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Category: Budget

Full Finance Function: Stop Losing Time and Money Without One

Posted on by Sarah

Why A Full Finance Function is important to you and your business.

You didn’t start your business to reconcile bank feeds or chase VAT deadlines.

But without a full finance function in place, you’re probably:

  • Duplicating data entry across systems
  • Reacting to problems after they hit
  • Making decisions with outdated numbers
  • Paying penalties because something was missed

Our clients who’ve switched to our fully managed finance function have saved hours each week – and tens of thousands per year. Why? Because we systemise, automate and optimise your entire financial workflow.

No more siloed spreadsheets. No more panicked HMRC calls. Just proactive financial management that pays for itself.

💡 Tax Tip: Want to reduce your Corporation Tax bill? We help identify eligible expenses—like director life insurance policies under an “excepted group life scheme”, staff events, or even home office allowances – that most business owners overlook. These small wins add up fast when tracked by someone who knows where to look.

Please contact us if you’d like to discuss your Finance tax planning then please contact us on 01386 366741 or email here and one of our advisers will be in contact.

Tax for Sole Traders Simplification: Is the Cash Basis Now Right for You?

Posted on by Sarah

For the many sole traders and partnerships, managing finances and preparing for the year-end tax return can be a significant administrative burden. Traditionally, this has involved accrual accounting – a method that requires you to account for all invoices and bills when they are issued, not when they are paid.

However, in a major move to simplify tax for the sole trader or self-employed, HMRC has introduced significant changes that make a much simpler method – cash basis accounting – the new default.

Here at The Accountancy Office, we want to break down what this change means for you and your business. It’s a positive development that could make your bookkeeping easier and improve your cash flow, but it’s important to understand if it’s the right fit.

What is Cash Basis Accounting?

In simple terms, the cash basis is a method of accounting that records income and expenses only when money actually changes hands.

  • Income is recorded when it lands in your bank account.
  • Expenses are recorded when you actually pay for them.

This straightforward approach eliminates the need to track debtors (money you’re owed) and creditors (money you owe) for your tax return, offering a much clearer, real-time picture of the cash available to your business.

What Has Changed for the 2024/25 Tax Year?

Previously, the cash basis was an optional scheme with strict turnover limits. From April 2024, HMRC has supercharged the scheme, making it more accessible and beneficial than ever before. The key changes are:

  1. It’s Now the Default: Cash basis is the new standard for sole traders and partnerships. If you want to use the traditional accrual method, you now have to actively choose to do so on your tax return.
  2. Turnover Thresholds Scrapped: The previous entry limit of £150,000 and exit limit of £300,000 have been completely removed. This means unincorporated businesses of any size can now benefit from this simpler system.
  3. Finance Cost Cap Removed: The previous cap that limited the deduction of interest and financing costs to just £500 has been abolished. You can now deduct the full interest costs, provided they are incurred wholly and exclusively for the business.
  4. More Flexible Loss Relief: Restrictions on how you can use a business loss have been lifted. Under the new rules, losses calculated on the cash basis can be used in the same way as accrual losses, meaning they can be offset against your other income from the same or previous year.

The Benefits of Using the Cash Basis

For many businesses, these changes make the cash basis an attractive option:

  • Simplicity: Your record-keeping is significantly simplified, making it easier to manage your own books.
  • Improved Cash Flow: You only pay tax on money you have actually received. This can be a huge advantage if your clients are often slow to pay.
  • Clear Financial Picture: It provides an immediate and easy-to-understand snapshot of the cash your business has at any given moment.

Is the Cash Basis Right for Everyone?

While the cash basis is a fantastic simplification for many, it’s not a one-size-fits-all solution. For example:

  • Businesses that hold large amounts of stock may find the accrual basis gives a more accurate reflection of their profitability.
  • If you are seeking significant business finance, lenders often prefer to see accounts prepared on an accruals basis as it shows a complete picture of your financial health, including future liabilities and income.
  • The cash basis is not available for Limited Companies.

The new, expanded cash basis is a great opportunity for many sole traders, but it’s crucial to get it right.

To find out more and discuss what these changes mean for you, get in touch with our team today.

How does Corporation Tax work?

Posted on by Sarah

Corporation Tax Isn’t Just an Annual Bill

Many business owners view corporation tax as a once-a-year bill that lands on their desk when their accountant prepares the company’s accounts. However, this approach can lead to financial surprises and cash flow struggles.

The reality is that corporation tax is a recurring tax—it increases as your profits grow, meaning it’s something you need to plan for throughout the year, not just at the end of it. Ideally, you should be reviewing the company’s corporation tax liability each month.

Corporation tax is charged on your company’s taxable profits, and it doesn’t stay static. If your business is doing well and your profits are increasing, your corporation tax bill will rise too. Unlike fixed costs such as rent or insurance, it’s a variable expense that grows in line with your financial success.

Many company owners make the mistake of only thinking about corporation tax at year-end, but by then, it’s too late to do much about it. That’s why proactive tax planning is essential.

How Corporation Tax Works

  • Tax is based on profit – The more your business earns, the more tax you’ll pay. The main rate of corporation tax is currently 25% for companies with profits over £250,000, while those with profits under £50,000 pay 19%. If your profits fall between these figures, a marginal relief calculation applies.
  • Tax is due 9 months after year-end – Your corporation tax bill is payable nine months and one day after your company’s financial year-end. But if your profits exceed £1.5 million, you may need to pay in quarterly instalments.
  • Profitability changes your tax bill – If your business was making £50,000 in profit last year and pays tax at 19%, but this year profits rise to £100,000, your tax bill could more than double.

Why You Need to Plan for Corporation Tax

1. Avoid Cash Flow Problems

If you wait until your tax return is filed to think about corporation tax, you may find yourself struggling to set aside the money in time. By treating it as a recurring cost, you can build it into your cash flow planning.

2. Make the Most of Tax Reliefs

With proactive planning, you can take advantage of tax reliefs and allowances that reduce your liability. For example:

  • Pension contributions – These are tax-deductible and a great way to extract profit efficiently.
  • Capital allowances – If you invest in equipment, you may be able to claim tax relief.
  • R&D tax credits – If you’re investing in innovation, you could be eligible for tax savings.

3. Set Aside Money Regularly

A good habit is to put aside a percentage of your profits into a separate tax reserve account. Some business owners save 19-25% of their monthly profits to ensure they have enough when the bill is due.

4. Know When to Take Dividends

If you take dividends, remember they’re paid after corporation tax. If your tax bill is higher than expected, it could affect how much you can withdraw from the company. Regularly reviewing your figures with an accountant can help you manage this.

Final Thoughts

Corporation tax isn’t just a once-a-year headache – it’s an ongoing financial commitment that grows with your business. Planning ahead, setting aside funds regularly, and making the most of tax reliefs can help you stay in control.

If you’d like advice on tax-efficient profit extraction, cash flow planning, or reducing your corporation tax liability, get in touch.

Call us on 01386 366741 or visit accountancyoffice.co.uk to book your free consultation.

12 things limited company business owners should think about ahead of the new financial year

Posted on by Sarah

For many Limited Companies, as 1 April approaches, mark the start of a new financial year and now is the perfect time to reflect, reassess, and plan ahead. 

A strong financial strategy can set the stage for a more profitable and stress-free year. Financial planning isn’t just about your business – it’s also about ensuring your personal finances are in order.

Here are 12 key areas to focus on for a successful year ahead.

Business Planning

1. Review Your Current Performance

Start by assessing how your business has performed over the past year. Review your financial statements, compare actual results against forecasts, and identify any trends. Are you hitting your revenue targets? Are there areas of overspending? Understanding your numbers is the foundation for future growth.

2. Set Clear Business Goals

What do you want to achieve in the next 12 months? Whether it’s increasing turnover, expanding your team, launching new services, or improving efficiency, setting measurable goals will keep you focused and help guide your decisions.

3. Conduct a Pricing Review

Are your prices still competitive and profitable? Many business owners set their prices and forget to review them regularly. Consider rising costs, inflation and industry benchmarks to ensure you’re charging appropriately for your services.

4. Create a Budget for the Year Ahead

A solid budget keeps you in control of your finances. Factor in expected income, expenses, tax obligations, and potential investments in your business. Having a clear budget helps prevent cash flow surprises and ensures you’re allocating resources effectively.

5. Plan for Tax Efficiency

Tax rules change frequently, so it’s wise to review your tax position with an accountant. Are you making the most of tax reliefs, allowances, and deductions? Could you benefit from extracting profit in a more tax-efficient way, such as dividends or pension contributions?

6. Strengthen Cash Flow Management

Cash flow is the lifeblood of your business. Review your invoicing process – are clients paying on time? Could you improve payment terms or introduce automated reminders? Consider whether you need access to financing to smooth out cash flow fluctuations.

7. Assess Your Marketing Strategy

A new financial year is a great time to refresh your marketing efforts. Does your branding still align with your business goals? Are you consistently attracting your ideal clients? Review your website, social media presence, and client acquisition strategies to ensure they’re working effectively.

8. Review and Improve Business Processes

Are there any inefficiencies in your operations? Look for opportunities to streamline workflows, automate repetitive tasks, or adopt new software that could save you time and money. A more efficient business means more profit and less stress.

9. Plan for Growth and Investment

If you’re aiming for growth, think about what investments you need to make. Do you need to hire staff, upgrade equipment, or invest in professional development? Planning ahead ensures you have the resources available when needed.

10. Protect Your Business

Risk management is often overlooked but is crucial for long-term stability. Review your insurance policies, contracts, and compliance requirements. If you rely on key team members, consider key person insurance. If you’re a director, ensure you’re meeting all your legal responsibilities.

Personal Financial Planning

11. Review Your Personal Budget

How much money do you need to cover your lifestyle and future plans? It’s important to assess whether your salary and dividends are sufficient – and sustainable. Consider any big expenses you have coming up, such as a house purchase, renovations, or that dream holiday.

12. Plan for the Future: Life Insurance, Pensions & Investments

As a business owner, your personal finances are closely tied to your company. Have you protected yourself and your family with the right life insurance and income protection? Do you have a will and lasting power of attorney in place? Are you making the most of pension contributions and investments to secure your long-term financial future? If you’re unsure, now is the time to get advice.

Final Thoughts

he start of a new financial year is a prime opportunity to reset and plan for success – both in business and in life. Taking a proactive approach in these 12 areas will put you in a stronger position for the year ahead.

If you need support with business or personal financial planning, we’re here to help. From tax efficiency and cash flow management to pensions and life insurance, we offer a full range of services to keep your finances on track.

Call us on 01386 366741 or visit accountancyoffice.co.uk to book your free consultation.

Keeping More of Your Money: A Real Story

Posted on by Sarah

We recently started working with a married couple running a successful limited company, despite only forming their company two years ago.

They were making good money, but every month, whatever came in, went out. When the tax bill landed, it was always a shock. They felt like they were working hard but never getting ahead financially.

The Problem?

  • No system for taking money out of the business efficiently
  • No tax planning – so the Corporation Tax bill was always a nasty surprise
  • They wanted to buy a house but struggled to show enough income 
  • They wanted to improve their lifestyle and needed an additional £3,000 per month personal income from their company, but their finances felt unpredictable

What We Did:

  1. Set up a structured way to take money out of the business, balancing salary, dividends and pension contributions to maximise tax efficiency.
  2. Created a tax reserve strategy so they weren’t caught off guard when bills were due.
  3. Planned their income properly so they could show enough on paper for their mortgage application.
  4. Helped them set business profit goals that allowed them to take home the income they wanted while still covering tax and business growth.

The Result?

  • They now pay themselves £3K+ per month comfortably
  • Their next tax bill is already planned for – no stress!
  • Their mortgage application looks stronger
  • They finally feel in control of their finances instead of constantly reacting to surprises

f you’re running a business but struggling to make your hard-earned cash actually work for you, we can help. Let’s get your finances working for your life goals – not against them.

Call The Accountancy Office  on 01386 366741 or book a call for a time that is convenient for you.

The Budget Roundup 15th march 2023

Posted on by admin

Chancellor Jeremy Hunt delivered his first Budget on Wednesday 15 March, as a “Budget for growth”.

There was very little talk of tax in the Chancellor’s budget this March. However there were more policies directed at getting people into work and keeping them there, all central to the Budget – which have lead to key changes on childcare and pensions.

Here are the key points of interest to our clients:

Limited Companies

Corporation tax
The Chancellor confirmed that the main corporation tax rate will increase from 19% to 25 with effect from 1 April 2023, affecting companies with profits of £250,000 and over.

Small companies with profits up to £50,000 will continue to pay corporation tax at 19%, with profits between these two figures being subject to a tapered rate.

Capital Allowances
The super-deduction regime will end 31 March 2023 and will be replaced from 1 April 2023 with ‘full expensing’ 100% capital allowances for qualifying plant and machinery. This will last for three years, to 31 March 2026, although the Government indicated that it is their ambition to make this permanent.

The Government will also introduce 50% first year allowances for ‘special rate’ plant and machinery, including long life assets. These rules apply only for corporation tax purposes and will not be available for businesses which are subject to income tax, unless they are below the Annual Investment Allowance threshold of £1m per annum.

The Government has also confirmed that the 100% first-year allowance for qualifying expenditure on electric vehicle charge-point equipment will be extended until 31 March 2025 for corporation tax and 5 April 2025 for income tax.

R&D Tax Reliefs
From 1 April 2023, there will be an increased rate of relief for loss-making R&D intensive SMEs. Eligible companies will receive £27 from HMRC for every £100 of R&D investment.

A company is considered R&D intensive where its qualifying R&D expenditure is 40% or more of its total expenditure.

Previously announced restrictions on some overseas expenditure will now come into effect from 1 April 2024 instead of 1 April 2023.

Personal Tax

Income Tax
The main personal tax-free allowance and the 40% tax rate threshold remain frozen at their 2022/23 levels until the end of 2027/28, representing a tax rise where income increases, a process known as ‘fiscal drag’. The 45% threshold is lowered from £150,000 to £125,140 for 2023/24.

Fiscal drag occurs when tax thresholds and allowances do not keep up with inflation or wage growth, resulting in more of a taxpayers’ income being taxable. This can also mean that more income is taxed at a higher rate – or more taxpayers are ‘dragged’ into paying tax at a higher rate.

The tax free dividend allowance falls from £2,000 to £1,000, and Capital Gains Tax annual exempt amount falls from £12,300 to £6,000, for 2023/24.

Pensions
The Government has announced three key changes to the tax relief you can get when saving towards your pension:

The annual allowance will rise from £40,000 to £60,000 in April 2023.

The lifetime allowance, currently £1,073,100, will be abolished entirely from April 2024.

The money purchase annual allowance will rise from £4,000 to £10,000 in April 2023.

The changes mean that many people will be able to contribute much more to their private pensions before having to pay tax.

Savings and ISAs

Savings & ISA allowances are frozen. The ‘starting rate’ for savings will be frozen at £5,000. This allows those earning less than £17,570 from employment to earn up to £5,000 in savings interest before paying any tax.

In addition, the maximum amount you can save into an ISA as an adult will stay the same at £20,000.

For junior ISAs, the limit will remain at £9,000. There is also no change to the Lifetime ISA limit of £4,000.

Energy Bills

Support with energy bills will continue for another three months, reversing a plan to make it less generous.

Under the Energy Price Guarantee, the government has been limiting energy bills for a typical household to £2,500 a year, plus a £400 winter discount.

The guarantee will continue at the same level until July, by which time the price of energy should have dropped sufficiently for it to become redundant.

Support with Childcare Costs

Working parents with three and four-year-olds are eligible for 30 hours of free childcare per week during term time. This will be extended to cover younger children in England, when both parents are working. Equivalent funding will be given to the authorities in Wales, Scotland and Northern Ireland.

The rising cost of childcare has been considered to be a deterrent for some parents to go back to work or work full-time. Yet there are questions over whether the policy will actually mean parents working more hours and whether there are the nursery places available for their children.

As a result, it will be a staged introduction, with 15 free hours of childcare for two-year-olds in April 2024, and in September 2024 for those aged over nine months, then 30 hours for all from September 2025.

National Living Wage and National Minimum Wage

The National Living Wage will increase by 9.7% for individuals aged 23 and over to £10.42 per hour from 1 April 2023.

Other rates of National Living Wage will rise from the same date by different percentages.

Action you need to consider now
Accountants Broadway

Given rising costs imposed on small businesses together with the rising cost of energy bills, the National Minimum Wage increases and the 10% inflation rate, you should take the opportunity to review your business and personal position:
If you haven’t already reviewed your business plan for 2023, you should model the impact of rising costs. Do you need to:

Increase your prices?
Reduce your overheads?
Increase your wages?
Consider other revenue streams?

Review your personal and business tax situation.

Would you be personally better off if you paid yourself more via PAYE or made more pension contributions? (particularly now you can add £60k into your pension each year tax free)
Would closing your limited company and trading as a sole trader now make more financial sense?

If you need help with any of the above, call us today on 01386 366741 and we’ll be pleased to help.