Whichever party gets elected tomorrow, no new government can avoid the reality that three of their major revenue streams are going to be basic rate income tax, national insurance and VAT.

All main three parties have announced there will be spending cuts, but these will only go some way towards reducing the UK’s massive deficit, so it’s a no-brainer that further tax rises are likely. Already last month, the new 50% top rate of tax has come into effect for incomes over £150,000, with personal allowances for anyone earning over £100,000 already scrapped.

So what might each of the three have in store for us?

LABOUR
PAYE/Tax : Income tax is to remain at current levels. Personal allowances are to be frozen though, meaning tax bills will rise as incomes increase
NI: National Insurance will be increased by 1% from April 2011 to 12%. The threshold at which NICs become payable will be raised so that anyone earning under £20,000 p.a. will not be affected
Capital Gains Tax (CGT) – no announcements on changes to the rate CGT, currently at 18%
VAT: – No proposed change to VAT rates

CONSERVATIVE
PAYE/Tax: No plans to raise income tax rates. The new 50% rate may not be a permanent feature. Transfer of £750 of personal allowances within married couples and civil partnerships will be allowable.
NI:- Will protect middle earners from the 1% NIC rise by increasing contribution thresholds so that individuals earning less than £35,000 will pay no more in cash terms.
CGT: No plans to change CGT rates
VAT: No plans to change VAT rates

LIBERAL DEMOCRATS
PAYE/Tax: Personal allowances to be increased to £10,000 (from £6,475), but basic rate band reduces from £37,400 t o £33,875
NI: Nick agrees with Gordon here – and will support Labour’s proposed changes
CGT: Will tax CGT at income tax rates, also will reduce the annual exemption to £2,000 from £10,100
VAT: No change to VAT rate

Although none of the three are proposing to alter the current VAT rate of 17.5%, many experts predict a rise to at least 20%, which would also be more in line with European VAT rates and, whilst neither Labour nor Conservative say they are going to raise CGT rates, it is widely expected that the gap between the 18% flat rate and the 50% top rate of income tax, will be narrowed in the future.

Watch this space!

Business owners are often reactive when it comes to selling or transitioning their ownership interest. Many are too busy dealing with the ‘here and now’ to prepare for the succession of their business. Whether the goal is to achieve a top price, or to reduce the tax impact, proactive steps, as early 3 to 5 years before the transaction, are critical.

If your ultimate plan is to sell to a third party, the aim should be to increase business worth to maximise the sale value.

However, if you are looking to transfer ownership to a family member, the aim might be to decrease the amount of gift or inheritance tax on the transfer of such ownership interests. If not structured properly, taxes can eat up 50% of the gross sales price. It is important to design and implement a wealth preservation strategy.

The average sale of a business can take up to 2 years to organise properly and only 7 % of businesses offered for sale attract a buyer, mainly due to low-level marketing and an unprofessional approach. In addition, many business owners have unrealistic expectations of the value of their business. Serious buyers are not interested if the business is basically a lifestyle, providing purely an income for the owner.

What steps can be taken now to increase the value in your business?

1. Prepare financial statements – these will add credibility and show growth trends and sustainable earnings.

2. Reduce debt – a large amount of debt increases risk of business failure and default.

3. Build a strong management team – this reduces reliance on one key person, and should improve profitability, by optimising performance of all employees.

4. Focus on increasing cash-flow – cash-generating businesses are attractive to buyers.

5. Review internal controls – strong internal controls will re-assure any potential buyer that the financial statements are reliable and the company’s assets are being utilised properly and appropriately.

6. Get a business valuation – an independent professional’s valuation will assist in justifying your asking price.

The key, as ever, is to plan ahead. If you want to know how we can help you maximise your exit ££££s, give Aileen a call on 07802 331887, or leave a message below.

If you want to reward your staff for all of their hard work in these difficult times but don’t want to give the taxman any extra, read on!

Childcare vouchers

The first £55 per week of childcare vouchers that you give to an employee is both tax and NI-free. The employee can use the vouchers to pay for approved childcare, e.g. a registered childminder. They give the voucher to the approved child carer who then sends it back to you for the company to settle.
The £55 limit is per parent not per child so if both parents work work for you, they can receive up to £110 a week tax-free (via separate vouchers).

Suggestion Scheme

In certain circumstances employers can reward staff tax-free for ideas.  Even if you get snowed under with suggestions, you get to pick the ideas to be used or rewarded, so you can decide who gets the money.
The taxman, however, will want to know all about the tax-free amounts you are giving to your staff, so you will need to have evidence of the benefit the business has derived from the suggestion by way of an estimate of the cost savings, or extra sales revenue etc.

The maximum you can pay for suggestions not implemented is £25. The maximum for a suggestion implemented is the lower of £5000 or 50% of the expected financial benefit in the 1st year ( or 10% of the expected financial benefit over 5 years).

Gift for personal appreciation

A gift made to your employee in recognition of some personal quality but not a reward for performing duties whether past, present of future, can be made tax free.  An example might be a wedding gift.

Personal Incidental Expenses

If an employee has to stay away overnight on business, then you can pay them up to £5 per night in the UK (£10 per night overseas) tax-free, in respect of their miscellaneous personal expenses such as telephone calls home or newspapers. You need make sure you don’t accidentally reimburse the expenses twice – first as part of the hotel bill and second via the employee’s separate expense claim.

Medical Check Up

Periodical check-ups paid for by the company are not a taxable benefit. However, for the exemption to apply, the health screening or medical check-ups have to be available to all employees generally, on similar terms. ( Medical Insurance is a taxable benefit)

Employee working from home.

If your employees work at home regularly, but not full-time, they can claim the increased energy needed to heat and light the property for longer and any extra water used, if it is metered.  However, they can’t claim a proportion of their mortgage or Council Tax as these are fixed, whether or not you work from home.
The claim must also be supported by receipts, showing the increased energy, water etc. used due to you working at home. These are tedious for you to collect and expensive for your company to process.  Instead why not pay £3 per week to all of your employees who work from home on a regular basis?  This may seem trivial, but it’s still £156 a year tax-free.

Could any of these suggestions work for you?   Leave your details below, or contact us directly on accounts@fabaccounts.com.

Any household whose total income is less than £58,175 may be entitled to receive tax credits from HMRC.

The level of award will depend of a number of factors, but the MAXIMUM possible for a regular couple with 2 children would be made up as follows:-

Child allowance ( 2 x £2,235)         £4,470

Family allowance                                     545

Basic Allowance                                   1,890

Couples allowance                              1,860

> 30 hours work pw                                775

TOTAL ALLOWANCE:                       £9,540

Other contributory factors are if you have a disabled child, a new baby, or if you are paying for registered childcare.

The nearer your income is to the upper limit,  the smaller the credit will be.    For example, one of our clients whose combined income was just over £50,000 in the year to April 2009, is eligible for £529!   Small beer maybe, or could be 100 small beers, depending on how you look at it.

The award for this year will be based on last year’s income.   If you have previously been over the threshold and have not claimed in the past, you may now be eligible, due to any change in circumstances.  But hurry!  your claim for this year must be submitted before 6 July 2009.

If in doubt, check it out!!  Give us a ring, or call the tax credits helpline directly on 0845 300 3900

It’s official! (well,  according to the latest research carried out by legal consultant Employment Law Advisory Services)

Having at least one woman on a company’s board reduces the risk of a business failing by more than 20%.  Also, more than 80% of companies with women on their boards are optimistic about surviving the recession in good shape.

Apparently, women executives are more frugal, responsive and flexible.

Firms with women in the boardroom achieve a 10% higher return on capital than those firms run entirely by men.  Added to this, women accountants traditionally earn up to 50% less than men.

Value for money, I’d say!

Web based accounting is a relatively new phenomenon where the user can access and use a complete accounts package, through a customised web-site usually hosted by their accountancy provider.  Following a good deal of research, the team here at FAB have identified Liberty Accounts as the best system currently on the market.  We have come up with 5 key reasons as to why this might be just the solution for anyone considering changing from their existing system, or upgrading from a manual system.

1. No upfront cost or upgrades.

Unlike buying traditionally boxed software,  there is no upfront cost with this option.   You pay a small monthly subscription, which is scaleable depending on how much of the system you want to use.   Because it is web-based, you are always on the latest version of software, so you never need to worry about being forced onto the next upgrade.  All you need to start is a typically configured computer (Windows, Mac, Linux etc), with internet access.

2. Scaleable to grow with your business.

There is a pretty exhaustive list of features available, but many small businesses or start-ups may only wish to use a few of them to begin with, say raising sales invoices, or posting purchase invoices or bank transactions.  As your confidence or your business grows, you can add on the bits you need  e.g.  stock, a fixed asset register, payroll.  You can even file your VAT on-line!

3. We can see exactly what you see, so we can help immediately.

With this system, both accountant and client can access the same accounting information.  You can opt to do as much or as little as you like. Some users might prefer to do just the basic data entry of invoices and bank transactions and let the accountant do all the VAT and the “clever stuff”.  At the end of the year, there is no need to any backing-up and sending of data files as all the data is stored via the web browser, so we can access your data remotely (or at your office) to perform month-end and quarterly routines.

4. Easy to use with multi-user access.

Because Liberty Accounts is delivered as a service over the internet, it is inherently networked, available for any authorised user to have access wherever they are.   With a lot of accounts packages, there is a charge for additional users

5.  100% security and back-ups

The system works over dial-up speed networks so if you have access to a wi-fi link you can use it while you’re on the road and be confident that your business data is secure, whatever happens to your laptop. We ensure that your data is stored in a way which minimises the risk of data loss. Daily backups are kept offsite and we regularly test restoration of those backups.

Sounds interesting?  Call us today for more details, or e-mail us at:  accounts@fabaccounts.com