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What is Payment on Account?

What is Payment on Account?

If your Income Tax and National Insurance (NI) liability is over £1,000 you are likely to find yourself making Payments on Account (POA). If unprepared, the first year this happens can be daunting. There is no denying that you will look at your Return and find it hard to believe that it is correct.

Payments on Account are based on HMRC’s belief that your profit next year will be similar or higher and require you to make payments towards the next years liability. HMRC calculate Payment on Account by taking your current liability and halving it, these payments are due in January and July following the tax year end.

Example

In John’s first year of trading his Tax Return ending 5th April 2022 shows a Tax and NI Liability of £3,000. This also means that he now has Payments on Account to make of £1,500 each. John’s payments are as follows:

• Due 31st January 2023 - £4,500 (£3,000 liability plus £1,500 first POA).

• Due 31st July 2023 - £,1500 (second POA)

In year two, John’s Tax Return ending 5th April 2023 shows a liability of £4,500. However, he has already paid £3,000 towards this amount (2 payments of £1,500). This means that his payments are as following:

• Due 31st January 2024 - £3,750 (£4,500 liability minus the POA already made £3,000, plus next year’s first POA £2,250)

• Due 31st July 2024 - £2,250 (second POA) Payments on Account are estimates and can be amended if you believe that your profit for the following year, will be lower than the current one.

This is one of the reasons to always keep your business income and expenses up to date, so you can quick and easily check how your profit for the year is looking.

If you have any questions on this or anything else please do contact us. You can all us on 03449844445 or email info@fbtc.co.uk 

Should I, shouldn't I - The 5th SEISS Grant

The rules for the 5th grants are surprisingly cumbersome. Here is a very brief breakdown of the grant application process, in two parts.

Firstly, you need to look at your profit for the period May 2021 to September 2021.

Compare May 2021 to September 2021 to the period May 2019 to September 2019. If your profit is “Significantly” lower because of Covid then you qualify for the grant. For driving instructors, the quickest and easiest way to confirm this is to look at your diary for those months and see how they compare, if your lessons are about the same then you will not qualify, if there are significantly less lessons being taught then you may qualify. For all other businesses, looking quickly at the cash sheets or software you used in 2019 will let you know how your profit compares.

HMRC knows that most trades have restarted, and which trades are booming. They will be surprised to see any applications from people operating these trades. It is therefore incredibly important to keep records showing that your profit is lower as HMRC may request your evidence to support your claim.

Secondly, there may be a completely justifiable reason why you will qualify.

You may have been made to isolate numerous times or you may even have had Covid for a significant period. If you have been affected and it has had a significant impact on your profit, we strongly suggest you keep the texts and emails you have received to confirm when you were unable to work and then you can show the impact this had on your profit, at that time.

If you believe you qualify then you will need to supply HMRC with your turnover figures for 2020/2021. The figure you need to use has to exclude any grants you may have received. 

HMRC have stated they will pursue people who should not have made claims. They are taking an incredibly long-time processing 2020/2021 Tax Returns as they are checking every return to see if taxpayers should have made the claims. To be clear, I am not saying do not make the claim, I am asking that you consider very carefully whether you honestly qualify. Especially as HMRC can insist you repay the grant with up to a 100% penalty if they believe you shouldn’t have claimed it.

What is the best way to change a Car?

Deciding whether to change your business car can be a difficult decision, as there can be significant tax implications. We are often asked what the best way to change a car is and of all the ways available it really comes down to two options, buying it or leasing it. Both effect your tax in very different ways, details of which are below.

Buying the car (Burst Tax Saving)

Driving Instructor cars are very unique in that, assuming Dual Controls are fitted, they are classed as Plant and Machinery rather than a Car. This distinction is incredibly important as it allows us to claim a one off 100% deduction in the year you buy the car. This means that if you buy a car before the 5th April 2022 you can claim up to 100% of the cost of the car and dual controls against your profit.

It is important to note two additional things:

1. If the full amount is claimed there is no additional tax relief on the car, and
2. When you sell or part exchange the car anything you receive for it is wholly taxable and will be added to your profit in the year you sell it.

If we do not claim the full amount in the year of purchase, then under the normal rules we can claim 18% of the remining balance over the life of the car.

This is the reason we refer to it as a Burst Tax Saving, you can have a massive tax saving in one year then your profit and tax will return to normal levels in following years.

How to pay for it.

From a tax point of view there are again only two real ways of acquiring the car, outright or on a Loan/HP/PCP agreement. By buying it outright there is no additional tax relief available, however when acquiring it on a Loan/HP/PCP agreement there is an additional tax relief. This is because you are being charged interest on the amount you borrow to acquire a business asset. This interest is therefore a business expense and is deducted from your turnover when calculating your profit. It is incredibly important to remember that you do not get tax relief on the repayment just on the interest charged. 

Leasing the Car (Regular Tax Saving)

Leasing the car, for example under a PCH agreement where you never have a right to ultimately own the vehicle, is completely different to the above as there is no Burst Tax Saving. However, in many ways it is much simpler as the amount you pay the lease company each year is an allowable business expense and is therefore deducted from your turnover when calculating profit. 

We refer to this as a Regular Tax Saving as you will always receive tax relief for 100% of each lease payment you make.

Manager’s thoughts

Normally when I am asked about tax relief and changing a car, I usually reply that there is no “one size fits all” approach to this kind of tax planning. Every person’s situation is different, and it really does come down to how you want to receive the tax relief. We have many clients who love the Burst Tax Saving and just as many who like the Regular Tax Saving, and that is absolutely great, you have to find whichever is best for you. 

This year however I might be moving ever so slightly closer to one over the other. Following conversation with Driving Instructors (DI’s) who are restarting their businesses and seeing just how many are working extra hours, I do think many DI’s will have significantly higher profits in 2021/22 than they normally would. Now this obviously cannot go on forever, and at some point, the market will return to its historic norm, but in the meantime many DI’s are going to see higher tax bills than they are used to. 

Buying a new car instead of leasing one could have a significant impact on your tax returns this year as you could see your profits pushed towards the higher rate band. So, buying a car could help bring your profits and tax in 2021/22 back down a level you are used to.

This is obviously incredibly speculative, no one truly knows what your profit will look like during the year, but you know the feel of your business and how full your diaries are.  It might be worth a quick five-minute check to see how your income might stack up this year and compare it to previous years and think about the merits of changing your car.

You must of course also consider the impact a car change can have on other things. Changing your car as discussed above, is highly likely to reduce your profits in the year of change and this could have an impact on things such as loan or mortgage renewals/applications which rely on reported annual taxable earnings. Finally, of course, as always when taking on any new debt you need to think carefully about whether you can afford it. 

Save your Valentine tax this year

Love is in the air, roses, wine and chocolates are everywhere and yet some of us are still thinking about tax. Although we would never give dating advice (trust me you really wouldn’t benefit), when it comes to tax, we really know our stuff. The Marriage Allowance is a little tax saving gift definitely worth having, a simple election could help you save around £238 in 2018/19, and while this may not seem like a lot, have you seen the price of roses, so every little helps.

I know we have made light of it here but please don’t read the above and think we are not serious, the days of huge tax savings are gone, so making as much of the little savings as you can is the best way to try and reduce you tax bill. If you or your partner aren’t making full use of your Personal Allowance, £11,850 in 2018/19, then this is something we would strongly recommend. The link below will take you to a HM Revenue and Customs website where you can make the election:

https://www.gov.uk/apply-marriage-allowance

If you are not sure about the election or would like to talk it over with someone please do call us, the team are here to help. 

Income Tax on Rental Properties

If you receive rental income from land or property, you will most likely have to pay tax on the profits made. Your profit is the amount left once you have added together your rental income from all sources in the tax year and deducted any allowable expenses or allowances. Tax relief on mortgage interest has changed significantly in recent years, the relief is moving from a deduction from profit to a general tax relief. The overall result should be the same for basic rate taxpayers, however, higher and additional rate taxpayers will see their tax increase. 

Rental income is the rent you receive from individuals, businesses, local authorities, national agency etc. It can also include lease premiums and the income element of leases granted, and this must be considered when granting a lease to anyone.

When preparing your return, income and expenditure from similar types of property are combined, the typical types are, residential, commercial, UK holiday let and overseas property. When calculating the tax, different tax laws may have to be followed.

A £1,000 allowance exists which means that if your rental income totals less than £1,000 per tax year you are now exempt from completing a Tax Return.  If you’re total rental income from UK property is less than £10,000 and your rental profit is less than £2,500 then you do not have to complete a tax return, however, you must notify HMRC of the profit figure every year so that the tax due can be calculated and collected through your PAYE code. Anything over this means you have to complete a tax return for as long as you own the property. 

The same tax rates apply; 0%, 20%, 40% or 45% dependent upon which band you fall into. Whether you have two business and a rental property, just one rental property or are thinking of buying your first property to rent the important element is to ensure you are compliant with HMRC, this is so that you avoid any unnecessarily penalties.

Having an accountant support you with your rental affairs is beneficial as they can advise on elements like carrying losses forward and if you come to sell the property, Capital Gains Tax. Watch out for our blog on Capital Gains Tax coming soon.

What about my tax?

By far, the most common question we get asked by new self-employed individuals is how much should I put aside for my tax bill. Unfortunately, this isn’t the easiest question to answer as every taxpayer is different and any answer must be very general. To try to give an answer is full of perils as we don’t want a client to put too much or worse, too little a side and get a very nasty shock in January. Years of experience tells us that between 15% - 20% of turnover should cover the Tax, National Insurance and a possible payment on account. However, it’s unusual for a first-year business to make an outright profit, initial set up costs can be high.

So, what is the best advice. The best advice anyone can give you is to get your accounts in early. The quicker we can prepare your accounts the sooner you find out what is due by the following 31^st January but putting aside 15% - 20% isn’t the worst idea either.

 What happens if I can’t pay?

The best thing to do is let HM Revenue and Customs know as soon as you realise you’re going to struggle to pay your tax. HMRC understand that sometimes businesses have up and down periods and will normally try to create a payment plan that’s works for both sides. You can contact HMRC’s payment support team on 0300 200 3835. 

If you have any concerns about your tax bill or paying HMRC please do contact us on 0344 984 4445.

Pay your tax liabilities

The following link is the quickest and easiest way for you to pay your tax liabilities;

https://www.tax.service.gov.uk/pay-online/self-assessment

You will need your UTR to hand to pay using the link. 

Why Class 2 is Important

Many clients ask us why they should volunteer to pay Class 2 National Insurance and we always give the same answer: “Class 2 is the only National Insurance Contributions a self-employed person pays that counts towards their State Pension and other State Benefits”. To get a full state pension a person must have 30 years’ worth of contribution, for employees this is Class 1, for Sole Traders or Partners this is Class 2. Class 2 is currently based on a weekly amount of £2.95 a week, which is calculated and collected through the individuals’ tax return.  
 
As you approach retirement age it is wise to request a state pension forecast which shows how many years contributions you have and any shortfall. To fill the shortfall an individual has to pay Class 3 National Insurance which is currently £14.65 a week. This is obviously a very significant difference which shows why it’s in your best interest to volunteer to pay Cass 2.

Capital Allowances and in particular the Annual Investment Allowance

Capital Allowances are available on the tangible assets held by the business. This is mainly Plant and Machinery, such as cars, dual controls, computers, laptops, printers and sat navs, tractors, vans, ovens etc. Depending on the type of asset you acquire, you can claim Capital Allowances at either 18% or 8% each year based on the original cost of the asset.

In the first year though there is currently a special allowance available called the Annual Investment Allowance (AIA) which states that you can claim up to 100% of the cost of an specific assets in the year you buy them.

Annual Investment Allowance gives 100% writing down allowances on the first £200,000 of investment in plant and machinery in each year. 

If you do not need the whole of the allowance to reduce your tax liability, in the year you buy the asset, any unused balance will be carried forward to subsequent years where you will be entitled to capital allowances on the remaining amount carried forward each year. 

When the asset is sold or taken out of the business a balancing adjustment may be needed, this can result in either a balancing allowance or balancing charge.

Example

You can claim up to 100% of the cost of a car with dual controls, (please note that AIA’s are not normally available on cars), against your profits for the year. In subsequent years you claim 18% on any remaining amount which has not been claimed in the first year.

e.g. You buy a car with dual controls for £18,000 in 2017/18 and claim AIA’s of £12,500. In 2018/19 you can claim Capital Allowances at 18% on the remaining £5,500 giving tax relief on £990.

Don't worry we will calculate this for you. 

It is important to be aware of AIA as it will affect the allowances you have in subsequent years and advice should be sought before making a purchase on which you intend to claim AIA’s or disposing of an assets on which AIA’s have been claimed.

Taking the leap into self-employment

Taking the leap into self-employment takes a lot of courage. The first decision to make is what business structure will you move forward with? Your business structure is important and will pave the way for your businesses future. This is in terms of the financial and legal matters of the day to day maintenance and administration.

Soletrader

As a soletrader it is all about you, any profits are counted as personal income, there is no separation between your business and personal assets. As a soletrader you have few regulations to adhere to, for example you don’t need to register with Companies House. You will be required to complete a registration with HMRC for self-assessment and you will have to complete a self-assessment tax return. An advantage to operating in this way is that you can withdraw cash from the business without any tax affect. 

Partnerships

Like a soletrader you will have to complete the individual self-assessments along with the partnership accounts. As there is joint liability for any liabilities it is important to create a partnership agreement which is signed by all.

Limited Liability Partnership (LLP)

This option means you have the flexibility of the traditional partnership, but you are protected regarding potential liabilities. Each partners liability is limited to the total sum that they initially invested. As above you will have to complete the individual self-assessments along with the partnership accounts.

Limited Company

A limited company has separate existence to that of their directors. Personal finances are separate to those that the business has. This might be a positive factor however there are more exhaustive requirements of a limited company. For example, registering with Companies House and submitting the company accounts. There are significant penalties for failing to send the accounts on time and you also must consider National Insurance contributions as they are greater than that paid by a sole trader/partner. You are also taxed if you withdraw income from the company, if it is distributed it is taxed as a dividend.

It is best to do your research and seek advice.

Financial perks of Marriage

Marriage brings many financial perks, one of which is the potential transfer of some of your Personal Allowances. For 2018/19 the Marriage Allowance lets you transfer £1,190 of your Personal Allowance to your spouse/civil partner. The person transferring it must earn less than their Personal Allowance, currently £11,850, although to be truly tax efficient they should earn less than £10,660, to make sure they don’t get a tax bill. While the personal receiving it cannot be a Higher Rate Taxpayer. 

To benefit from Marriage Allowance the following must apply:

·         you’re married or in a civil partnership,

·         the transferor does not pay income tax or your income is below your Personal Allowance,

·         the transferee’s only income is taxed at the basic rate, which in 2018/19 means taxable income of no more than £46,350.

When used correctly the transfer can help save Income Tax at 20% on the amount transferred, which in 2018/19 is £238. It may not seem like a lot but if this can keep you below the cap for Payments on Account this can really help with your cash flow.

Feel free to contact us if you would like further advice and guidance on this.

Evidence is Key

Record keeping is vitally important and been prepared with your records is a good habit to get into. You will thank yourself in the future if you receive a letter from HMRC advising they are going to conduct a business record check. To make sure you are on the right track with your records think about how you record your work and your cashflow. By ensuring you think about these two factors you will be able to give the vital supporting evidence that will be required should an investigation take place. It could be two, three or four years before you have to check your records in such a situation. Clear information will be informative, and you will not need to try to remember what that transaction was, here is an example: 

You book a holiday for you and some friends and pay the deposit yourself. Your friends pay you their £200 share by bank transfer a few days later and you pay it into your personal bank account. This is an entirely non-taxable transaction. However, two years later when the Revenue are looking into your affairs if you can’t recall and or evidence what that £200 was, the Revenue are quite likely to assume that it relates to a block booking of driving lessons which has not been declared in the tax return and so tax you on it – and don’t forget there could be penalties and interest to add to the basic tax due. 

FBTC's advice is to think about your;

Diary - Keep detailed records of the lessons you undertake in a daily diary. Mark all bookings taken and just as importantly mark any that do not turn up or cancel.  At the end of the day or week total the cash received in the diary and bank that sum.  This will give a clear trail of your business activity. The FBTC online cashbook provides you with an ongoing report which is useful for viewing your current net profit. 

Bank accounts - Keep your personal and business cash flows separate by using a separate bank account for the business.  Use it religiously.  Don’t be tempted to use any of your cash earnings to buy petrol, lunch or anything else you might need during the day, this prevents the possibility of “forgetting” to record the cash income.  Pay for business costs with a bank card and keep the receipt.  Again, this will give a clear audit trail of your business expenses.  For your personal drawings make regular weekly withdrawals or transfers to your personal account and record them as such and use this cash and only this cash for your non-business expenditure.  Finally, it is best to include references on your bank transfers for your own personal bank transactions, particularly in relation to one-off deposits and expenses because you’ll not remember everything two years down the road!

Key Fraud Rules to Remember

HMRC will never contact customers who are due a tax refund by text message or by email. Figures from UK Finance show £366.4million was lost to financial fraud in the first half of 2017, with a further £101.2million lost through authorised bank transfer scams. 

To help people protect themselves the Take Five campaign (supported by HMRC) has issued three key pieces of advice:

1. A genuine bank or organisation will never contact you out of the blue to ask for your PIN, full password or to move money to another account. Only give out your personal or financial details to use a service that you have given your consent to, that you trust and that you are expecting to be contacted by.

2. Never automatically click on a link in an unexpected e-mail or text.

3. If you're approached with a request for personal information, don't provide it. ​

If you have any questions about the above please contact us.

Are you completing your Self Assessment correctly?

Your main priority is likely to get your Self-Assessment submitted on time, but are you completing it correctly? FBTC have compiled an overview of tips for you to think about when preparing and filing your tax return.

A key element of your tax return is your income. Are you including it all?

You will have been required by HMRC to complete the tax return because you are self employed. However, once asked to complete a tax return, you have to include all sources of income. So don’t forget bank or building society interest, PAYE income and rental property income. And this is income received during the whole of the tax year. If this is the first year that you began self employment some people mistakenly think you only include income received after the self employment started. Consider all expenses that you are trying to claim for to ensure they are definitely allowable for tax purposes. Getting your income and expenses correct is important so as to reduce the chances of an HMRC enquiry/investigation.

It isn’t just about what you include it is about how and where you include it. From year to year you might miss classify your expenses, recording transactions under different categories. It’s best to be consistent.

Don’t rush to complete your return, there is a chance that you may transpose figures or add them up incorrectly, which will lead to the wrong calculations. This might mean you pay more tax than you need to and nobody wants to do this.

Deadlines are suddenly on top of us even though we know exactly when they are. Preparation is key to ensuring accuracy and filing on time to avoid the £100 late penalty charge. It is much better to know what your tax liability is in advance rather than filing it on the deadline and then not been able to pay your bill. If you were unable to pay your tax liabilities, you will start to receive late payment interest from 1^st February and further delays in payment could lead to surcharges based on a percentage of the outstanding balance.

HMRC state ‘tax doesn’t need to be taxing’, this is correct it doesn’t need to be and having a professional acting for you can be beneficial. This is not only to ensure you are compliant with HMRC regulations, but a good accountant will also save you money.

A broken laptop, a paper eating dog and a trip to Italy

The deadline to file your self-assessment tax return and pay any liabilities that are due is fast approaching, it is 31^st January 2018. Less than 6 weeks to go!

You may have a reasonable reason for missing the deadline, but this has to be communicated with HMRC and there is no guarantee they will accept your reasons.

HMRC have published some of the excuses that are given for late filing;

1.   My tax papers were left in the shed and the rat ate them

2.   I’m not a paperwork orientated person – I always relied on my sister to complete my returns, but we have now fallen out

3.   My accountant has been ill

4.   My dog ate my tax return

5.   I will be abroad on deadline day with no internet access so will be unable to file

6.   My laptop broke, so did my washing machine

7.   My niece had moved in – she made the house so untidy I could not find my log in details to complete my return online

8.   My husband ran over my laptop

9.   I had an argument with my wife and went to Italy for 5 years

10. I had a cold which took a long time to go

The above excuses were used in appeals to HMRC against penalties for late filing. As you might guess, the appeals were unsuccessful.

You will receive £100 penalty for submitting your tax return after the deadline date. 

If you would like to chat about FBTC completing your accounts and tax returns, contact us now on 0344 984 2515 or email fbtcenquiries@fbtc.co.uk

Allowable Business Expenses

It is important to know what expenses are allowable against your business profit. The following list includes the principle examples of expenses, that you are likely to incur whilst running your business.

Office Costs
Includes items such as postage, stationary, computer software, printing material.

Vehicle Costs
Franchise fees
Vehicle insurance
Cleaning
Repairs and servicing
Fuel
Leasing
Road Tax
Breakdown cover
Interest element on finance used to purchase the vehicle

Travel and Subsistence Costs
Parking
Train bus, air and taxi fares
Hotel rooms
Meals on business trips 

Staff Costs
Wages paid to another person for work done in your business

Financial Costs
Bank account charges that relate to your business
HP/Loan interest for the purchases of business assets
Accountancy Fees

Advertising and Marketing Costs
Material used to promote your business such as branded clothing and advertising material
Website 

Subscriptions
Trade magazines
Membership to professional bodies

Capital Expenditure

Certain items of expenditure are classed as capital expenditure. These items include cars, dual controls, computers, laptops, printers and Sat navs. For these items you are entitled to a capital allowance to set against your net profit to cover the depreciation of the asset and is in addition to the finance interest mentioned above under vehicle costs. FBTC will calculate the capital allowances for you.
Business mileage
Rather than claiming the vehicle costs and capital allowances on a new car, as mentioned above, it is instead possible to claim business mileage. FBTC can advise on the most beneficial option.

Private usage
Some expenses incurred may also hold an element of private usage. The private element of the expense will be disallowed.
FBTC will calculate this for you.

Do you know the difference between tax avoidance and tax evasion?

The recent publicity regarding the “Paradise Papers” and last year the “Panama Papers” could lead one to think that it is only the rich and famous that need to be careful when it comes to keeping tax affairs in line.

However, we cannot stress enough that small businesses must also be vigilant. HMRC have been given significant extra resources to be able to check that businesses and their owners are paying the correct amount of tax. These resources will be increased further as Making Tax Digital is introduced.

Penalties for tax avoiders are primarily a percentage of the additional tax due ranging from 30% to 100%. Tax evasion can lead to a criminal prosecution and thus the possibility of a custodial sentence.

Do you know the difference between tax avoidance and tax evasion?

• Tax avoidance involves bending the rules of the tax system to gain a tax advantage.  

• Tax evasion is the illegal evasion of taxes by for example deliberately not declaring a source of income.

Tax avoidance can quite often simply be a difference in interpretation between the taxpayer and HMRC of the tax rules. HMRC are becoming more aggressive in this area as they seek to bring in more taxes for the Government.

Keeping accurate records is vitally important, especially if you are chosen for a ‘Business Record Check’. This document will ask initial questions about your accounting records before HMRC decide if they will need to pay you a visit to carry out further checks. 

It is impossible to say when or if you will ever be chosen for the Business Record Check.  Therefore, it is vital that you keep your accounting records up to date and in a clear and satisfactory format.

This then takes us to the question, how often do you keep your accounting records up to date?  Once a week?  Once a month? Once a year?

FBTC recommends that you should try and set some time aside each week to update your accounting records and get into the habit of doing it every week, whilst the week is still fresh in your memory. 

You will find it much easier to recollect what has happened in the last seven days, than trying to think back over fifty-two weeks, if you are only completing your records after the tax year has ended.  

If you are unsure as to how to keep your records or are concerned about the standard of your record keeping, then please do not hesitate to contact us. FBTC does have an online cash book which you may find useful.

Ambition is the path to success, persistence is the vehicle you arrive in

The FBTC Tips to Business Success

Everyone has different ideas and views on what they class as ‘successful’, is it the amount of money you make or is it having the perfect work life balance (does this even exist?). If you know what you want to achieve you are heading in the right direction. The following factors will help you to achieve your success!

Focus – What do you want to achieve? Set yourself short term goals to ensure you stay on track. By knowing what you truly want, you can define your business and achieve your goals.

Believe – In yourself and your business. If you don’t who will?

Tax – Don’t forget about it! Ensure you plan for your taxes. (We can look after this area for you, one less factor to worry about!)

Creativity – Stand out from your competitors, think outside of the box, sometimes it is good to be different. Develop your business to put you ahead of the rest. It is also important to realise you don’t know everything, be open to new ideas and opportunities that approach you.

Adapt – You need to do this for your business to survive, adapt to change to ensure you are giving your customer what they want and need (they may not know they need it yet). Opportunities sometimes fall into your lap which aren’t the norm and you need to be able to understand how to deal with such happenings.  

Challenges – Identify and manage your challenges, develop your analytical skills. There is never a problem you just need to find the solution. This will help you move your business forward.

Cash -  Feed your bottom line, find ways to get money upfront to improve your cashflow. Make sure your capital expenditures aren’t draining your business.

Organisation – This is important in both your personal and business life. Been organised means you have control and this will increase your productivity. 

Understand – Spend time researching your industry and your target audience, you will then understand what your customers want and need. This way you can ensure your business is offering the correct products and services, in the right place and at the right time. 

Notes – Reflect on your business, write down your thoughts. Keep your notes to help you plan and prepare for the future. Self-reflection will help you to develop self-awareness and encourages active engagement in your work.

Technology – Stay ahead of the game, every day is changing. Does your business require you to use the latest software? Should you be liaising with your customer more, can you do this by using new technology? We can do everything we need to with our mobile phones, is their opportunity for you to make changes? Smartphones, social media, texting, emails and other communication channels make it easy to get your message out.

Add Value – Give your customers that little bit extra. Find low cost or no cost ways of making clients feel even better about the product or service you have provided. Such acts will increase your gestures of goodwill and also increase your word of mouth referrals. 

Net Profit – Keep an eye on your net profit, make sure you know how your business is operating. This then supports your focus, creativity and understanding. This also give you the opportunity to recognise any areas of concern, manage your finances and deal with any challenges.

Consistency – Ensure you develop positive habits that you can enforce over a long term. Therefore, giving each of your customers the same experience. 

You – Take time for you! You are the most important part of all!

Why do we have to pay money in advance of next year’s bill – payments on accounts? Why can't we just be charged the bill at the end of the year?

 If your total Income tax and NIC’s for the year is greater than £1,000, in addition to your Income tax and NIC bill, you will be asked to make ‘payments on account’ towards the next year.  They are payable in two equal instalments.  One by the end of January following the end of the tax year and one six months later by the end of July.

How are they calculated?  In simple terms, each of the two payments on account are calculated as 50% of your total Income tax and NIC due for the year just ended. 

When your tax bill is calculated for the following year, the total Income tax and NIC due is reduced by the sum of the two payments on account you have made in the year.  Consequently, if your profits are exactly the same amount in that year you will have already paid your total tax bill in advance.  If your profits are more or less than the previous year, this would result in a balancing payment or a refund. 

So why do these payments have to be made?  Does it sound unfair?  Not if you consider that unlike the employed paying Income tax and NIC under PAYE, the self-employed have nine months after the tax year ends in which to pay their Income tax and NIC bill.  HMRC’s view is that by then, you will have been earning towards that year so they want a cut of it before the tax year has ended.  It also keeps you up to date with your payments and gives you a clearer indication of where you are with your tax affairs. 

Under certain circumstances, payments on account can be reduced or completely removed.  This should only be done under guidance and advice from your tax adviser.  Unfortunately, the ‘I cannot afford to pay them’ reason to reduce/remove payments on account will not wash with HMRC!