AI vs Accountant

Posted on August 21, 2025 by Sarah

AI vs Accountant: Why Professional Advice Matters When Deciding Between a Sole Trader and a Limited Company

Artificial intelligence (AI) tools can crunch numbers in an instant, but they can’t replace the judgement of a chartered accountant—especially when it comes to choosing the right business structure.

In two recent LinkedIn posts I shared a real example from my practice: an enquiry from Jane, a soletrader making around £60,000 profit. She was wondering if she should incorporate to save tax. I fed the same numbers into an AI calculator and discovered a series of mistakes. This blog summarises what happened, sets the record straight with the latest tax rules and shows why relying solely on AI can cost you.

Jane’s Question: Should I Go Limited?

Jane’s friend said that she would “save tax by going limited”. On the face of it, the idea sounds plausible. After all, corporation tax on profits up to £50,000 is 19%, which is lower than the 2045 % bands for personal income tax. Limited companies also separate personal liability from business debt and often allow more flexibility to raise finance or share profits within a family.

Tax rules change constantly, and several factors can tip the scales. To illustrate this, I ran the numbers for Jane twice: once manually and once through an AI calculator. Here’s what I found.

How AI Got the Numbers Wrong

When I asked the AI tool to work out Jane’s tax bill as a sole trader versus a limited company for the 2025/26 tax year, it provided a neat set of figures—but they weren’t correct. The mistakes stemmed from using outdated thresholds and misunderstanding how different taxes and expenses work. Below are some highlights (or lowlights):

Employer’s National Insurance (NIC) threshold – The AI used the old £9,100 annual secondary threshold. From April 2025, employers start paying NIC at a much lower £5,000 threshold .
Employer’s NIC rate – It applied the historic 13.8 % rate instead of the current 15 % rate on earnings above the secondary threshold .
Accountancy fees as a posttax deduction – The calculator treated accountancy fees as an aftertax personal expense. In reality, they’re deductible business expenses that reduce taxable profit .
Class 4 National Insurance – It assumed a flat 6 % NIC on all profits over £12,570. For 2025/26, selfemployed people pay 6 % NIC only up to £50,270; profits above this are charged at 2 % .
Class 2 National Insurance – The tool still added Class 2 NIC. From April 2024, Class 2 NIC is no longer payable for selfemployed people with profits above the Lower Profits Limit .
Overall outcome – Most importantly, the AI concluded that incorporating would save Jane money. When I corrected the numbers using current rates and allowed for accountancy fees correctly, the result flipped: as a limited company director with a typical mix of salary and dividends, Jane would actually keep around £352 less than she would as a sole trader.
The AI’s calculation looked plausible but ignored the subtle changes to National Insurance thresholds and rates and mistreated expenses. It only came close to the right answer when I challenged it with followup questions.

A Reality Check: Sole Trader vs Limited Company at £60,000 Profit

Comparing Jane’s situation under both structures using the latest 2025/26 rates:

Item	Sole Trader	Limited Company
Profit before tax	£60,000	£60,000
Deductible accountancy fees	Deducted from profit before tax	Deducted from company profits
Taxes & NIC	Income tax at personal rates + Class 4 NIC (6 % to £50,270; 2 % thereafter)	Corporation tax at 19 % on profits; salary subject to employer NIC at 15 % and employee NIC; dividends taxed at lower rates
Net amount retained	≈ £45,705	≈ £45,353

The table shows that, at this profit level, there’s no immediate tax advantage in forming a limited company. The savings from the lower corporationtax rate are largely wiped out by higher employer NIC, administrative costs and the correct treatment of accountancy fees.

Beyond Tax: Other Factors to Consider

Tax isn’t the only consideration. Here are some other factors Jane (and anyone in a similar position) should weigh up:

Liability – A limited company is a separate legal entity, so you’re personally liable only for the amount you’ve invested . Sole traders are personally responsible for their business debts.
Funding and ownership – Companies can raise capital more easily by issuing shares and may attract investors . Sole traders rely on personal or business loans.
Administrative burden – Companies must submit annual accounts and corporationtax returns from the first pound of profit . Sole traders have a simpler selfassessment and can use cashbasis accounting .
Flexibility in sharing profits – Companies can distribute profits as dividends to shareholders, including family members, potentially reducing the family’s overall tax bill .
Future plans – For owners expecting to earn significantly more in future or raise external finance, incorporating might deliver longterm savings and growth opportunities despite higher shortterm costs.

Conclusion: Why You Still Need Professional Advice

AI tools can provide ballpark figures, but they often lag behind when tax rules change or when they’re required to interpret realworld complexities. In Jane’s case, an AI calculator not only used obsolete NIC thresholds and rates but also mishandled deductible expenses and underplayed the realworld result. If Jane had relied on the tool, she might have opted to incorporate unnecessarily and ended up paying more tax.

When it comes to AI vs Accountants there is no one size fits all answer to the sole trader vs limited company question. Profits, risk tolerance, growth plans and personal circumstances all play a part. A qualified accountant stays on top of legislative changes – such as the new £5,000 employer NIC threshold and 15 % rate , or the removal of Class 2 NIC – and can model how those changes affect your specific situation. Before making a decision that could impact your takehome pay and liability for years to come, always seek professional advice.

So to contact The Accountancy Office to discuss this more please click here or call us on 01386 366741

Changing Accountants

Posted on August 12, 2025 by Sarah

looking at changing accountants? A business will often have a need to change accountants. Having the right accountant is crucial for your financial health and peace of mind. Whether you’re a small business owner or an individual, your accountant plays a significant role in managing your finances, tax planning, and ensuring compliance with regulations. If you’re considering changing your accountant, it’s essential to approach the process methodically to ensure a smooth transition and continued financial stability.

Here’s a step-by-step guide to help you navigate this change effectively.

1: Assess Your Current Needs

Before making any changes, take a moment to evaluate your current needs. Ask yourself:

Are your accounting needs being met?
Do you feel your current accountant understands your business or personal financial goals?
Are communication and responsiveness issues?
Have there been any recent errors or concerns about the quality of service?

Understanding what you need from your accountant will help you find someone who better fits your requirements. Also consider timings. For example, if you’re mid-way through your financial year, you may wish to look for a new accountant closer to the end of the financial year to minimise disruption.

2: Research Potential Accountants

Once you have a clear understanding of your needs, start researching potential accountants. Consider the following:

Experience and Expertise: Look for accountants with experience in your industry or who specialize in your particular needs, whether personal finance, small business accounting, or corporate tax planning.
Reputation: Check online reviews, ask for recommendations from trusted colleagues or friends, and verify credentials and professional affiliations.
Services Offered: Ensure the prospective accountant offers the services you require, such as bookkeeping, tax preparation, financial planning, and advisory services.

3: Arrange Meetings

Narrow down your list to a few potential suitable matches and contact them for an initial telephone call or meeting. Prepare questions that will help you assess their fit for your needs, such as:

How do you stay updated with the latest tax laws and regulations?
What is your approach to communication and client updates?
How regularly will we speak?
How long does it typically take you to complete the type of work I need?

This step will help you gauge their expertise, communication style and ability to meet your expectations.

4: Evaluate Costs

Understanding the cost structure is vital to ensure it aligns with your budget. Discuss the following aspects:

Pricing models (hourly rates, fixed fees)
Any additional fees for specific services
How often billing occurs and preferred payment methods

While cost is important, it should be weighed against the value and quality of service provided and your needs.

5: Check Compatibility

Ensure that you and your potential accountant have a good rapport. This relationship should be based on trust and mutual understanding. Consider:

How comfortable you feel discussing sensitive financial information
Whether their communication style matches your preferences
If their values and business ethics align with yours

A good working relationship can lead to better financial outcomes and smoother collaboration.

6: Review Contract and Terms

Once you’ve chosen an accountant, carefully review the contract and terms of service. Ensure all services, fees, and expectations are clearly outlined. Don’t hesitate to ask for clarification on any point before signing.

7: Notify Your Current Accountant

Once you’ve finalised your decision, professionally notify your current accountant of your intention to switch. Review your contract to understand any notice periods or obligations. Request all necessary documents and ensure all outstanding invoices are settled.

8: Transfer Information

Your new accountant will work with your new accountant to transfer financial documents, tax records and any other necessary information. This transition should be seamless, with both parties coordinating to minimise disruption and it should only take a short amount of time.

Your new accountant will also set up the relevant authorisations with HMRC so that they can deal with your tax affairs on your behalf. They will also carry out anti-money laundering checks which they are legally required to do.

Changing accountants can seem daunting, but it’s crucial to ensuring your financial needs are met effectively. By following these steps, you can make an informed decision and find an accountant who aligns with your goals and supports your financial well-being. With the right partner, you can look forward to enhanced financial management and peace of mind.

International Women’s Day 2025

Posted on March 10, 2025 by Sarah

Mary Harris Smith: The First Female Chartered Accountant

In a profession historically dominated by men, Mary Harris Smith stands out as a true trailblazer. Born in 1844 in London, she became the world’s first female chartered accountant but her path to recognition was far from straightforward. Her story is one of determination, resilience, and an unwavering belief in her own abilities.

Early Life and Career

Mary Harris Smith was born into a middle-class family and showed an early aptitude for numbers and business. In the late 19th century, opportunities for women in finance were virtually non existent, but Mary refused to let that stop her. She trained as an accountant and began practicing independently, something almost unheard of for a woman at the time.

By the 1880s, Mary had established her own practice, offering services in bookkeeping, auditing, and financial advice. Her skills and professionalism were widely respected, yet her gender remained a barrier to full professional recognition.

In 1888, Mary applied to join the Institute of Chartered Accountants in England and Wales (ICAEW) – the professional body for chartered accountants. Despite her experience and impeccable credentials, she was rejected solely because she was a woman. The ICAEW’s rules at the time explicitly restricted membership to men.

Undeterred, Mary continued her work and reapplied several times over the next few decades. Each time, she was met with the same response – women were not allowed.

Breaking the Glass Ceiling

It wasn’t until after World War I, when attitudes toward women’s roles in society began to shift, that Mary’s persistence paid off. In 1919, the Sex Disqualification (Removal) Act was passed, making it illegal to exclude women from professions solely based on their gender.

Mary wasted no time. In 1920, at the age of 76, she was finally admitted to the ICAEW, becoming the world’s first female chartered accountant. It was a historic moment, not only for Mary but for women in the accounting profession worldwide.

Mary’s Legacy

Mary Harris Smith’s achievement paved the way for future generations of female accountants. Her story is a testament to the power of perseverance and the importance of challenging outdated norms.

Today, women make up nearly half of all chartered accountants in the UK – a remarkable shift that can be traced back to the doors Mary Harris Smith pushed open over a century ago.

Mary’s legacy reminds us that progress is often hard-won but with determination and resilience, change is possible.

How much National Insurance will my company pay in 2025-2026?

Posted on November 11, 2024January 24, 2025 by admin

As the dust settles on Labour’s first Budget in 14 years, we look at the impact for businesses, in particular single directors’ of limited companies.
The biggest budget announcement related to employers National Insurance – hitting employers hard with a double whammy:
1.2% increase in employer’s National Insurance contributions (NICs) and

Lowering the secondary threshold (ST) which means employers will start to pay NICs on employees earnings from £5,000 instead of the current £9,100 threshold.
However, the Employment Allowance (EA) will be increasing from £5,000 to £10,500 which will help offset some of the additional costs – for some employers but not all.
Sole Directors of Limited Companies
A company with only one employee paid above the Class 1 National Insurance Secondary Threshold, where that employee is also a director of the company are specifically excluded from claiming the employment allowance.
Whilst this has always been the case (and seems somewhat outdated considering the reduction in the dividend allowance in recent years,) it does mean that sole directors will face additional NIC costs.

Example of a Director’s salary in 2024-2025
In 2024, for a single director working through their own limited company, the most common annual salary was typically £9,100 or £12,570.
A salary of £9,100 did not attract any Employers’ National Insurance because it was below the secondary threshold. The salary also suffered no employee tax or National Insurance contributions and secured a pension credit for the director, as if it had been paid and securing a qualifying year towards the state pension.

National Insurance Chart

What will be the optimum director’s salary in 2025/26?
We anticipate that for the 2025/26 tax year, sole Director Companies (with no employees) will choose between:
A salary of £12,570, achieving the most efficient tax savings available and securing a qualifying pension year, or
Lower salary, not achieving full tax savings and forfeiting a qualifying year, or
No salary, reducing administrative costs and forfeiting a qualifying year.
A salary of £6,000 would incur an Employers NI liability of £150 but it is too low to qualify for the state pension credit because earnings need to be equivalent to the National Insurance Lower Earnings Limit (LEL) (£533 per month 24/25 and £542 25/26).
However, a £6,000 salary + £150 Employers NI would save corporation tax of 19% = £1,169.
If you were to take £6,000 as dividends rather than a salary, the personal tax would be £481 based on the basic dividend rate of 8.75%.
Alternatively, employing an additional staff member could make the business eligible for the Employment Allowance, offsetting Employer NI costs.
There is no definitive answer as to what the best optimum salary for a limited company director is. It will depend on your personal situation, business position, personal priorities and overall tax position.
For company directors with employees (who can claim the Employers Allowance) the optimum salary will usually be £12,570.

What about larger companies?
Let’s look at a larger business who employs 150 workers paying them an average salary of £38,000 per year.
This example highlights the real impact of the Employers’ National Insurance changes with a clear illustration of how the government expects to raise extra revenue.
150 employees x £38,000 = £5,700,000
2024 Employers NIC x 13.8% = £598,230
The company is not eligible to claim the Employment Allowance as it’s Employers NICs exceeds £100,000.

In 2025, with the same number of employees and the same pay rate, the business will be eligible for the Employer’s Allowance due to the removal of the £100,000 cap.
150 employees x £38,000 = £5,700,000
2025 Employers NIC x 15% = £742,250
Less Employers Annual Allowance = £10,500
Total Employers NIC = £732,000
This employer will pay an additional £133,770 in NICs each year (22%) which is a very significant additional tax burden.

How Can I Prepare for the Employers National Insurance Increase?
Adapting to these new additional costs will require thoughtful adjustments to business strategies.
Here are some proactive steps you can take:
Review Payroll Budgets: Businesses should reassess their payroll budgets to account for the higher NI rate and the lowered threshold. By factoring in these changes early, businesses can better prepare for their financial impact. The National Minimum Wage increase should also be considered, where applicable.

Optimise Workforce Planning: Employers may consider restructuring roles or adjusting part-time and flexible work arrangements to manage costs effectively. Prioritising efficiency within the workforce and identifying ways to improve productivity could help offset some of the increased NI expenses.

Consider Salary Sacrifice Schemes: Some companies may explore tax-efficient remuneration options like salary sacrifice schemes, where employees opt to exchange part of their salary for non-cash benefits, reducing the NI liabilities for both employers and employees.

National Minimum Wage
The 6.7% increase in the National Minimum Wage from April 2025 will have a significant impact on employers.
The National Living Wage will increase to £12.21 from 1st April 2025, for employees aged 21 and above.
The National Minimum Wage rate for employees aged 18-20 will increase to £10.00.
The National Minimum Wage rate for employees aged 16-17 will increase to £7.55.
The National Minimum Wage rate for apprentices will increase to £7.55.

Conclusion
There were other announcements that will impact business owners that we have not covered in this blog. For your free Budget Report and complimentary personalised NIC projection, please call 01386 366741 or email us here

The Accountancy Office has been selected as part of SmallBiz100 Line Up

Posted on September 6, 2024 by admin

Exciting news alert!

Following a nationwide search, we’re absolutely delighted to have been selected as part of this year’s SmallBiz100 line-up, which showcases 100 of the most impressive independent businesses from across the nation as part of the countdown to Small Business Saturday on 7th December 2024

We’ll be bringing Evesham into the spotlight on 27th October 2024!

Watch out for further details coming soon!

https://smallbusinesssaturdayuk.com

What does the UK general election mean for my business?

Posted on July 1, 2024 by admin

General Elections can bring uncertainty due to whoever wins making their own polices which affect us all.

We’re going to focus on the key points of the leading parties’ manifestos ahead of the next general election on 4^th July and how they may affect small businesses.

Conservatives

abolishing “the main rate of self-employed National Insurance. The party’s long term ambition is to scrap National Insurance entirely “when financial conditions allow”
further cut tax for workers by reducing employee National Insurance contributions by another 2p
no plans to raise corporation tax or capital gains tax
keep the VAT registration threshold under review and exploring options to “smooth the cliff edge” at £90,000
uphold triple lock pension, raising state pensions by 8.5%. plan to introduce a “triple lock plus,” increasing the tax-free state pension allowance by at least 2.5%.
to expand tax free childcare – 30 hours a week of free childcare from when a child is nine months old until they start school.
To tackle late payment, promote digital invoicing, improving enforcement of the Prompt Payment Code, building on the creation Laof the Small Business Commissioner with “powers to tackle unfavourable payment practices
Continuing programmes including the Invest in Women Task Force and the Lilac Review to encourage more female and disabled entrepreneurs.
Work with the British Business Bank and private sector fund managers to secure a £250m Invest In Women Fund to support female entrepreneurs.
Take more companies “out of the scope of burdensome reporting requirements” by lifting the employee threshold allowing more companies to be considered medium-sized. This is expected to save small businesses at least one million hours of admin per year.

Labour

no plans to increase taxes on working people
not to expect increases to National Insurance contributions, as well as basic, higher, or additional rates of income tax, and VAT.
to cap corporation tax at 25%
modernising HMRC in order to tackle tax avoidance (this will involve even further increasing reporting requirements)
providing more training opportunities
remove zero-hour contracts and ban ‘fire-and-rehire’ practices.
to make it easier for small businesses to access funding and investment
to introduce tough new laws to stamp out late payments
Scrap business rates and replace it with a system of business property taxation that is “fairer for bricks and mortar businesses”
To rejuvenate the construction industry – build 1.5 million new homes, create opportunities for small builders and tradespeople and to reduce red tape in the current building planning system
Retain annual investment allowance for small business, and “give firms greater clarity on what qualifies for allowances to improve business investment decisions”

Reform UK

raising the income tax threshold to £20,000 a year
removing VAT from energy bills
raising the minimum corporation tax profit threshold to £100,000 – as well as reducing the corporation tax rate to 20% (and eventually 15%)
abolishing existing IR35 rules
raising the VAT threshold to £120,000
abolishing business rates for high street small businesses
Cut entrepreneur’s tax relief to 5%.
Reform the tax system.

Liberal Democrats

cut income tax by raising the tax-free personal allowance
Abolishing business rates and replacing them with a commercial landowner levy to help high streets.
support HMRC in hopes they can better tackle tax avoidance
review IR35 reforms (also known as off-payroll working) to make sure the self-employed are treated fairly
Setting a 20% higher minimum wage for people on zero-hour contracts attimes of normal demand.
Expand parental leave and pay
Supporting small employers with statutory sick pay costs
Reforming capital gains tax to “close loopholes exploited by the super-wealthy by adjusting the rates and basing them solely on capital gains while increasing the tax-free allowance from £3,000 to £5,000, on top of a new tax-free allowance for inflation, and introducing a relief for small businesses”.
boost trade for small businesses by bringing down trade barriers
enforce the prompt payment code – requiring companies with more than 250 employees to sign
Tackle the problem of late payments
protect triple lock pensions so they rise in line with inflation, wages, or by 2.5% (whichever is highest)
plan to establish a new employment status: the dependent contractor, which will sit between employed and self-employed. This will provide entitlement to minimum earnings levels, sick pay, and holiday entitlement.

What are your thoughts? What policies would you like to see implemented to support small businesses?

Will you be voting this year?

Did you know we have expanded our service offering?

Posted on December 22, 2023 by admin

We are very excited with our new diversified service offering. This is a fantastic step towards providing our clients with comprehensive and tailored support throughout their business lifecycle and personal financial journey.

We have added Independent Financial Advice to our existing suite of services.

Expanded Services

As your accountants we work with you to ensure your tax affairs are optimal. When it comes to your personal wealth there is far more to it than just tax planning. This is why we believe that in the same way you receive expert advice relating to your tax affairs and business management, you should ensure you receive expert financial planning advice from a qualified financial planner.

Our separately branded financial planning business TAG Financial Planning are able to offer advice in all areas of financial planning, such as:

Pensions – review existing pensions, company contributions and commercial property.
Investments – portfolio review, ISAs, Bonds, Trusts etc
Insurance – shareholder protection, key man insurance, Mortgage life cover, income protection and critical illness cover
Goals Based Financial Planning – identifying goals and objectives, current position, strategy & progress modelling, implementation of plan to achieve success.

A member of our financial planning team will work with you to identify, quantify, and bring to life your life goals. They will assess your current financial plan, review the strengths and weaknesses, and advise what adjustments are required align it with your desired outcome.

Together with the financial planning we can also provide additional services as follows:

Corporate Restructuring
Share Schemes
M&A Tax Services
Capital Allowances
R&D Tax Credits
Tax Investigation
Exit Planning
Trust Planning
Inheritance Tax Planning
Property Portfolio Planning
Valuations
VAT Advice

We all know the benefit of receiving timely professional advice when it comes to financial matters, especially when big changes are required.

For more information or to arrange an initial conversation with an adviser please contact us on 01386 366741 or email hello@tpitdev2.uk and one of our advisers will be in contact.

You work hard for your money, it’s important that your money works hard for you!

How can I raise cash to grow my business?

Posted on October 17, 2023 by admin

This is often one of the biggest hurdles that growing businesses face, raising cash. You’ve increased your sales to maximum capacity, you’ve got a team and processes in place but you can’t plan for further growth without further financial investment.

It’s a great position to be in but you need to consider your options for funding.

Firstly, be sure of what you’re setting out to achieve. Have a clear plan in place and clearly define your goals:

What’s your action plan for the next 12 months?
The next three years?
The next five years?
How much cash do you need for each of the above stages?

There are several different approaches to guiding your business to the next level. Here we list some potential options for consideration:

Personal Funding

The quickest and easiest way to raise finance is often to utilise personal savings. The disadvantage is that the amount of funds may be limited and insufficient to fund the level of growth required. Also, there may be a level of risk with no guarantee that the company will be able to repay those funds. Raising money from friends and family is also another option but again there is a level of risk and no guarantee that the money will ever be returned which can lead to strained relationships.

There are then only two other options – Equity or Debt.

Equity

Equity means you are looking for investor to give you money, in exchange for a stake in your business.

The benefit of raising cash this way is that it doesn’t need to be repaid and you may get to benefit from an investor with extremely valuable experience which will help the business grow in the direction you want it to. However, you’re also giving away a portion of your business which means you will have less control so it’s important to make sure you choose the right investor.

Here are some examples of equity investments:

Private Equity – investors who provided cash to established businesses in return for a large or controlling stake, to help them grow to the next level.

Corporate Venture Capital – an investment made by a large company into a smaller business, in return for a share of that business.

Expansion Capital firms – give established businesses money to grow and reach maturity.

Angel Investors – act as mentors and invest their own money in early-stage businesses for a share in the company.

Venture Capital – invest in businesses with high growth potential, often after Angel investors have got the business started. The money comes from established entrepreneurs, investment banks and other financial institutions.

Crowdfunding – Using an online platform, investors buy shares in a company to help it grow.

Debt

Debt financing means you are borrowing money that needs to be repaid, usually with interest being paid on the amount you borrow.

Debt is often a scary word and managing any borrowing needs to be done carefully when looking at raising cash. Some debt is straight forward and short-term. Other debt is longer term. This is why you need to be clear of the purpose for your lending requirements.

Always consider all the options and think ahead to your 5 year plan. Raising equity can be complex and is a lengthy process. Make sure you have sufficient cash to meet your plans. Having a strong financial business model and cashflow plan is essential.

Here are some debt options for consideration:

Overdraft – short term lending, typically from a compay’s bank and up to an agreed limit. Overdrafts can be expensive but a business will only pay interest on the amount they actually borrow.

Credit cards – another short term option and easily accessible but usually with a high interest rate.

Invoice factoring – selling your unpaid sales invoices to a third party who will collect the debt from your customer, paying you a percentage of the invoice value up front, minus their fee. A fairly expensive option but useful if you have a large amount of outstanding invoices with slow payers.

Asset financing – raising funds to purchase physical assets such as vehicles and equipment. A fairly quick form of finance, also giving the lender tangible assets to recover should you default on the repayments. Useful for asset intensive businesses with the option to consider refinancing the assets and releasing cash to the business.

Supplier Credit terms – often overlooked as a form of financing and another short term option. Negotiating extended credit terms with your key suppliers can free up working capital.

Business loans – borrowing money from a loan provider such as a bank and then paying it back with interest over an agreed period. Loans can be both short-term and long-term. There are also various Government backed loan schemes such as the Recovery Loan Scheme and start-up loans.

Peer to Peer Lending – a business borrows money through an online platform and pays it back with interest over an agreed period.

Direct lending funding – A business borrows money from a fund and repays it with interest. A fund may be able to provide loans where a bank will not.

There is also one other option – Grant Funding. A Grant is a non-repayable type of funding, usually awarded by governments, organisations, or companies to invest in certain assets or activities, or to help a business achieve a particular goal.

Exactly what level of debt is suitable for your business depends on your precise requirements at any one time. Whatever level of debt you undertake, it’s important to measure it. Keep track of your level of gearing and monitor your debt to equity ratio – a simple formula to show how capital has been raised to run a business. This is an important financial metric because it indicates how financially stable a company is when facing problems with trading or other operational considerations and what ability it has to raise additional capital for growth.

How an accountant can help you

There are a number of ways in which a qualified accountant can help make your business more efficient, especially when it comes to managing your debt. Every business is different but monitoring cash and debt, is equally as important as measuring profit.

An accountant can support you in creating a cashflow forecast to make sure you’re in good cash health and by spotting any potential cash shortfalls early on. You also need to understand what you owe as well as what cash you have in the bank. Looking at your bank balance every day won’t tell you all you need to know.

Based in the Heart of Evesham, The Accountancy Office are here to help If you wish to discuss any aspect covered in this article please don’t hesitate to call 01386 366741 or email us here.

Associated Companies for Corporation Tax 2023

Posted on September 22, 2023 by admin

Associated Companies for Corporation Tax – New Rules from April 2023

The rules around corporation tax changed on 1 April 2023. The amount of corporation tax that a company will pay will depend on the level of its profits, and also whether or not it has any associated companies.

From 1 April 2023, companies with profits below £50,000 will pay corporation tax at the small profits rate of 19% whilst companies whose profits exceed the upper limit of £250,000 will pay corporation tax at the main rate of 25%.

Where two or more companies are “associated” with each other, the Corporation tax limits are divided by the number of companies concerned.

What is an Associated Company?

A company is an associated company of another at any time when:

One of the two has control of the other or
Both are under the control of the same person or persons

Companies are considered associated for the full accounting period, even if they are only associated for part of that period. Associated companies can also include both UK and Non-UK tax resident companies.

Dormant Companies which are not carrying on any trade or business are excluded from the associated company calculation.

When considering whether a person has control over more than one company, the most common test for “control” is the voting power of a shareholder. In a simple case, where each of the company’s shares carries one vote, any person or persons who own more than 50% of the shares will “control” the company.

It is important to understand the number of associated companies as soon as possible to estimate tax liabilities. If you are forecasting to produce significant profits for your company and you have one or more Associated Companies, you may wish to considering restructuring your activities to minimise any loss of marginal relief.

If you wish to discuss any aspect covered in this article please don’t hesitate to call 01386 366741 or email us here.

Do I need an Accountant if I’m using Xero?

Posted on August 23, 2023 by admin

As much as we love Xero, yes you do! Don’t be fooled – it’s great software but it doesn’t replace professional advice!

You may expect us to say that because we’re accountants but here’s a few reasons why we strongly advise that every business owner still needs an accountant, even if they’re using fantastic software such as Xero.

1: Software is a tool. It automates labour intensive tasks, enabling the user to perform specific tasks far more efficiently. It doesn’t replace the knowledge of a highly skilled bookkeeper or accountant. The software relies on the user entering data correctly and it doesn’t identify errors made by the user. Mistakes happen, it’s human nature but mistakes can sometimes be costly, if not identified and corrected promptly.

2: If you don’t understand the purpose of a journal in your accounting records, you probably should leave it to a professional that does. Bookkeeping is a highly skilled job and is far more than data entry. If you don’t understand double entry bookkeeping, you probably won’t understand how to correct any mistakes you make. Journal entries are often required to make corrections to your accounting records.

3: Your accounting software won’t accurately calculate the tax you owe. Various adjustments to the accounts are required to arrive at your taxable profit. This will include adding back items such as personal expenses and depreciation. Capital allowances also need to be considered. These items are adjusted on the tax return. Your accountant will ensure your tax bill is minimised and that everything is claimed correctly.

4: Many small businesses start off with a great idea but lack the financial knowledge required to make good commercial decisions. Many businesses fail due to incorrect accounting data, lack of legislation knowledge, poor advice and lack of expert guidance. Your accountant will be able to support you through all these challenges, ensuring you make timely and accurate decisions to ensure successful business growth – and to keep your business running smoothly.

5: The human touch. People forget that many accountants also serve as business advisers. Keeping your business on track, identifying mistakes and offering support throughout the year whenever it’s needed, are just a few things your accountant can help with. Accountants carry a wealth of knowledge through working with clients from all walks of business. Most experienced accountants will have seen most of the problems and challenges that a business may encounter. As a result, an accountant can provide an unbiased sounding board for your ideas, warn you of potential risks and alert you to any opportunities that you may have missed.

6: Running a business is tough and extremely time consuming. Your accountant should be a partner to your business, taking care of the many financial tasks involved in running your business – reducing your workload and saving you both time and money.

7: Using an accountant that specialises in Xero will ensure that you’re getting the most from the software. They will be able to provide you with training in using Xero but also suggest other add-on applications that will integrate with Xero and automate your processes, saving you time.

8: If you’re looking for financial borrowing, you will need the help of an accountant to support any financial applications such as mortgages and bank loans.

9: Tax laws are always changing. With the full roll-out of Making Tax Digital around the corner, you will need an accountant on side to help you understand and implement the changes.

10: Your accountant will act on your behalf with HM Revenue & Customs. Contacting HM HM Revenue & Customs can be a very time consuming process so your accountant. Your accountant can save you lots of time by speaking to them for you, saving you the pleasure!

For qualified advice on Xero Accountants contact The Accountancy Office in Evesham were we will be happy to discuss your requirements. Visit us at our website, email us or call us on 01386 764761

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