when you are submitting your returns. Read through our advice below to prepare yourself for your next self-assessment and avoid those pesky errors! Remember to Pay This has to be the first thing we talk about, even though it’s the last thing you need to do. More individuals than you may expect complete their self-assessment” and then do nothing. It’s easy to assume that everything’s done now, but you do actually have to arrange the payment to HMRC yourself. Whether it’s by direct debit or cheque. Be sure to finish this step to avoid any late fees or criticism from HMRC. Keep a Record of Everything This will make your life so much easier when it comes to self-assessment time, but is something so few contractors, freelancers and business owners do right. Keep a clear and easy to follow record of every piece of expenditure, every wage or dividend – anything to do with money! When it comes to filling in your self-assessment, you’ll find having everything to hand (preferably on a spreadsheet) speeds the process up and prevents any panicked searches for bank statements. Check the Figures Check your record keeping and ensure that the figures entered onto the tax return match the actual amounts in your records. Any errors could result in you under or over declaring your income and taxes. Read the Questions Just like an exam back at school, be sure to read the questions and make sure you know exactly what the form requires of you. If you provide the wrong information, it could mean you have to re-do the whole thing. You could be declaring the wrong amount of tax/profit etc. Always be sure before you do anything. Amend Your Self-Assessment If you realised you have made a mistake on your tax return. It won’t be too late to do something about it. Can go back and amend your self-assessment should you need to. You have 12 months after the usual 31st January tax return deadline to amend a self-assessment. You amend your self-assessment via the process that you submitted it, so online if it was submitted in this way and on paper if you submitted it on paper. Use an Accountant Of course, the best way to avoid all of the headaches involved with self-assessment forms is to simply hire a self assessment tax return accountant. They have the professional knowledge to understand what is required and have often done it hundreds of times before.  Still remember to keep a record of everything though – it’ll make their life a lot easier! If you have already started, or even submitted your self-assessment. Feel like you need assistance with it, it may not be too late to get help either. You, or an accountant can amend a self-assessment so long as it’s before the deadline, which you can find on the Government’s website. If you want to complete your next self-assessment on time and correctly, consider asking an accountant for help. Contact Account ease for expert advice and professional assistance, and avoid any mistakes!  

From 1 November 2022, VAT-registered businesses will have no choice. But to use Making Tax Digital (MTD) compatible software to file their VAT returns, unless they have a digital exclusion exemption. Businesses with a taxable turnover above the VAT registration limit of £85,000 have had to use MTD VAT rules since 2019. It became a requirement for all VAT businesses from 1 April this year. HM Revenue & Customs (HMRC) will remove the option to file a VAT return from 1 November without using MTD compatible software, so it is advisable to set up this process sooner rather than later. Despite promises to not issue penalties for those who use the wrong filing method. Businesses could be handed a default surcharge instead and from January 2023, late payment penalties as well. It has been reported that around 10 per cent of businesses above the VAT threshold and 55 per cent of those below. It have not yet signed up to MTD VAT, which they need to do as soon as possible. A portion of businesses have not signed up for MTD but are already filing their VAT returns using MTD software. They must complete the sign-up process now. So you should check if this applies to your business as soon as you can. For businesses that file VAT returns annually, the online return will be accessible until 15 May 2023. Additionally, for those with a digital exclusion exemption. The online VAT return will remain open for those who can access it with assistance or through another body. Businesses that benefit from this exemption should be aware of this. If you are unsure it is best that you check before the November deadline. For more advice and information, contact us today. You can reach out us via phone call and also via email. Mail us at askus@account-ease.co.uk or call us at 0208 133 4599.