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Mid-Year Tax Planning- Why it is More Important Than You Think

Posted on by Sarah

What is Mid-Year Tax Planning?

Mid-year tax planning is a proactive review of your finances (usually around September–November) to identify opportunities to minimise tax, optimise profit extraction, and plan cash flow for the months ahead. It’s about being forward-looking, not just reacting once the year has already ended.

Now as the year draws to a close, many business owners are focused on finishing strong, wrapping up projects, and getting ready for a fresh start in January. But when it comes to your finances, waiting until year-end to review your tax position is often too late to make meaningful changes.

That’s where mid-year tax planning comes in. Taking time now—while there’s still flexibility—can make a significant difference to both your tax bill and your overall financial health.

The Benefits of Mid-Year Tax Planning

1. Time to Take Action

By checking in before year-end, you still have time to implement strategies such as pension contributions, dividend payments, or capital purchases. These can reduce your taxable income, improve cash flow, and ensure you’re working in the most tax-efficient way.

2. Avoid Nasty Surprises

Nobody enjoys an unexpected tax bill. A mid-year review highlights your likely tax position, so you know what’s coming and can set aside the right funds. No more scrambling to cover a bill you didn’t plan for.

3. Optimise Salary and Dividends

For limited company directors, the right balance of salary and dividends is key. A review before the year-end ensures you’re extracting profit in the most efficient way—making the most of allowances and avoiding unnecessary tax.

4. Make the Most of Allowances and Reliefs

There are plenty of tax allowances and reliefs available—but most need to be used before the tax year ends. A mid-year check makes sure nothing is missed, whether it’s ISA contributions, capital allowances, or director’s pension planning.

5. Cash Flow Confidence

Knowing your tax position in advance means you can plan your cash flow with confidence. Whether that’s setting aside funds for your January self assessment bill, or planning investment back into your business, you’ll avoid unnecessary stress.

6. Stay Ahead of Changes

Tax rules and thresholds shift constantly. A mid-year review allows you to get tailored advice on how upcoming changes may affect your business and personal finances—so you’re never caught off guard.

Summary

Mid-year tax planning isn’t about creating more admin – it’s about making smarter financial decisions while you still have options. By taking a proactive approach now, you can:

  • Save money on your tax bill
  • Make the most of allowances and reliefs
  • Plan ahead with clarity and confidence
  • Avoid unwanted surprises

If you’d like to make sure you’re set up for success before the year-end, why not start with a free 15-minute discovery call? It’s a no-obligation way to talk through your situation and see where we can help. Book your free discovery call here.

 

Making Tax Digital- Why Spreadsheets Won’t Be Enough

Posted on by Sarah

For years, spreadsheets have been the go-to tool for tracking income and expenses. But under Making Tax Digital (MTD), they just won’t cut it. Here’s why.

Spreadsheets aren’t fully digital

MTD requires digital records and a direct link to HMRC. Copying and pasting figures into a form won’t be allowed – it breaks the “digital link” rule. However, you can look into ‘bridging software’ that will convert your spreadsheet to MTD compliant format.

Risk of errors

Spreadsheets are prone to mistakes. One wrong formula or accidental overwrite can cause huge problems, especially when quarterly reporting is mandatory.

No automation

Software like Xero pulls in bank transactions, invoices, and receipts automatically. Spreadsheets can’t match that — meaning more admin and higher risk of missing transactions.

Penalties for non-compliance

If HMRC finds you’re not keeping records in an approved way, you risk penalties and extra scrutiny.

The better alternative: Cloud accounting software

Xero and other MTD-compliant tools are designed to:

  • Maintain digital records in line with HMRC rules
  • Submit quarterly updates automatically
  • Provide real-time visibility of your tax position

In Summary 

Spreadsheets might feel familiar, but they’ll soon be a compliance risk. By switching now, you’ll not only be MTD-ready, you’ll also benefit from smarter bookkeeping, better reporting, and less admin.

Talk to us today about moving onto Xero ahead of MTD.

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.

Why a Full Finance Function Is Your Secret Weapon for Scaling

Posted on by Sarah

Ambitious business owners are natural multitaskers. But when your limited company is pushing beyond £250k turnover, the DIY approach to finances stops being clever—and starts costing you.

A full finance function, like the one we deliver, means we handle everything:

  • Bookkeeping and VAT
  • Payroll and pension submissions
  • Director payments and dividend planning
  • Management accounts and board packs
  • Year-end compliance and tax optimisation

You stop wasting time chasing receipts or second-guessing your cash flow. Instead, you get back the brain space to focus on growing your business—with full clarity on where the money’s going and how to keep more of it.

💡 Tax Tip: Let’s say you’ve got surplus cash and want to extract it tax-efficiently. A full finance function tracks retained earnings, so we can time your dividend declarations and pension contributions to minimise higher-rate tax exposure. Done right, this can save you thousands annually in dividend tax.

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.

AI vs Accountant

Posted on 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):

  1. 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 .
  2. Employer’s NIC rate – It applied the historic 13.8 % rate instead of the current 15 % rate on earnings above the secondary threshold .
  3. 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 .
  4. 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 % .
  5. 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 .
  6. 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.
  7. 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

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.

Tax Changes on Pick-Ups – April 2025

Posted on by Sarah

Starting from April 2025, significant tax changes will affect double cab pick-up trucks in the UK. 

These vehicles, previously classified as commercial vehicles, will be reclassified as passenger cars for tax purposes. This reclassification impacts capital allowances and Benefit-in-Kind (BIK) taxation.

Key Dates:

•1 April 2025: For corporation tax purposes, double cab pick-ups will be treated as passenger vehicles.

•6 April 2025: For income tax purposes, double cab pick-ups will be treated as passenger vehicles.

Implications:

•Capital Allowances: Currently, businesses can claim full capital allowances on double cab pick-ups, treating them as plant and machinery. After 1 April 2025, these vehicles will be subject to car capital allowance rates, which vary based on CO₂ emissions.  

•Benefit-in-Kind (BIK) Taxation: Presently, double cab pick-ups are subject to a flat BIK rate (£3,960 annually). Post 6 April 2025, BIK rates will align with those of passenger cars, calculated on a sliding scale based on CO₂ emissions. Given the typically higher emissions of these vehicles, this change could substantially increase tax liabilities for employees using them as company vehicles.  

Transitional Provisions:

To ease the transition, HMRC has outlined that businesses purchasing, leasing, or ordering a double cab pick-up before the respective April 2025 deadlines can continue to apply the current tax treatment until:

•The vehicle is disposed of.

•The lease expires.

•5 April 2029.

Whichever occurs first.  

Action:

If you’re considering acquiring a double cab pick-up, doing so before April 2025 will allow you to benefit from the existing tax advantages during the transitional period. It’s advisable to assess the long-term implications of these changes on their tax position and consider alternative vehicle options if necessary.

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

How much turnover does my business need to make to pay me what I want after tax?”

Posted on by Sarah

“How much turnover does my business actually need to make… to pay me what I want… after all taxes?”

If you run a UK limited company and pay yourself a combination of salary and dividends, you might be wondering:

This is a deceptively complicated question. Why? Because income tax, dividend tax, corporation tax and personal allowance tapering all interact in messy ways. The wrong combination of income can trigger extra tax without giving you more in your pocket.

But what if you had a simple calculator that worked it out for you?

That’s exactly what I’ve created: a Turnover Target Calculator for UK Ltd Company Directors.

What the Calculator Does

This tool shows you the turnover required to achieve a specific monthly net income, after all taxes have been deducted.

You can enter:

  • Your desired net monthly income
  • Your business’s annual running costs
  • Your average gross profit margin 

The calculator then shows:

  • The gross dividend required to reach your net income target
  • Tax due on your salary and dividends
  • Corporation tax
  • Total pre-tax profit required
  • The turnover you need to make it all happen

Tax Efficiency Built In

It also flags when you hit the messy part of the tax system:

  • Personal allowance tapering (starts above £100,000 income)
  • The “tax trap” zone where earning more = disproportionately higher tax

To make this easier to compare, the calculator uses a benchmark row set at a net income of £99,999.96. This helps you see exactly how much extra tax you’d pay if you go over it.

Why This Matters

Most small business owners overestimate how much income they can draw and underestimate how much profit they need to generate to get it. Worse, they hit tax traps without realising.

This calculator makes it easy to:

  • Set realistic income goals
  • Avoid the tax cliffs
  • Understand the true cost of drawing more
  • Forecast more accurately

Ready to Use It to calculate your Business Turnover??

The Turnover Calculator is formatted for ease of use, fully protected so you can’t break it, and designed to save you time, stress, and costly mistakes.

For a limited time, the Turnover Calculator will be available free of charge whilst testing is completed. After that, it will be available to purchase online via secure link.

Would you like to start planning smarter with free access today? Get in touch to request your free copy. 

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Need help with your limited company finances? I’m an accountant who specialises in helping business owners take control of their numbers and their income. Drop me a message if you’d like personalised support.

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 Monthly Checks To Keep Your Business Finance Healthy

Posted on by Sarah

Running a successful business isn’t just about making sales—it’s about keeping your business finances in order so you can grow sustainably and avoid cash flow surprises. 

Whether you’re handling your finances in-house or outsourcing them to a finance team like ours, there are key checks you should be making every month to keep your business in good financial health.

Here are 12 essential things to review every month:

1. Cash Flow Position

Cash is the lifeblood of your business. Check your cash flow statement to see how much money is coming in and going out. If your cash reserves are running low, identify where the bottlenecks are and take action – whether that’s chasing late payments or adjusting spending.

2. Bank Reconciliations

Ensure your bank statements match your accounting records. Unreconciled transactions could indicate missing income, duplicate payments, or errors that might distort your financial picture.

3. Aged Receivables (Outstanding Invoices)

Check your list of unpaid customer invoices. Who owes you money? How overdue are they? Consistently late payments can hurt your cash flow, so follow up on outstanding invoices and consider adjusting payment terms if late payments are a recurring issue. 

It’s also crucial to issue invoices promptly – delays in sending invoices can lead to delays in payment, which in turn affects your cash flow. The sooner your customers receive their invoices, the sooner they can process and pay them.

4. Aged Payables (Outstanding Bills)

Review what you owe to suppliers and ensure you’re paying on time. Late payments can lead to damaged relationships or unnecessary interest charges. If cash flow is tight, prioritise essential suppliers and negotiate payment terms.

5. Profit & Loss Review

Look at your monthly profit and loss (P&L) statement to see if your revenue and expenses are on track. Compare against previous months and your budget—are there any unexpected changes that need addressing?

6. Business Savings & Tax Reserves

Set aside money for tax liabilities such as VAT, Corporation Tax, and PAYE. Unexpected tax bills can cause cash flow problems, so having a dedicated savings strategy is crucial.

7. Payroll & Staff Costs

Ensure payroll is processed correctly and on time, and check for any discrepancies. If staff costs are rising, assess whether this aligns with business growth or if there are inefficiencies to address.

8. Expense Tracking & Cost Control

Are your expenses creeping up? Review your spending to ensure you’re not paying for unused subscriptions or unnecessary costs. Small leaks can add up over time.

9. VAT & Other Tax Deadlines

Ensure you’re keeping up with VAT returns, PAYE, and other tax obligations. Missing deadlines can lead to penalties, so stay on top of them or use an outsourced finance function to manage this for you.

10. Sales Performance & Pipeline

Revenue isn’t just about what you’ve made—it’s also about what’s coming in. Review your sales figures and check your pipeline. If sales are slowing, consider adjusting your strategy or increasing marketing efforts.

11. Stock & Inventory (If Applicable)

If you sell products, review your inventory levels. Are you holding too much stock and tying up cash? Or are you running low and at risk of losing sales? Keeping a balance is key.

12. Business Goals & Financial KPIs

Each month, assess your progress towards key financial goals. Are you hitting your revenue targets? Have you reduced costs where needed? Are you staying within budget? Tracking KPIs will help you make informed business decisions.

By running these checks monthly, you’ll gain a clearer understanding of your business’s financial health and be able to take proactive steps before issues arise. 

If you’d rather focus on growing your business and leave the numbers to experts, our outsourced finance function can handle all of this for you – giving you peace of mind that your finances are in safe hands.

Need help staying on top of your business finances? Get in touch with us today.

Call us on 01386 366741