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The Government has committed to supporting 5.5 million small businesses by updating its Help to Grow campaign and introducing a new Small Business Council next month.

Building upon existing initiatives, the council will create a platform for SME leaders nationwide to actively engage with the Government.

With small businesses constituting 99.9% of all UK enterprises, employing 27m people, and generating £4.5 trillion in annual turnover, the Government designates 2024 as “the year of the SME”.

The Help to Grow campaign and website have been updated to serve as a comprehensive resource hub for SMEs. A notable addition is the Help to Grow management scheme, a 12-week intensive program enhancing SME leadership skills. This initiative, which is 90% subsidised by the Government, has already been utilised by nearly 8,000 businesses, aiming to support up to 30,000 throughout its duration.

Business and Trade Secretary, Kemi Badenoch, said:

“Small businesses are the lifeblood of our local communities and drive the UK’s economy, supporting jobs and wages across the country.

“This new council will mean SMEs have a clear voice at the table and we can deliver on the key needs for business.”

Talk to us about your small business.

Chancellor Jeremy Hunt has said that there is little scope for further tax cuts in the Spring Budget.

In last year’s Autumn Statement, the Chancellor announced various tax breaks, including a cut to the main rate of National Insurance from 12% to 10%. In January, he suggested that he intended to reduce taxes in the upcoming Spring Budget.

Furthermore, while addressing the annual World Economic Forum in Davos, Switzerland, he highlighted that nations with lower tax rates experience more “dynamic, faster-growing economies”.

However, reports from The Times state that during a recent cabinet meeting, Hunt acknowledged “major structural weaknesses” in the economy, citing low productivity as the primary cause. This casts more doubt on the possibility of significant tax cuts in the upcoming Spring Budget on 6 March.

Speaking on the BBC’s Political Thinking podcast, the Chancellor said:

“It doesn’t look to me like we will have the same scope for cutting taxes in the Spring Budget that we had in the Autumn Statement. But we also want to be clear that the direction of travel we want to go in is to lighten the tax burden.”

In response to the reports, Mr Hunt mentioned that he is awaiting the “final numbers” from the independent Office for Budget Responsibility (OBR) which guides the Government’s budgeting decisions.

Despite the tax burden reaching a record high, further tax cuts may be improbable. The Institute for Fiscal Studies (IFS) recently highlighted the need for the next Government to secure an additional £20 billion to sustain current spending levels.

Contact us about your tax liabilities.

House price declines are gradually easing as sales volumes increase across the UK. In October 2023, prices dropped by -1.4%, slowing to -0.8% by December.

The East of England (-2.5%) and the South West of England (-2.2%) experienced the most significant declines in 2023. In contrast, house prices in Northern Ireland increased by 3.2%. Despite this, higher mortgage rates are expected to persist, influencing house prices throughout 2024.

Data indicates that sellers are consistently reducing asking prices to attract buyer attention. More than 20% of sellers are now agreeing to discounts exceeding 10% of the initial asking price, and this figure rises to 25% in London and the South East of England.

Prices have stalled for various reasons, including:
• tax alterations restricted property acquisition by investors and international buyers
• the Brexit vote impacted job growth • the pandemic closed cities which altered work patterns
• elevated mortgage rates disproportionately affected pricier housing markets.

It is unlikely that mortgage rates will fall significantly in the near future, staying within the 4% to 5% range.

Interestingly, Nationwide’s January index found that the average house price had increased by 0.7% during the month, a significant turnaround from the December figures.

Talk to us about your property finances.

In a bid to tighten tax regulations and combat tax evasion, HMRC is implementing measures affecting sellers on platforms such as eBay, Vinted, Airbnb and Etsy.

Effective from 1 January, many digital platforms are now mandated to collect under new international rules adopted by the UK through the Organisation for Economic Cooperation and Development (OECD).

The reporting obligation applies not only to the sale of goods, such as second-hand clothes and handmade items, but also encompasses services like taxi hire, food delivery and short-term accommodation letting.

Currently, individuals generating income exceeding £1,000 annually through online side hustles must register as self-employed and submit a self-assessment tax return. While those earning below this threshold are often exempt from filing a tax return, it is recommended that they maintain records in case of inquiries.

Online platforms are mandated to report seller information to HMRC, with the first reports expected at the end of January 2025. As a result, sellers are advised to stay informed and comply with tax regulations to avoid potential penalties.

While this move will have a wide impact, tax experts at the Low Income Tax Reform Group reassured taxpayers that their obligations have not changed:

“The new rules have caused a great deal of confusion, but they simply mean that HMRC is receiving more information from online platforms than before.

“If you are following existing rules and declaring your income as required, then you don’t need to worry or do anything differently.”

Contact us to discuss these changes.

In a move to ease financial burdens on UK households, the Government has implemented a historic National Insurance (NI) cut, providing relief for 27 million taxpayers.

As of Saturday, 6 January 2024, the main rate of National Insurance has been reduced by 2%, dropping from 12% to 10%. This reduction, exceeding 15%, equates to a £450 saving this year for the average salaried worker earning £35,400.

For a household with two average earners, the annual savings could be worth nearly £1,000, marking a positive impact on the disposable income of families nationwide.

HMRC has launched an online tool to assist individuals in understanding the implications of the tax cut. This tool, hosted on the Government’s cost of living support website on GOV.UK, uses salary information to provide personalised estimates of potential National Insurance savings for employees.

In addition to this historic tax cut, further measures will apply later this year, including a National Insurance cut for 2m self-employed individuals, set to take effect on 6th April 2024. This move, worth £350 for the average self-employed person on £28,200, is part of the Government’s commitment to supporting businesses and households alike.

Chancellor Jeremy Hunt, said:

“With inflation halved, we’ve turned a corner and are cutting taxes – starting with today’s record cut to National Insurance worth nearly £1,000 for a household.

“From nurses and brickies, to cleaners and butchers, 27 million hard-working Brits will have a little more cash in their pockets.”

Talk to us about your personal tax liabilities.

In a move to boost international trade and foster greater exporting opportunities for small businesses, UK Export Finance (UKEF) has introduced more flexible and expedited financing.

The Government’s export credit agency made this announcement during its annual conference, revealing it now has the capability to fast-track trade finance applications worth up to £10 million – double the previous limit.

This initiative aligns with the Government’s commitment in the 2023 Autumn Statement to provide additional support for SMEs seeking to access global markets through UKEF.

The measures introduced will also widen the maximum timeframe for loans from the General Export Facility from two to five years. This aims to give businesses more adaptable repayment terms amidst the current challenging economic landscape.

By expanding the ‘auto-inclusion’ scheme, small businesses can now swiftly secure Government-backed credit without manual intervention from UKEF.

Tim Reid, CEO at UKEF said:

“In speaking with our customers – and especially with small businesses – it’s clear that ease of accessing finance and flexibility in repayment terms make a big difference for firms wanting to export.

“We’re confident that our announcements will unlock even more deals for UK firms looking to sell to the world, whether they’re exporting for the first time or looking for the latest in a long line of export successes.”

Talk to us about your small business.

Want to talk to an expert?

If you’ve found the topics covered in this report to be of interest or would like to delve deeper into any of them, we welcome the opportunity to engage in a more detailed discussion with you. Our team of experts is always keen to share insights, and we’re confident that a conversation with us can provide valuable perspective.

We are also well-positioned to update you on the latest trends, opportunities, and challenges in the business world. As we all know, staying ahead of the curve is vital in today’s fast-paced business landscape, and we are here to help you navigate it successfully.

If you’re considering getting extra support, we invite you to explore the comprehensive solutions we offer.

To schedule a meeting or to get more information, please don’t hesitate to contact us.

Business leader confidence in the UK economy fell to -28 in December 2023 after hitting -21 in November, according to the latest economic confidence index from the Institute of Directors (IoD).

The decline is in contrast to business leaders’ confidence in their own enterprises, which surged to +36 in December – a notable uptick from the +30 recorded in November.

Positive trajectories were also observed in revenue and export expectations for December. The net outlook for revenue in the next 12 months, compared to the last year, climbed from +37 in November to +42 in December.

Similarly, export prospects exhibited an upward trajectory, escalating from +15 to +20 in the final month of the year.

Business investment expectations dropped slightly to +23 from +22 in November, while projections for costs and wages maintained their ground at +74 and +69, respectively. Headcount expectations fell slightly from +25 in November, settling at +24 in December.

Dr Roger Barker, director of policy at the IoD, said:

“Business leaders remain extremely cautious about the outlook for the wider economy over the next 12 months, although they are more optimistic about the prospects for their own organisations.

“In the coming months, the Bank of England will be considering its next step in terms of interest rates. Based on the evidence of this survey, an early cut in interest rates would be justified in terms of helping to kick-start business confidence.”

Get in touch about your business prospects.

Your guide to understanding VAT

Value Added Tax (VAT) is a significant part of the UK tax system. If you run a VAT-registered business, you’re required to charge this tax on most goods and services, which you must then report and pay to HMRC. Basically, you are collecting VAT on the Government’s behalf.

While this may sound straightforward at first, VAT is known for being complicated, and many small business owners find it difficult to get right. The purpose of this guide is to simplify the VAT process for business owners and provide clear, easy-to-understand instructions for managing VAT responsibilities effectively.

The VAT basics

Whenever a product or service is subject to VAT, the individual or business selling that product or service must charge the customer VAT, and then pass that onto HMRC. The seller can also recover any VAT that they had to pay in delivering that product or service (for example, on materials).

Understanding VAT

Understanding VAT is crucial for SMEs for several reasons:

• Compliance with tax laws: Failure to understand and properly handle your VAT obligations can lead to legal issues, including non-compliance penalties. As a result, it’s vital to know when you’re required to register for VAT, how to file VAT returns, and how to reclaim VAT you’ve paid on business-related goods and services.
• Cashflow management: VAT can significantly affect your SME’s bank balance. Knowing how to manage VAT effectively can help businesses maintain a healthy cashflow. There are different schemes available and picking the correct one can significantly improve cashflow.
• Pricing: VAT-registered businesses need to understand how much VAT to charge on their products or services.
• VAT thresholds and schemes: Learning about the different VAT schemes available to your business can help simplify the process.
• International trade: If your business is involved in importing or exporting goods and services, understanding VAT is vital for international trade compliance.
• Claiming VAT back: VAT-registered firms can recover VAT on many costs associated with running their business, which can reduce overall expenses.
• Record-keeping and reporting: Proper record-keeping and timely VAT reporting are essential. SMEs must keep accurate records of all VAT-charged sales and purchases and file regular VAT returns using software compatible with Making Tax Digital (MTD)for VAT. Failure to do so can result in fines and complications with HMRC.

Making Tax Digital (mtd)

MTD for VAT was introduced in 2019 to make it easier for businesses to get their VAT right and keep on top of their affairs. All VAT-registered businesses are now required to comply with these rules.

Under MTD for VAT, businesses and individuals are required to use HMRC-approved digital software to keep track of their tax records. Tax returns are submitted to HMRC using compatible software instead of filling out paper forms or even using the older VAT return portal online.

VAT registration

Threshold for registration

The current VAT registration threshold in the UK is £85,000. When a business’s taxable turnover reaches or exceeds this threshold within a 12-month period, it must register for VAT with HMRC. You’re also required to register if your business is likely to pass the threshold within the next 30 days. Once registered, the business must fulfil new responsibilities, including:

• charging VAT on certain products and services
• submitting VAT returns on a regular basis (usually quarterly)
• paying HMRC any VAT owed
• keeping detailed VAT records.

The VAT threshold is currently frozen at £85,000 until March 2026, which could mean more businesses will find themselves reaching the threshold sooner.

Voluntary registration

Businesses register for VAT voluntarily even if their turnover is below this threshold. Voluntary registration can be beneficial in certain circumstances, such as when a business’s customers are predominantly VAT-registered themselves or if the business is often in a refund position with HMRC.

How to register for VAT

Businesses registering for VAT can do so through the HMRC website. Here’s a brief overview of the steps involved:

• Preparation: Before starting the registration process, ensure you have all the necessary information ready. This includes details about your business such as its turnover, bank account details, and contact information. We’d also recommend signing up for MTD-compatible software ahead of time.
• Online registration: You’ll need to register for VAT through HMRC’s online service. If you don’t already have a Government Gateway account, you’ll need to create one as part of the process.
• After you register: Once the registration is complete, HMRC will provide you with a VAT number and information about how to submit your first VAT return. They’ll also confirm your registration date, and you’ll be signed up for MTD for VAT automatically.
• VAT returns and record-keeping: After registration, businesses are required to submit VAT returns, usually quarterly, and maintain detailed records of sales and purchases using HMRC-approved accounting software.

VAT rates and categories

Different VAT rates apply to various goods and services:

Standard rate

The standard rate of VAT is currently set at 20%. This default rate applies to most goods and services provided in the UK, including consumer electronics, alcoholic drinks, and other general goods and services. This is the default rate unless a specific item is designated under another category.

Reduced rate

Goods and services considered essential or beneficial from a social policy perspective are taxed at a reduced rate of 5%. This includes domestic fuel and power, children’s car seats and the installation of energy-saving materials.

Zero rate

Zero-rated items are still subject to VAT but at a rate of 0%. This category includes most food items, books, newspapers, children’s clothing, and shoes.

Exempt and outside the scope

VAT-exempt items are not subject to VAT and include insurance, providing credit, and certain types of education and training services. Goods and services outside the scope of VAT include MOT tests, postage stamps, and health services provided by doctors. These items are distinct from zero-rated goods in that they are not part of the VAT system at all.

The difference between selling a zero-rated product and an exempt product is that for a zero-rated product you can still reclaim the VAT you were charged in relation to the sale.

Understanding which category a product or service falls into is essential for accurate VAT accounting and compliance.

VAT accounting

Many small businesses can sign up for VAT accounting schemes to simplify the VAT process and help them manage their finances. Here are some of the main schemes:

• Flat rate scheme: This scheme simplifies record-keeping by allowing businesses to pay a fixed rate of VAT to HMRC. It’s suitable for VAT-registered businesses with an annual taxable turnover of £150,000 or less (excluding VAT). The VAT percentage paid depends on the business type.
• Cash accounting scheme: Under the cash accounting scheme, VAT is accounted for when payment is actually received from customers, rather than when invoices are issued. This can improve cashflow, as you won’t need to pay your VAT bill until your business has received the money. This scheme is available for businesses with a turnover of up to £1.35 million. It’s particularly beneficial for those that have slow-paying customers or cashflow management problems.
• Annual accounting scheme: The annual accounting scheme allows businesses with an annual turnover under £1.35m to submit one VAT return per year instead of four, simplifying administration. The scheme requires businesses to make advance payments based on their estimated VAT liability, with a final balancing payment due two months after the end of the VAT year.

How an accountant can help

Handling VAT effectively is vital for the smooth operation of a small enterprise. Here’s why you should consider hiring an accountant to assist you:

• Expertise and knowledge: Accountants have specialist knowledge and stay updated on the latest tax laws and regulations. This expertise is crucial for navigating the complexities of VAT, including understanding different rates and the implications for your business.
• Time and efficiency: VAT accounting can be time-consuming. An accountant can handle these tasks efficiently, allowing you to focus on other critical aspects of your business.
• Compliance and accuracy: Ensuring compliance with VAT regulations is essential to avoid penalties and fines. As accountants, we can ensure that VAT returns are accurate and submitted on time, reducing the risk of errors and compliance issues.
• Strategic planning: Accountants can provide guidance on which VAT scheme to choose and help develop strategies to optimise cashflow and reduce tax liabilities.
• Handling audits and enquiries: A VAT expert can handle communications with HMRC and resolve potential issues effectively.
• Advisory on transactions and growth: As your business evolves, an accountant can advise on the VAT implications of business transactions, international trade, or expansion activities.

As VAT accountants, we can support your small business by saving you time and stress managing your VAT obligations. It’s our job to ensure that you always comply with MTD for VAT rules, and we’ll provide strategic advice to ensure you pay the right amount of VAT – no more, no less.

Have any questions or need assistance? Feel free to reach out to us.

Making an informed decision

Many individuals invest in real estate to boost their income and gain greater financial security. But while the journey can be rewarding, it also requires committing a significant amount of your own time and money. So, how do you know if property investment is right for you?

In this guide, we outline what you need to consider when making your decision, from assessing your personal finances and setting goals for the future to exploring the pros and cons of becoming a property investor. Let’s get started.

Making a well-informed decision

Before you step onto the property investment ladder, it’s important to understand your financial situation and the risks involved in this kind of investment.

Do you have a strong financial foundation?
Investing in property requires significant upfront costs, so assessing your current financial situation first is vital. Do you have the funds available to cover a deposit and mortgage repayments? Can you afford to pay for the necessary repairs and maintenance?

Working with a financial expert to assess your income, savings and any existing debts can help you better understand your personal financial health. The stronger your financial foundation, the easier it’ll be to weather potential challenges associated with real estate investment.

What’s your appetite for risk?
While property is usually a safer investment option than stocks and shares, there’s no guarantee you’ll get a good return on your investment. Properties can depreciate in value, and unexpected expenses can add up – so you need to think carefully about your appetite for risk.

What would happen if your property depreciates in value or something else goes wrong? Could you afford to lose the money you’ve invested?

Exploring strategies such as diversification and taking out property investment insurance can help you mitigate some financial risks along the way.

What are your investment goals?
Before you make your decision, you should think about your investment goals. You can start by asking yourself a few questions:

• How will you generate an income? Knowing how you intend to make an income from your investments can help you set achievable goals. Will you rent to tenants, turn properties into holiday homes, or renovate them to increase their market value?
• How much money do you want to make? Think about your financial goals. How much are you hoping to earn from your investments, and in what time frame?
• How will you use the extra income? Will your investments help you achieve a particular financial goal? Perhaps you want to use the profits to help fund your retirement, or maybe you just want to gain more financial freedom.
• Do you want to grow your property portfolio? What are your long-term investment goals? Will you focus on one or two properties, or are you hoping to build a large investment portfolio over time?

Knowing the answers to these questions can help you set realistic, measurable goals that align with your current financial situation and long-term strategy.

Can you take on the extra responsibility?
Money isn’t the only resource you’ll need; property investment is also a significant time commitment. Whether you operate as a buy-to-let landlord or a property developer, property investment requires active management.

Consider whether you have the time to carry out extra responsibilities such as property maintenance and repairs. Furthermore, if you become a landlord, it’s your job to provide a safe home for your tenants, which means you must ensure it meets certain standards before you can rent it out.

How to get the most out of your property investments

Do your research
Aspiring property investors should carry out thorough market research before taking the plunge.

Looking at current property prices and mortgage rates can help you find the deals that work best for you. Keeping an eye on market trends can also help you determine whether now is the right time to invest in property.

There are several factors you’ll need to consider in 2024. A recent forecast from property website Rightmove suggests that average house prices in the UK will fall by 1% this year, which could be good news for property investors on a budget.

Meanwhile, changes in market interest rates mean that the cost of mortgages is coming down. Earlier this year, Bank of England governor Andrew Bailey told MPs that he hopes this trend will continue as UK inflation approaches the Government’s 2% target.

On the other hand, ongoing economic issues and higher property taxes in 2023 contributed to thinner profit margins for many UK property investors. As a result, more landlords have been streamlining their portfolios or exiting the buy-to-let market altogether.

The property investment landscape is likely to shift further in the coming year, so choosing the right time to invest is key. Working closely with property experts and financial advisers can help you make well-informed investment decisions that set you up for success.

Diversify your property portfolio
Diversification is a key component of investment risk management. Spreading your investments across property types and locations can mitigate the impact of market fluctuations on your overall portfolio.

Let’s say you own residential properties in several different locations across the UK. If the housing market worsens in one area, you’ll still have a steady income from your investment properties in the other locations.

Additionally, diversifying your property investments means you can benefit from different income sources. This not only boosts your overall returns but also gives you a stronger financial position, helping you navigate market changes and take advantage of opportunities in different parts of the real estate market.

Work with financial experts
You don’t need to embark on your property investment journey alone. As your financial advisers, we can provide support every step of the way, whether that means helping you decide whether property investment is right for you or offering expert tax planning advice.

Professional accountants can also take on many of your financial management and bookkeeping tasks, reducing your administrative burden and freeing up more time for you to focus on your other responsibilities.

Get in touch with us today to find out how we can help you with your property investment goals.

New year, new strategy.

The new year marks the start of new beginnings, so there’s no better time to revisit your personal financial strategy. Drawing up an economic plan with clear, achievable goals can improve your long-term financial health and help protect you and your family against external factors.

Whether you’re putting a personal financial plan together for the first time or you want to revisit your strategy, here are a few personal financial planning tips to help you secure your financial future in 2024.
How to approach your personal financial strategy

Look at your current financial situation
Before embarking on your personal financial planning journey, you’ll need to conduct a thorough analysis of your present situation. The better you understand your circumstances, the easier it will be to plan and budget accordingly.

Working out your net worth or pinning down the value of your assets and liabilities can be a little more challenging for those with more complex financial affairs – for example, if you’re a shareholder in a business or own a large investment portfolio.

In this instance, you may need to consult with a professional adviser to gain an accurate understanding of your financial circumstances.

Using cloud accounting software to track your spending can also make it quicker and easier to conduct a financial health check.

Are your books in order?
Staying on top of your books is vital if you want to understand your finances. By keeping detailed, accurate and up-to-date financial information on file, you’ll find it easier to see where your money is going and what you should focus on in the future.

Set your goals for 2024
Once you know where you stand financially, you can start plotting out the year ahead. Establishing clear and achievable financial goals is crucial for guiding your efforts throughout the year.

Perhaps you want to pay off debt, invest in property, put money aside for your children’s education or build up a rainy day fund. Whatever your ambitions, setting measurable, time-bound objectives can make it easier for you to stay on the road to financial success.

Your budget
A crucial piece of the goal-setting puzzle is your personal budget. Your budget should align with your current circumstances and financial goals. Think about what you’re spending at the moment, how much you’re earning and how much money you need to save to meet your goals.

If you want everything to go to plan, you’ll need to create a realistic personal budget that aligns with both your current circumstances and financial goals. Look at your past financial data to understand how you usually spend money and identify areas to cut down on.

Your tax strategy
Your tax strategy is an important part of your financial plan. By minimising your total liabilities, you can retain more of your hard-earned income to meet your personal goals.

Work with an accountant to devise a tax-efficient plan that ensures you pay the right amount of tax – no more, no less. In the short term, this could include maximising reliefs on your self-assessment tax returns or timing the sale of property correctly to defer your capital gains tax payments.

More long-term tax strategies could include setting up a trust to protect assets or an estate plan that helps you pass your wealth onto the next generation.
Business owners
Entrepreneurs should consider the tax treatment of their business income. Since companies are often taxed at a lower rate than self-employed individuals, incorporating your business may help boost your personal income in certain circumstances.

If you’re the director of a limited company, for example, paying yourself a combination of salary and dividends can help you minimise your personal tax bill.

Your accountant can offer expert advice on these matters, ensuring that you structure your pay in the most tax-efficient way possible.

Important questions to ask yourself
Do you have an emergency fund?
Unforeseen circumstances can disrupt even the best-laid plans. If you fall on hard times, an emergency fund acts as a financial safety net.

The exact amount you’ll need to save will depend on your unique circumstances, but you should aim to put enough money aside to cover a few months’ worth of living expenses. If you can afford to build up a fund, this can save you a lot of stress in the long run.

Do you have any outstanding debt?
If you have any outstanding debts, addressing them should be a priority. The longer you leave bills unpaid, the more interest you’ll accrue.

To create a repayment strategy that will help you to pay off your existing debts, evaluate and organise them based on their urgency and interest rates.

Do you have enough income to achieve your goals?
Personal financial planning isn’t just about scrimping and saving; it’s also about ensuring you have the income you need to achieve your short-term and long-term goals.

In some cases, it may help to explore opportunities to boost your income, such as taking steps to grow your business or expand your investment portfolio.

Although no investment is entirely without risk, diversifying your income streams can help you boost your personal wealth while safeguarding you against financial pitfalls.
Getting your personal financial plan right
The best financial strategies evolve alongside your circumstances and goals. Regularly reviewing your plan ensures it stays relevant and protects your finances as much as possible.

However, constantly adjusting your strategy can be time-consuming and difficult to get right. If you want to get the most out of your plan, you should consider working with finance professionals.

As accountants, we can use our expertise to draw up a cost-effective strategy that helps you achieve your goals and strengthens your personal finances. We can also offer specialist personal tax advice on how to minimise your tax bill so you can retain more of your hard-earned income.

If your circumstances change or new legislation affects your strategy, we’ll help adjust your budget and tax plan accordingly to give you the best chance of success.

With our expertise by your side, you’ll be able to navigate 2024 with confidence and build a stronger, more secure financial future.

Get in touch to discuss your personal financial strategy for 2024.