As inflation bites and the energy crisis shows little sign of ending anytime soon, we have pulled together a range of ideas that our clients could seek to use in the coming months to help their business and personal finances.
The following is not intended to constitute advice and we would always recommend seeking professional advice before acting on any of the ideas laid out below.
Your relationship partner will be able to provide introductions or assistance on any of the following ideas.
Management Information at a click of a button
Most of our clients are now using cloud-based accounting software to ensure that they have management information (almost) at a click of a button.
The likes of Xero and Quickbooks allow a business to be able to pull down transactions automatically from your business bank and credit card accounts each day, which can then be easily processed and placed against the appropriate income or cost category in your accounts. Time savings versus using manual or spreadsheet-based accounting systems are huge.
Even if the time savings – or the ability to have up to the minute data – don’t quite grab your attention, HMRC will be bringing in the next round of Making Tax Digital with effect from April 2024 meaning that all self-employed individuals and landlords with income of over £10,000 (based on the 2022/23 tax returns) will be required to make quarterly submissions to HMRC direct from their accounting packages. The option of returns will not be available.
Both Xero and Quickbooks are bringing out very low cost or free apps that can be used to assist the self-employed and landlords. We would strongly recommend anyone affected look sooner rather than later – you will see below other ways in which cloud packages can help.
We’ve partnered with the free to use Reducer to help you make smarter purchasing decisions suited to your business.
Reducer connects with your cloud account and uses your spend history to create bespoke purchasing recommendations across eight key areas including utilities, phone and card costs. Choose which improvements you’d like to make, and Reducer will handle the rest.
For those clients seeking to review a greater range of costs for potential savings, we also have a link with Auditel, an established Cost Consultancy.
Auditel have considerable experience in identifying cost savings and assisting with their implementation. They are comfortable to work within a contingent fee structure, so we feel that they offer a timely and appropriate route to addressing your spiralling costs.
We have partnered with Capitalise which specialises in finding the best funding options – including the recently extended Recovery Loan Scheme – to help businesses grow, business credit ratings, plus other services which help with cashflow. This includes access to specialist equity, grant and debt providers.
The Capitalise software automatically extracts data from your cloud-based accounting software and suggests a range of funding options for your business. Again, there is no cost to you for this service and no time requirement.
Increase in director’s salary payments
Following the changes announced in the Spring Statement, many director/shareholders will be able to draw a higher salary from July onwards due to the increase in the National Insurance bands.
We would generally recommend that director/shareholders draw a salary of £1,047 per month from July onwards, with any remaining drawings taken as dividends
The increase in the salary level from July will save the average director/shareholder around £176 per annum, and the employing company around £383 in Corporation tax compared to maintaining a monthly salary of £823.
Using salary sacrifice schemes for your staff
An easy way to ensure that your business and your staff can make a tax saving on their salaries is to use salary sacrifice schemes. These schemes reduce the cash portion of the employee’s salary in return for the company providing another non-cash benefit instead.
They can be used for a variety of different reasons with the most common being pension contributions, the cycle to work scheme or even the provision of electric company vehicles.
If you and your employee agree to use a salary sacrifice scheme, make sure that their contract is updated and your business as the employer will save Employer’s National Insurance, whilst the employee will save Employee’s National Insurance and Income Tax on the reduced salary.
For example, where you have a workplace pension scheme in place, you should check to see if your business is using a salary sacrifice scheme to make all of the pension contributions on behalf of the staff.
Given the recent record fuel prices, many of us might be considering the move to an EV.
Businesses acquiring a new and unused electric car can claim a 100% first-year allowance in the year of purchase (including if acquired through a hire purchase arrangement – but not through contract hire) with the whole purchase price set against the company profits.
From the employee’s perspective (including company directors), anyone using an company electric vehicle for personal use will be subject to an annual benefit in kind of 2% of the vehicle’s original list price.
For example, a £50,000 new electric car will result in a tax saving of £9,500 for a company in the year of purchase and a personal tax liability of £200-450 for the employee.
The self-employed can also benefit from the first-year allowances in much the same way as companies, but any private usage will restrict the tax relief available.
Grants under the Workplace Charging Scheme can also be claimed by businesses to install electric chargers, with employers able to pay for the installation of a charger at the employee’s home without an additional benefit in kind.
Tax-free ‘Benefits in Kind’
Alongside the salary sacrifice options and the tax efficiencies of using electric cars, the option of providing business mobile phones could be considered as the provision of mobile phones is no longer a taxed benefit in kind in most circumstances with business contracts potentially being cheaper than individual personal contracts.
In addition, directors and perhaps more senior members of staff could consider taking out ‘relevant life’ insurance policies – potentially in replacement of existing personal life insurance policies – as employers may offer relevant life policies without any tax implications to the personal insured or the beneficiaries of such policies which can remain the spouse, partner or family members.
If this is of interest, please contact Matt King on firstname.lastname@example.org
Green Incentive Grants
There are any number of grants available to help you and your business go green. These range from home improvements to grants for installing environmentally friendly technology in your business premises.
Local and national Government bodies as well as energy suppliers provide these grants. Examples include:
- Renewable energy business grants
- Sustainability grants
- Energy efficiency grants
- Sustainable innovation
Ofgem provide further details of where to find help with grants: OFGEM business energy efficiency grants and schemes
Capital allowance ‘super deduction’
For qualifying capital expenditure made on or before 31 March 2023, companies will be able to claim a ‘super-deduction’ equivalent to 130% of the cost of most new fixed assets (except cars and buildings).
For example, if £1,000 were to be spent on new computer equipment, office furniture or commercial vehicles, the company would have a deduction of £1,300 against their taxable profits, saving £247 in Corporation Tax.
Claims for the tax relief will be made through the company’s Corporation Tax return where applicable.
Research & Development
Companies undertaking research and development in an attempt to find a technological or scientific improvement or efficiency to existing products or services, or indeed develop a new product or service, may be able to claim enhanced tax relief of up to a further 130% of the qualifying expenditure.
To obtain the R&D relief you need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- could not be easily worked out by a professional in the field
From April 2023, new claimants of R&D relief (or those who have not claimed in the previous 3 accounting periods) will have to pre-notify HMRC of their intention to claim.
We assist many clients each year with the production of a report explaining the research and development projects as was as ensuring that any claim is maximised and can work on either a set fee or a proportion of the tax savings made.