Update: The date for self-employed businesses and landlords with annual business or property income above £10,000 to follow the rules for Making Tax Digital has been moved back to 6 April 2024.
Landlords: Are you ready for Making Tax Digital?
Making Tax Digital is a new way of working that sees the government calling upon taxpayers to report their income and expenses via digital software.
At present it only applies to VAT registered businesses with a taxable turnover above the £85,000 VAT registration. However, self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from their next accounting period starting on or after 6 April 2023.
This means that any type of landlords, including but-to-let and furnished holiday lets, with an annual turnover above £10,000 will be required to keep income and expense records digitally and submit their tax return directly to HMRC using compatible software.
These cloud accounting software solutions are user friendly. They streamline the recording and reporting process and synch with your business bank account – all via an app on your phone or tablet.
Cloud accounting solutions use bank feeds to import live data, this reduces the time needed to undertake manual data entry. They are easy to use on the go and can improve the cashflow of your business. This can, in turn help in making crucial business decisions as there will be a better picture of finances with the real time information.
It is understandable that you may be unsure of these big changes, but businesses must ensure their data is accurate and compliant with the new legislation. There will be a penalty regime introduced by the government for late submissions and late payment of tax.
The deadline for landlords may seem a long way off but it is good to forward plan and may mean you get a better deal from the cloud accounting software provider you choose to use.
We have specialist knowledge and accreditations to support our clients with their Making Tax Digital obligations.
Get in touch with us now if you would like to discuss how to prepare for the digital future.
Chris Goads BSc FCA, partner at Stephenson Smart’s Wisbech, March and Downham Market offices, assesses the impact that Bounce Back Loan repayments might have on businesses and what options there might be to help with making the repayments.
What is a Bounce Back Loan?
The Bounce Back Loan was one of the financial support schemes put in place by the government to support businesses, at the start of the coronavirus pandemic.
Many businesses are now starting to receive the payment schedules for Bounce Back Loans taken out, with their first repayments being due.
Although Covid restrictions are starting to be lifted, we are still seeing different sectors and businesses recovering at different rates. Some businesses are still not functioning at the same level they were before the pandemic hit, and therefore seeing a reduction in income.
Some of our clients are started to be contacted by the bank they took their Bounce Back Loan through with repayment schedules for those loans, often with a high monthly payment. For example, if a business took out a Bounce Back Loan of £50,000, they will be looking at a repayment rate of around £887 per month, to start imminently.
What if I can’t start to repay my Bounce Back Loan?
Our advice is that if your business is facing a repayment figure that is unattainable you may be able to look at a Pay As You Grow option. This allows firms to extend their loan terms, reduce repayments or take a repayment holiday.
The bank you borrowed your Bounce Back Loan from should have been in touch to highlight this option. It is important to contact them as soon as possible, and ideally about a month before your first payment is due, to ask to defer or flexibly manage your repayments.
As Chartered Accountants and Business Advisors, Stephenson Smart are qualified and experienced in helping businesses manage their cashflow and plan financially, even in difficult times. We are keen to support our clients, local businesses and our communities during this recovery period.
If we can support you or your business with this or any other financial help, please get in touch.
In this article and video Kerry Williams, Associate Director at our Great Yarmouth office, explains the new super-deduction and how it works alongside the Annual Investment Allowance.
What is super-deduction?
The chancellor announced the new super-deduction allowance in the spring Budget.
Super-deduction works alongside the Annual Investment Allowance and gives 130 per cent deduction against the purchase of new plant and machinery. However, it is only applicable to companies and for the purchase of new equipment.
There is no upper expenditure limit on super-deduction.
Corporation Tax at 19 per cent = tax saving of 19,000 pounds
Super-deduction – 130 per cent deduction = 130,000 pounds
Corporation Tax at 19 per cent = tax saving 24,700 pounds
Also announced was a 50 per cent first-year allowance for assets that would ordinarily qualify for the Special Rate Pool. However, if you have any remaining Annual Investment Allowance to use you should utilise that first to get 100 per cent deduction rather than 50 per cent deduction.
What is Annual Investment Allowance?
Annual Investment Allowance gives 100 per cent deduction against business profits for the purchase of qualifying plant and machinery.
The current expenditure limit is 1 million pounds until 31 December 2021 when it will drop to 200,000 pounds.
Any expenditure in excess of this limit goes into a Main Pool or Special Rate pool for tax purposes and attract Capital Allowances at either 18 per cent or 6 per cent per annum.
Do vehicles qualify for super-deduction?
Commercial vehicles such as lorries and vans do but cars do not. However, electric cars still qualify for the 100 per cent First Year Allowances.
Planning and timing are key to making the most of super-deduction and the Annual Investment Allowance. At Stephenson Smart we can help you get this right, please get in touch.
In this article Dan Jastrzebzski, partner at Stephenson Smart accountants, explains how to make sure your property qualifies as Furnished Holiday Lettings
The last year has impacted hugely on the holiday market. It is not only airlines that have been affected, but holidays closer to home. If you own a property that you rent as a furnished holiday let you need to be aware of the impact that the reduction in rental occupation may have on your tax affairs.
There are special tax rules for rental income from properties that qualify as Furnished Holiday Lettings.
If you let properties that qualify as Furnished Holiday Lettings you can claim Capital Gains Tax reliefs and you are also entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures.
There is also a benefit to those wishing to use the earnings to increase the threshold to pay into a pension, as profits on Furnished Holiday Lettings count as earnings for pension purposes.
To qualify as a furnished holiday letting your property must be commercially let as a business. You must make the property available for commercial let for 210 days in the year, and actually let the property as furnished holiday accommodation to the public for at least 105 days in the year.
Days when you let the property to friends or relatives at zero or reduced rates is not a commercial let.
There will be many furnished holiday let owners who will have struggled to meet these criteria this year. However, you may still be able to qualify for tax reliefs. If you have more than one property you may qualify for the averaging election or if your property reaches the occupancy threshold in some years but not in others you may qualify for a period of grace election.
There are many tax, and other financial benefits, to owning and letting furnished holiday properties as a commercial business. I am a tax expert at Stephenson Smart and specialise in income tax and capital gains tax for individuals. I’m fully qualified to give tailored advice to help you navigate tax relating to your business and personal finances.
One positive thing to come out of the Covid pandemic is the amount of new business start ups in the UK. 2020 saw an extra 84,758 businesses setting up, compared with 2019. This is equivalent to a 12.3 per cent increase year on year, which is the highest percentage growth since 2011 and the highest actual growth on record.
Starting up a new business is both an exciting and a challenging task, which carries with it an element of risk. Key decisions need to be made, and there are many factors to consider.
Business plan for new business start up
A business plan is an essential document that will guide you in establishing and growing your new venture; helping you focus your thoughts, providing you with targets and goals as well as giving you an indication of your cash requirements.
Finance for new business start up
Business financing can take two forms: debt or equity. Debt means borrowing money. Loans may come from family, friends, banks, other financial institutions, or professional investors. Equity relates to selling an ownership interest in your business. Such a sale can take many forms, such as the admitting of a partner or, if you are in a company, issuing of additional shares to investors.
Getting a grant is also an option. There are many different small business and start-up grants available depending on where your business is based, how large it is and what you do.
What type of company is right for a new business start up
Options are: Sole Trader, Limited Company, Company Limited by Guarantee and Limited Liability Partnership (LLP). The type of company you choose will be dependent on the nature of the business you intend to carry out.
Taxes, legalities, and insurance for a new business start up
A significant task for a new business owner is ensuring that the business complies with the extensive tax, legislation and insurance requirements that are imposed by various authorities. To avoid problems, penalties and – in some cases – legal action, it is important to understand your obligations.
Stephenson Smart are Chartered Accountants and Business Advisors in Norfolk and Cambridgeshire. We can guide you through these important decision-making processes. As specialist business start up advisors, we can help you make the appropriate registrations, assist with cash flow forecasts and offer regular updates to enable you to monitor the performance of your business.