National Minimum and National Living Wage rates increasing on 1 April 2018

The government is increasing the National Minimum and National Living Wage rates on 1 Ap‌r‌il 2018.

This includes the largest increases in a decade for the rates that apply to 18-20 and 21-24 year olds.

As the minimum wage increases more employers than ever will be directly affected, including those who currently pay above the minimum. See below for rates effective from 01 April 2018 and historic rates.

National Minimum Wage and National Living Wage Rates
Effective
Year
25 and Over
21 to 24
18 to 20
Under 18
Apprentice
01/04/2018
2018
£7.83
£7.38
£5.90
£4.20
£3.70
01/04/2017
2017
£7.50
£7.05
£5.60
£4.05
£3.50
01/10/2016
2016
£7.20
£6.95
£5.55
£4.00
£3.40
2015
£6.70
£5.30
£3.87
£3.30
2014
£6.50
£5.13
£3.79
£2.73
2013
£6.31
£5.03
£3.72
£2.68
2012
£6.19
£4.98
£3.68
£2.65
2011
£6.08
£4.98
£3.68
£2.60
2010
£5.93
£4.92
£3.64
£2.50

 

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Businesses behaving badly… and going bust (Part 1)! 

I recently watched a tv series which featured 3 friends who held equal shares in a hotel business they ventured into. One was in charge of the hotel, another looked after the pub & bar, and the third looked after the kitchen as a chef.

Over a 9 month period (from owning the business):

  • There was no particular individual in charge to drive and manage the business – according to them, it was managed by all 3!
  • Every night featured a drunken party at the bar such that hotels guests couldn’t get a good night sleep – the parties were more important! 
  • Hotel guests arriving late had to weave through a bar filled with partiers just to get information on how to check in – because front desk was closed from 9pm!
  • The food in the fridge was mixed with raw and cooked meat, expired products and mould growing food.
  • Guests complained about the quality of the food and service. 
  • One of the owners declared himself as employee of the month, even though they had a few other employees. 
  • Always offered free pints and drinks to parties during the nightly parties. 
  • Had no financial plan and a system to manage finance and cash flow.

This business was only ‘in the moment’ and had no plan for growth and the future and thus represents a typical example of a business behaving badly. 

Here are some tips to ensure your business does not behave badly, stays ahead, generates profits and becomes cash positive:

Have a pilot

You or someone in the business need to be responsible for directing the business. This involves being responsible for strategy, decision making, delegation and overall management.

Become financially literate 

This does not mean you have to be the accountant or finance director (great if you are)! You however need to be aware of what the numbers are saying and how you can use that to take proactive action in driving the business forward. 

Understand your income

What is your most profitable product or service? Which market, sector, industry or customer drive increased sales revenue? It is recommended that you have financial information that gives you insightful analysis on margins and profitability mix. 

Understand your costs

Having a good knowledge of your cost drivers would go a long way in helping you focus on cost savings and reductions to improve your bottomline. A robust system of accounting would help categorise and segment your cost structure to better identify cost drivers and actions you can take to reign in on  excessive costs. 

Plan and forecast your cash flows

‘Cash is king’ is a well known catch – it is however a very important factor to businesses not behaving badly! Making profit does not really translate into being cash positive and having money in the bank. 

Making profit should ideally lead to being cash positive over time. 

Having a good knowledge of your income and expenses is a great way to begin the process of planning and forecasting your cash flow. 

A cash flow forecast will make you aware of when you have funds to spend and when you are most likely to have less cash. This can be great and useful information as you will be able to make spending decisions more effectively and efficiently.

Get support

Businesses today thrive much better when they are able to make commercial and viable decisions with concise, insight and informative management information. Value creation can be achieved with metrics that help you to focus and grow your business.

Transitioning and positioning your business for growth from being the CEO that wears all the hat to engaging field experts can be one of the best course of actions you can take to drive your business forward.

At MATTANS, we can provide the support you need with managing your finance and cash flow, thereby helping you to move your business ahead of your competition.

To find out more on how we can help, contact us for a free 1 hour consultation – 0330 311 2983, info@mattans.com.

Alternatively, I invite you to sign up to receiving our newsletters by clicking here
Tobi Lab FCCA

Business Manager

MATTANS – Chartered Certified Accountants

How many mobile phones are tax free? 

Your company provides you with more than one mobile phone. Only one can be deductible for tax purposes. Is it possible to make a claim for all lines or shift exemption between phones?

 

What is a mobile phone for tax purposes?

A mobile phone is equipment (including equipment installed in a car) that could be used to transmit spoken messages and that was not connected to a land-line.

 

From 2006/07 onwards the definition of a mobile phone was extended to include apparatus designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service. This covers a connection (e.g. a SIM card) provided independently of a mobile phone. For example, a SIM card provided by an employer to be used in a mobile phone that belongs to an employee.

 

It is worth noting that certain devices that were primarily designed and adapted as Personal Digital Assistants (“PDAs”) in the past have evolved over time so that many modern consumer PDAs are likely to be smartphones. It is also worth noting that this is an area of rapidly changing technology and it is not possible to be certain about the application of the definition of “mobile phone” to future or new forms of smartphone. See EIM21779

 

Exempt phones

If only one mobile phone is provided for both business and private use it will be a tax deductible expense.

 

If two mobile phones are provided for business and private use, one will be exempt and the other will represent a benefit. It is up to the employee and employer to decide which one will be exempt and which one will be chargeable as a benefit. The applicable tax exemption can be switched between devices, but not both.

 

If two mobile phones are provided for business use only, these will be exempt.

 

Tip

If you want to maximise the benefit and reduce tax charge on mobile phones:

  • The purchase and contract of the phones and lines must be in the name of the company / business (not in the name of the individual)
  • If self-employed (that is not a limited company), you need to keep records of both private and business use.
  • Private use must be insignificant
  • Proper records must be kept to track level of private use and switch of exemption where 2 mobiles are provided for private and business use.

To get more advice or support with the above or your record keeping, please send an email to info@mattans.com

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Surviving a HMRC tax investigation

Is HMRC after you and your business?

If you have to prepare and file tax returns you have good reason to expect and be paranoid about an investigation by HM Revenue & Customs. HMRC has more powers than ever, so businesses are under closer scrutiny and the number of tax investigations in the UK is on the increase.

A tax investigation can be triggered by a discrepancy in your figures, or may result from a completely random check. Whatever the cause, an investigation is usually extremely complex, time consuming and stressful. So unless you are very sure of your position, our recommendation is that you should take professional advice as soon as a tax investigation or inspection starts.

You’re under the microscope

With revolutions in information technology and the government’s Making Tax Digital strategy, HMRC’s powers to scrutinise your business are increasing all the time, meaning businesses are under the microscope more than ever. In a bid to find unpaid taxes, the taxman already has the capability to trawl through billions of items of personal financial information from dozens of sources.

In addition, the tax authorities now have increased powers to search premises and can even extract information from third parties to build their case against you. And with businesses currently required to file returns online, HMRC can use advanced software to analyse your returns and compare them with industry averages. Software developments mean that soon the taxman will be able to access even more areas of your personal financial information, including information gathered from social media.

And forget any old ideas about burden of proof. If the taxman decides to visit, you’re guilty until proven innocent. It seems that nowadays there’s nowhere to hide.

 So what triggers a tax investigation?

Only round 7% of tax investigations are a result of random factors. Instead, the vast majority are due to a discrepancy where HMRC believes that something is wrong with your tax return. Ratio analysis is an increasingly important weapon in HMRC’s armoury – this means that alarm bells ring if a company’s figures show a high degree of fluctuation from year to year, or if your business has been displaying suspicious activity – for example, unexpectedly high turnover

How do you lower your chances of being investigated?

 Take care when filing tax returns

HMRC does not accept mistakes or ignorance as excuses. So make sure your files are accurate and complete and use the blank space in your tax returns to explain any unusual fluctuations in turnover or profit.

File your tax return on time

A late return will not only incur a penalty charge, it will also draw attention to your data and increase the likelihood of your business being investigated.

Pay your taxes on time

It’s all about keeping your head below the parapet, so you should always pay your tax well in advance to allow for your payment to be processed.

Make sure your files and records up to date and accurate

Always keep clear financial records so that you’re fully prepared should the tax man come knocking.

Keep both hard and electronic copies

Retain copies of invoices, receipts, business bank statements and any other relevant documents and retain copies of your accounts going back at least six years.

Honesty is the best policy

There’s really little point in attempting to conceal information or use illegal tax avoidance tactics, as they will be uncovered. And ask yourself the question – is deception really worth all the stress and anxiety, especially if a random tax investigation takes place?

What happens in a tax investigation?

Be prepared for a very stressful time. A full inspection will usually start with you receiving a letter instructing you on what you need to hand over. What you need to provide will depend on what they are investigating. HMRC will then take all of your records, go through them in detail, then come back with questions.

A tax investigation can go on for months, even a year or more, and it can potentially cost thousands of pounds in accountancy fees. In addition, the penalties can be raised up to 100% of the tax that was supposed to be paid. However, this may be reduced if it was due to an honest mistake. Investigations usually delve back one year into your business accounts, however if HMRC suspect any dishonesty, it is empowered to go back 20 years, although this is usually restricted to six years.

It is possible to go to prison for tax offences, particularly in cases where large amounts of PAYE and VAT are concerned, but HMRC usually seek civil penalties.

Keeping records for tax – what records to keep

What records to keep

You’ll need to keep records of:

Why you keep records

You don’t need to send your records in when you submit your tax return but you need to keep them so you can:

  • work out your profit or loss for your tax return
  • show them to HM Revenue and Customs (HMRC) if asked

You must make sure your records are accurate.

Keep proof

Types of proof include:

  • all receipts for goods and stock
  • bank statements, chequebook stubs
  • sales invoices, till rolls and bank slips

If you’re using traditional accounting

As well as the standard records, you’ll also need to keep further records so that your tax return includes:

  • what you’re owed but haven’t received yet
  • what you’ve committed to…

View original post 231 more words

Top tips for managing finance and cashflow

1. Track your monthly spending.

Many people do not know how much they spend each month on food, clothing, housing, or entertainment. Whether you are paying with cash, a debit card or credit card, total your expenditures at the end the month to gain a better picture of how you’re spending your income.

2. Develop a household budget you can follow.

Using the data you’ve compiled by tracking your monthly expenses, develop a realistic budget so that it’s easier to live with. Track how well you follow it each month – that means continuing to track your monthly expenses. There are many apps that you can use for this. You can download a simple Excel spreadsheet byclicking here

3. Be sure to budget for savings.

Your savings are a Rainy Day Fund, which is important when unforeseen expenses or emergencies arise. Be sure to budget part of your monthly…

View original post 354 more words

Top tips for managing finance and cashflow

1. Track your monthly spending.

Many people do not know how much they spend each month on food, clothing, housing, or entertainment. Whether you are paying with cash, a debit card or credit card, total your expenditures at the end the month to gain a better picture of how you’re spending your income.

2. Develop a household budget you can follow.

Using the data you’ve compiled by tracking your monthly expenses, develop a realistic budget so that it’s easier to live with. Track how well you follow it each month – that means continuing to track your monthly expenses. There are many apps that you can use for this. You can download a simple Excel spreadsheet by clicking here

3. Be sure to budget for savings.

Your savings are a Rainy Day Fund, which is important when unforeseen expenses or emergencies arise. Be sure to budget part of your monthly paycheck for deposit into a savings account – ideally at least 10% of each check. If you find or earn extra money – put that away in a savings account, too!

4. Pay your monthly bills on time and avoid late charges.

Take inventory of your regular monthly bills and make reminders for yourself on when each bill is due. That way you can avoid costly late fees, which can also damage your credit score. The best approach is to pay bills as soon as they arrive.

5. Review your credit report.

The details of your credit report can have an enormous impact on your financial future. Obtain a free report once a year at http://www.annualcreditreport.com, and check it for accuracy. Be sure to dispute any errors.

6. Obtain your credit score.

Your three-digit credit score tells lenders and businesses how well you manage your credit and your finances. Scores range between 0 and 1,000. The higher the number, the better the rating and the better chance you have of obtaining credit at a better rate.

7. Eliminate credit card debt.

Credit cards can make it easy to pile on debt. If your debt adds up faster than you can pay it off, you’re likely living beyond your means. Stop using the credit cards and pay off existing balances – the sooner you do, the less you’ll pay in interest. Remember: not all debt is bad; taking on loans for higher education or to buy a home is really an investment in your future.

8. Take advantage of free money.

If your employer offers a contribution match for retirement savings or heath savings accounts, be sure that you’re contributing enough to obtain the maximum match amount. Otherwise, you’re missing an opportunity for free money. Maximizing your contributions can lower your taxable income.

9. Assess your insurance policies.

Insurance is an important tool for protecting against financial hardships, and the premiums you pay can be one of your top household expenses. Talk with your provider to be sure you have the appropriate level of protection – that way, you’re not paying too much for coverage.