Category Archives: Uncategorized

Then and Now

When we first started our IT business and my husband said “do you want to do the invoices?” I had no experience of bookkeeping whatsoever so obviously I said “yes”. During the first 4 or 5 years with the help of our very patient accountant I cobbled some kind of system together. With no set hours of work or job description I fitted the bookkeeping around our 4 small children. One of my VAT returns was completed whilst I was in labour with our third child, I’m not sure how accurate that one was!  During that time to say my bookkeeping was sporadic would be an understatement. The typical run of things was:-

  • Invoices would possibly make it out by the 3rd week of the month
  • Statements went out every now and again if the bank balance got low
  • The bank balance was checked monthly when the statement arrived
  • Expenses were recorded when my husbands car/wallet/pockets were cleaned out
  • Suppliers would get paid when I received a statement
  • At the end of a VAT quarter you would find me hiding out in the office for 3 days in a state of panic
  • When the accountant asked for last years accounts ready for them to do year end that could involve a week or two of grappling around for the information and tidying up the loose ends that I had been putting off for a couple of months
  • A cash-flow forecast was something I hadn’t even heard of
  • Month end reports were me sitting with my husband over a glass of wine and announcing everyone got paid and whether there was enough left/or not for us

Following a meeting with our accountant about 5 years ago I came away thinking that next year I wanted to understand everything he said without having to ask for an explanation or just nodding my head. This is where my real bookkeeping journey began, I have spent the last 5 years becoming fully qualified and also realising that “you don’t know what you don’t know”. I know that sounds obvious but when you are doing a job that you are capable of but not qualified for there is a remarkable amount you don’t know. I didn’t know that if you don’t reconcile your bank, credit card, PAYE &NI account, Wages Control Account, Supplier Accounts etc then your numbers may be meaningless because you have to make sure your numbers are in touch with reality. I didn’t know that some customers only pay when you send them a statement as part of their cash-flow management. I also had no idea that a cashflow projection was possibly one of the key management accounting reports you can produce,  I could keep going but you get the picture,

I am now a complete advocate of daily bookkeeping and of having checklists, bookkeeping by it’s nature is fairly repetitive so checklists are a great way to maintain accuracy and consistency.

  • By looking at the numbers every day you can very quickly spot potential cash-flow challenges and manage them before they cause issues in your business
  • You will pick up customer payment patterns so can manage those relationships in a way that works for your business
  • You know when supplier payments are due and can either pay or communicate with them on when they can expect the payment
  • No more working until 3am to get the VAT return submitted on time

Above all being in control of your business finances will put you in the driving seat of your business providing you with real time information on it’s performance and enabling you to make informed strategic decisions.

DilbertMadeUpNumbers

If  you would like help to put a structure in place and put you in a position of control over your business finances e-mail us today to book a free consultation sue@virtualbalance.co.uk

Summer Budget 2015

Well did you celebrate like Ian Duncan Smith on the announcement of the plans to introduce compulsory living wage or hold you head in your hands? I have put together a summary of the highlights of the budget below if you want to wade your way through the detail you can find the tax legislation and rates at www. gov.uk and a budget summary at Budget Summary.

  • Personal Allowance – this is the amount you can earn before income tax is taken.

Income tax personal allowance

*If you were born before 6th April 1938 then your personal allowance is fixed at £10,600

  • NI Allowance for businesses – Small firms employment allowance for NI will increase from £2000 to £3000 in April 2016
  • Corporation Tax – Tax paid on profits of a business

CT Rates

  • Annual Investment Allowance – The amount of expenditure on general and ‘special rate’ plant and machinery businesses are able to claim annually. Cars are the main exception to this capital expenditure

AIA

  • National Living Wage – New compulsory living wage for anyone over 25 will start next April at £7.20 raising to £9 per hour by 2020
  • Inheritance Tax – the inheritance tax threshold will increase to £1m when a property passed to spouse or civil partner.

If a residence is passed on death to a direct descendant there is an additional nil-rate band, £100,000 in 2017-18, £125,000 in 2018-19 and £175,000 in 2020-21. It will then increase in line with the Consumer Prices Index from 2021-22 onward.

The existing nil-rate band will remain at £325,000 from 2018-19 until the end of 2020-21.

  • Taxation of lump sum death benefits – the tax paid out when you receive a taxable lump sum from a pension scheme or non-UK pension scheme on the death of the pension holder

Currently 45% this is being reduced from 6th April 2016 to the recipient’s marginal rate of income tax.

  • Increasing rent-a-room relief
  • From 6th April 2016 the tax free income will increase from £4250 to £7500  also increases the level if an individual rents out rooms in a guest house, B&B or similar, providing it is their main residence.
  • Vehicle Excise Duty – Car tax  – this is one of the biggest U turns I have seen recently!!

Car Tax

  • DIvidend Tax – tax paid on your dividend receipts

Dividend tax credit is to be replaced by a new £5000 tax free dividend allowance. Dividend rates will now go up from zero to 7.5% for basic income tax payers, 25% to 32.5% for higher rate taxpayers and from 30.56% to 38.1% for additional tax rate payers.

  • University – from 2016-17 maintenance grants will be replaced by loans for students which will need to be paid back when they earn more than £21,000.
  • Cars – Fuel duty has been frozen for another year, insurance premium tax is being increased from 6% to 9.5% but any new cars don’t need an MOT until they are 4 years old.
  •  Child Benefit- Tax credit and universal credit support will be limited to the first 2 children from April 2017  *multiple births like triplets are excluded from the limit.

The budget covered a lot more topics than I have mentioned such as bank levy’s & the HMRC’s ability to take money out of your account if you owe them over £1000 and have aggregated across your accounts more than £5000.

To see if you have won or lost this time around go to BBC Budget Calculator although if you draw income from your Ltd company via dividends this won’t be reflected in the calculation. Almost certainly if you do then you have lost out on this round.

As a small business owner with 4 children I can honestly say that this is not a win win situation for my family. Equally as a small business owner I can relate to the issues faced with reducing costs and increasing income whether it be for a sole trader or the whole country.

At Virtual Balance we work closely with our clients on this very issue and help them to make those tough decisions that are necessary to secure a brighter future.

 

Summer Budget 2015

Well did you celebrate like Ian Duncan Smith on the announcement of the plans to introduce compulsory living wage or hold you head in your hands? I have put together a summary of the highlights of the budget below if you want to wade your way through the detail you can find the tax legislation and rates at www. gov.uk and a budget summary at Budget Summary.

  • Personal Allowance – this is the amount you can earn before income tax is taken.

Income tax personal allowance

*If you were born before 6th April 1938 then your personal allowance is fixed at £10,600

  • NI Allowance for businesses – Small firms employment allowance for NI will increase from £2000 to £3000 in April 2016

 

  • Corporation Tax – Tax paid on profits of a business

CT Rates

  • Annual Investment Allowance – The amount of expenditure on general and ‘special rate’ plant and machinery businesses are able to claim annually. Cars are the main exception to this capital expenditure

AIA

 

  • National Living Wage – New compulsory living wage for anyone over 25 will start next April at £7.20 raising to £9 per hour by 2020
  • Inheritance Tax – the inheritance tax threshold will increase to £1m when a property passed to spouse or civil partner.

If a residence is passed on death to a direct descendant there is an additional nil-rate band, £100,000 in 2017-18, £125,000 in 2018-19 and £175,000 in 2020-21. It will then increase in line with the Consumer Prices Index from 2021-22 onward.

The existing nil-rate band will remain at £325,000 from 2018-19 until the end of 2020-21.

  • Taxation of lump sum death benefits – the tax paid out when you receive a taxable lump sum from a pension scheme or non-UK pension scheme on the death of the pension holder

Currently 45% this is being reduced from 6th April 2016 to the recipient’s marginal rate of income tax.

  • Increasing rent-a-room relief
  • From 6th April 2016 the tax free income will increase from £4250 to £7500  also increases the level if an individual rents out rooms in a guest house, B&B or similar, providing it is their main residence.
  • Vehicle Excise Duty – Car tax  – this is one of the biggest U turns I have seen recently!!

Car Tax

 

  • DIvidend Tax – tax paid on your dividend receipts

Dividend tax credit is to be replaced by a new £5000 tax free dividend allowance. Dividend rates will now go up from zero to 7.5% for basic income tax payers, 25% to 32.5% for higher rate taxpayers and from 30.56% to 38.1% for additional tax rate payers.

  • University – from 2016-17 maintenance grants will be replaced by loans for students which will need to be paid back when they earn more than £21,000.
  • Cars – Fuel duty has been frozen for another year, insurance premium tax is being increased from 6% to 9.5% but any new cars don’t need an MOT until they are 4 years old.
  •  Child Benefit- Tax credit and universal credit support will be limited to the first 2 children from April 2017  *multiple births like triplets are excluded from the limit.

The budget covered a lot more topics than I have mentioned such as bank levy’s & the HMRC’s ability to take money out of your account if you owe them over £1000 and have aggregated across your accounts more than £5000.

To see if you have won or lost this time around go to BBC Budget Calculator although if you draw income from your Ltd company via dividends this won’t be reflected in the calculation. Almost certainly if you do then you have lost out on this round.

As a small business owner with 4 children I can honestly say that this is not a win win situation for my family. Equally as a small business owner I can relate to the issues faced with reducing costs and increasing income whether it be for a sole trader or the whole country.

At Virtual Balance we work closely with our clients on this very issue and help them to make those tough decisions that are necessary to secure a brighter future.