Accountancy Blog

Pension planning in your business

How your pension savings can help finance your business.

As traditional loans fall out of favour with increasing numbers of business owners, you may be looking for an alternative route for financing – and your pension could be the answer.

Data from the British Business Bank shows that in 2017 the number of small businesses seeking traditional bank loans reached a record low of only 1.7%.

In contrast, the use of alternative finance has been on the rise, with external equity finance increasing by 79% at the start of 2017, and peer-to-peer lending up by just over 50%.

Funding your business using your pension pot may be an overlooked option compared to these, but it can be well worth considering if you want more control over the way you finance your business. More…

Extracting profits from a business

What are the tax implications?

People run businesses for a variety of reasons from passion to pride, but making a living is high up the list for most people.

How do you go about drawing profit from your business, and doing so efficiently?

If your business operates as a partnership or sole trader, the profits it makes are what you are taxed on, subject to any expenses which are not deductible for tax purposes.

It makes no difference to your tax bill whether the profits are held within the business or extracted for your personal use.

When you work through a limited company, the total tax paid by the company and the shareholders will depend on the methods used to extract profits from the company and the amount withdrawn.

This guide discusses some of the common ways in which you can extract profits from your own company. The tax rates and thresholds quoted apply to 2018/19. More…

Abolish IHT says think tank

A think tank is calling for inheritance tax to be abolished, as part of a set of proposals for major reform to the UK tax system.

The Institute for Public Policy Research (IPPR) published its 10-part plan for economic reform, which includes replacing the system of inheritance tax with a new ‘lifetime gifts tax’.

Under current rules, inheritance tax applies to the estate of a person who has died, if it is worth more than the £325,000 threshold.

The IPPR’s proposed tax would instead be levied on the individual receiving the gift. More…

Class 2 NI looks here to stay

Chancellor Philip Hammond has opted to scrap the planned abolition of class 2 national insurance contributions (NICs).

The Government was originally due to abolish class 2 NICs for the self-employed from 6 April 2018, but the move was delayed for 12 months in November 2017 and has now been abandoned.

The policy, which was first announced by Hammond’s predecessor George Osborne in 2016, was expected to save millions of self-employed workers around £150 a year.

However, the Government cited concerns that it would force low-earning sole traders to pay more towards the state pension, and that scrapping class 2 NICs would make the tax system more complex. More…

Apprenticeships drop by 31% year on year

The number of people starting apprenticeships has dropped by 31% in the last 12 months, the Department for Education has claimed.

In the academic year between August 2017 and May 2018 there were 315,900 apprenticeship starts, compared to 457,200 the same time the year before.

Business groups including the British Chambers of Commerce (BCC) and the Institute of Directors (IoD) argue the apprenticeship levy creates barriers for employers who hire apprentices.

Employers with an annual pay bill of over £3 million are required to pay the apprenticeship levy, and receive an allowance of £15,000 to offset against it. More…

Chancellor mulls abolishing dividend allowance

The Treasury is reportedly considering abolishing the dividend allowance in Autumn Budget 2018.

The Daily Telegraph claims Chancellor Philip Hammond has business owners, directors and shareholders in his sights to help fund a Government pledge to increase spending on the NHS.

Hammond cut the dividend allowance from £5,000 to £2,000 in Spring Statement 2017, with the move taking effect from 6 April 2018.

The first £2,000 taken in dividends in 2018/19 is tax-free, with anything above this threshold being taxed according to the individual’s rate of income tax. More…

Residential property tax

How has devolution affected what tax you pay?

First-time buyers in England, Northern Ireland – and for a short time in Wales – were the biggest winners in the most recent shake-up to affect property taxes in Autumn Budget 2017.

Philip Hammond’s headline measure was to abolish stamp duty for first-time buyers on homes worth up to £300,000, and the chancellor didn’t stop there.

He also introduced a reduced rate of 5% on the portion worth from £300,000 to £500,000, providing a welcome boost for many aspiring homeowners in London where the average residential property sold for £556,146 in 2017. More…

Use Capital allowances to reduce tax

How to minimise business tax in 2018/19.

If there’s one thing that keeps us awake at night it’s the thought of how many British businesses are failing to claim capital allowances to which they are entitled – worth billions of pounds across the board, according to some estimates.

Capital allowances provide the mechanism for tax relief on certain types of capital expenditure (the purchase of assets such as office furniture, or equipment) essentially providing a deduction against profits.

Depending on the nature of the allowances, the deduction may be up to 100%, providing full write-off against profits in the year of purchase. More…

VAT – a big issue for SME’s

VAT creates the biggest administration burden for around two-thirds of businesses in the UK, research from the British Chambers of Commerce (BCC) has claimed.

The report, which polled more than 1,100 businesses of all sizes, found that 64% were bamboozled by an array of rates and rules to comply with VAT legislation.

This percentage is likely to increase in the near future as VAT-registered businesses with taxable turnover of more than £85,000 prepare for Making Tax Digital to take effect from April 2019. More…

Inheritance tax – make sure you plan ahead

The Treasury fetched a record high of £5.2 billion in inheritance tax receipts last year, according to statistics published by HMRC.

Inheritance tax receipts increased 8% year-on-year in 2017/18 to continue a long-term trend, which began when the nil-rate band was frozen at £325,000 with effect from 6 April 2009.

Since then, inheritance tax receipts have grown by an average of 10% a year, with the latest increase £388 million higher than in 2016/17. More…