The new tax year which began last month and brought with it a series of useful tax-free allowances that you may not currently be aware of, including the Government’s new trading and property allowances.
Under the new trading allowance, anyone is able to earn up to £1,000 a year from a personal hobby or start-up business before income must be declared to HM Revenue & Customs (HMRC) via a self-assessment tax return.
This exemption applies to people who sell goods via online marketplaces such as eBay and also those who provide ‘casual services’ such as gardening or babysitting.
New self-employed microbusinesses can also take advantage of the new rules, but will be expected to pay income tax on their full profits once the £1,000 threshold has been exceeded.
Furthermore, under what is known as ‘rent-a-room’ relief, homeowners are now entitled to earn up to £7,500 a year from letting out furnished accommodation in their home. However, those who rent out rooms via short-term letting websites such as Airbnb could face a shock in coming months, as the Government is reportedly considering changing the rules so that such lettings are not entitled to the tax break.
Homeowners can also benefit from the new property allowance – which enables people to earn up to £1,000 tax-free by renting out the likes of driveways, parking spaces and loft storage to other people.
The property allowance also applies to Airbnb lettings, but an HMRC spokesperson has warned: “If someone is using the rent-a-room relief to let their home, they will only be able to use the new property and trading allowances for a separate source of income”.
They added: “They can use rent-a-room relief for letting out a furnished room and the new property allowance for renting out their driveway for a parking space. Or, they can use rent-a-room relief for letting out a room and the new trading allowance for doing some handyman work”.
Put simply, in order to take advantage of trading allowance, property allowance and rent-a-room relief in a single tax year, people will need to have three separate money-generating ventures.
Well, you have had an idea, you think you can turn it into a business and even better you can make a profit from it. You’re starting out small so you ask yourself, why do I need an accountant? Surely I am too small to employ the services of an accountant and they are going to cost me money, aren’t they?!
So here is something you should think about!
What business structure should I use?:
One of the most critical decisions you make at the start of your business is about the legal structure. So you don’t want to get it wrong. Your accountant can give you tailored advice depending on your individual circumstances so that you make the best decisions possible.
You must register your business with the Inland Revenue whether it is full time, part time, profitable or not. You also need to consider whether you need to register for PAYE or VAT. If you ignore these or register late you will automatically be liable to penalties. An accountant is a good person to deal with all of that so you can get on with running your new business.
When you start up you will soon find out that everyone is an expert on every topic. It is always good to have a second opinion. Your accountant has plenty of experience and advice they can give you. With years of experience they have seen it all before and you can benefit from their experience.
Keeping proper accounting records is a legal requirement. A good accountant will take the time to understand your needs and recommend a suitable accounting system, it may be a simple spreadsheet, or a full blown accounting system like Sage. They will also take the time to make sure you understand the system and the need for the systems. Get it right and you can save a lot of time, money and trouble.
The most important thing about any business is cash flow. No business, no matter how large or how small, can survive without positive cash flow. You need to be in control of your cash from day one. A good accountant will explain the ways you can keep your cash flow under control.
It’s true, accountants cost money, but in reality a good accountant will save you money. There are many ways a good accountant can save you money, they can help reduce your tax, VAT and even PAYE. They can also help with the commerciality or running your business from cost cutting to advising on your sales prices.
Many startup business owners think that an accountant will cost them money, quite the opposite, in most cases a good accountant will save your startup business a lot of money and free up your time to concentrate on marketing and expanding your business. Many business owners see accountants as a necessary evil but a good accountant can be a real asset to your business. Take your time to find a good accountant, see more than one and make sure you ask them plenty of questions. Look after them and in return you will be well rewarded!
At Ball & Co, we appreciate how daunting it can be to start a business. We offer a fully tailored service, taking the stress out of your early months and allowing you to concentrate on growing your new company and getting your business off the ground.
Our first steps will be to advise on the best business structure for you and we will ensure that tax efficiency is at the forefront of our recommendation. We will then assist with formation of your business whether it is as a sole trader, partnership, limited liability partnership or limited company.
We will register you with HMRC for the taxes relevant to your business, from PAYE and CIS to VAT, you can be confident that you are fully compliant with all that HMRC requires of you.
Once we have set the foundations of your business you will be ready to build on them. We aim to build a solid, trusting relationship with our clients and will be pleased to offer you accounting and taxation services detailed in Our Services.
For pro-active support and assistance in getting your new business start-up off the ground, contact us to arrange a free initial meeting or discussion, with no obligation.
Many taxpayers struggle to understand the complex tax returns and complete them correctly. Furthermore, ongoing changes to tax legislation mean that taxpayers risk incurring more penalties through failing to complete their returns on time or correctly.
We aim to ease the stress often caused by self assessment burden and save you time, worry, and money by handling this process for you. We will do all the necessary computations, complete your return, and even offer advice on how you can minimise your tax liability.
We can deal directly with the HM Revenue & Customs on your behalf and, should you be selected for a self assessment enquiry, act for you at any meetings.
To find out how we can help you, please contact us.
New National Minimum Wage (NMW) and National Living Wage (NLW) rates are set to came into effect from 1 April.
The NLW, which applies to those aged 25 and over, is set to rise from its current rate of £7.20 to £7.50 an hour, whilst the NMW rate for individuals aged between 21 and 24 will increase to £7.05 from its current rate of £6.95.
Workers aged 18 to 20 will see their hourly rate rise to £5.60 from £5.55, and the rate for those aged under 18 will rise by 5p to £4.05 from £4.00.
Apprentices stand to benefit from a 10p increase from £3.40 to £3.50 per hour.
Commenting on the wage rises, Bryan Sanderson, Chair of the Low Pay Commission (LPC), said: ‘The minimum wage increases on 1 April will bring another year of substantial pay rises for the lowest paid. The minimum wage will cover more workers than ever, and ripple effects mean that the benefits could affect people earning above the minimum as well.’
However, Mr Sanderson acknowledged that businesses may experience added pressure. He stated: ‘Accompanying pay increases, there will inevitably be pressure for employers. These are turbulent times and we will continue to monitor the situation closely.’
From April, the government will align the NMW cycle with that of the NLW. This means that any future NMW increases will occur in April of each year, instead of October.