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Month: October 2019

Rates and Thresholds from April 2019 to March 2020

Below are some of the changes to rates and thresholds, as advised by HMRC.  These will become effective from April 2019.

 

Personal Allowance                £12,500 per year.

Basic Tax Rate                         20% on annual earnings above the personal allowance, up to £37500.

Higher Tax Rate                      40% on annual earnings from £37501 to £150,000.

Additional Tax Rate                45% on annual earnings above £150,000.

 

The threshold above which both employers’ and employees’ national insurance contributions will begin is £8,632 per year, or £719 per month.

The new minimum wage rates from 1st April will be :-

Age 25 and above                                                                                                 £8.21

Age 21 to 24 inclusive                                                                                          £7.70

Age 18 to 20 inclusive                                                                                          £6.15

Aged under 18, but above compulsory school leaving age                           £4.35

Apprentice under 19 years old                                                                           £3.90

Apprentice over 19 years old, but in first year of the apprenticeship        £3.90

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Making Tax Digital Update (MTD)

Who is affected?

VAT registered businesses with a turnover of over £85,000 are affected from April 2019.   Businesses with a VAT turnover of under £85,000 will not need to register for MTD until 2021 as it currently stands.

 

Key dates

As of 1st April tax has gone digital and your VAT return will need to be submitted by MTD rules

Quarter ending in June VAT return needs to be submitted by 7th August

Quarter ending in July VAT return needs to be submitted by 7th September

Quarter ending in August VAT return needs to be submitted by 7th October

 

What you need to do

You will need to maintain your records digitally which could be in an accounting software such as QuickBooks or Xero.  If you are using a spreadsheet you will need to use a bridging software to submit your VAT return. 

 

If in doubt, please speak with us.  There is a 12 month “soft landing” where fines will not be levied but this does not mean you don’t have to do it for 12 months.  You must make all reasonable attempts to submit your VAT returns under the new guidelines.

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What Does Your Account Manager Do

Below is a guide to just some of the tasks that your Account Manager might undertake before your draft accounts can be prepared.

Enter all sales and purchase invoices and receipts onto relevant software (unless this is done by the client).

Ensure that payment has been received for all sales invoices. Check with the client if any payments to the client remain outstanding.

Ensure that all purchase invoices have been paid. Check with the client if any invoices appear to be unpaid.

Complete a bank reconciliation (if there is a business bank account).

Reconcile the VAT paid if VAT-registered, to ensure that the correct VAT has been paid.

Monitor sales to ensure that a client is registered for VAT if the VAT threshold is reached.

Reconcile the PAYE if PAYE-registered, to ensure that the correct PAYE has been paid.

Reconcile CIS if registered for CIS, to ensure that CIS payments are up to date and that the correct amount has been paid.

Check with client as to whether there are any expenses that we should expect to see in the draft accounts, but appear to be missing, e.g. mileage, phone and internet use.

Submit VAT if VAT – registered (unless client does this).

Submit CIS if CIS – registered (unless client does this).

Prepare CIS deduction statements for sub-contractors.

Add payroll journals to the appropriate software package used by or, on behalf of, the client.

Prepare management accounts to show client how the business is doing at a certain point in time, including calculating an accrual for how much Corporation Tax is due at that point in time. Prepare working papers at the end of the financial year, from which the draft accounts will be prepared.

Check allocation of any dividends and issue dividends where appropriate to cover an overdrawn Director’s Loan Account.

Answer any client queries as they arise.

Use the above information as a starting point in the preparation of the client’s personal tax return.

Please contact your Account Manager if you have questions regarding any aspect of the above information.

 

 

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How well is your business doing?

Ratios

There are a number of different ratios that can be used by companies to help them measure and analyse their performance. The ratios are often compared to previous year’s performance as well as the average results for your industry. This can then be used to measure how well you may be doing in different aspects of your business. There are 5 different categories of ratios that each ratio falls under. These are: profitability ratios, market ratios, debt ratios, activity ratios and liquidity ratios.

Profitability ratios are probably the most commonly used ratios, they measure how a company would use its assets and how it controls its expenses to produce a good rate of return. Market ratios are used to show the return on investment for the business. They are often used when trying to sell a business to show potential investors that the company is worth buying into and will be profitable. Debt ratios are often used to measure how quickly a business can pay off any long tern debts, for example a bank loan or mortgage. Activity ratios are used to measure whether a business is getting the most out of their resources and also whether their cash is being utilised. Liquidity ratios are used to measure whether a business is capable of paying of their debts, for example a business may have a lot of cash in the bank but if their liabilities are higher than their assets then their company is not liquid.

You do however need to be careful when using any single ratio as it will never give you the full picture of how well your business may be doing. An example of how this may happen is if you use the gross profit margin ratio  and compare it to the net profit margin ratio.

A simple example of this is shown below.

Looking at the results above you can see two very different results but they are both correct so must be used correctly. If for example you had set a target at the beginning of the year to make a 25% profit. If you were to use the gross profit margin you can see that the profit you have made would be 30% which is great as it looks like you have beaten your target. However as you are able to see this doesn’t show you the full picture as the 30% doesn’t include any of your expenses. When you take your expenses into account you can see that your profit margin falls to only 5%.

Another ratio that is good to use is the current ratio  (also known as the working capital ratio). This is one of the basic liquidity ratios as it simply uses the company’s current assets to see if they would be able to cover their current liabilities. An example of this is shown below:

As you can see in this example the company’s current ratio is 2.0. This means that for every £1 of liabilities that they have, it is covered by £2 worth of assets. A common rule of thumb that is used is that if you have at least a 2.0 current ratio your company is often in a good position.Facebooktwitterredditlinkedinmail

2019 Personal Tax Returns

You must submit a Personal Tax return if, in the last tax year (6 April 2018 to 5 April 2019), you were:

 

  • self-employed as a ‘sole trader’ and earned more than £1,000
  • a partner in a business partnership

 

We will require the following information, in order to complete your tax return, original documents where possible.

  • P60
  • Any P11d benefits
  • Property income
  • Savings income (even if less than £1,000)
  • Capital gains
  • Pensions
  • Dividend vouchers
  • Sole trader accounts
  • CIS deduction statements (if self employed)
  • Student loan statement
  • Child benefit figure received
  • Non-resident information

If you are registered on our Online portal, through Accountancy Manager, we will be uploading a new custom form to make giving us this information quicker and easier.

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