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Yesterday, the chancellor announced his spring budget.
There is a lot to digest and unpick. With a general election looming, it was clear that the chancellor had decided to put more money back into the pockets of working people. However, not much of this money directly comes to small business owners.
National Insurance Contributions are again being cut. The government is cutting the main rate of employee National Insurance by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.
The government is also cutting a further 2p from the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000, around £650 a year.
The point where businesses need to register for VAT is going up from £85,000 to £90,000. This will supposedly help small businesses grow. There are differing opinions about this. What we see is that, in reality, businesses often slow their growth as they near the VAT threshold. Radically lowering the VAT threshold towards £40,000 or even lower would make it a level playing field for most small businesses. But then, what does the Chancellor really know about small businesses?
Inflation has more than halved from its recent peak, i.e. from 11.1% to 4.0%. The OBR forecasts inflation to fall to its 2% target in Q2 2024, a year earlier than in their November 2023 forecast. In 2023, the UK was pretty much in recession as GDP grew by 0.1%. Growth is now forecast to pick up from the first half of 2024 and the IMF is forecasting that the UK will have the third fastest cumulative growth in the G7 over the 2024-2028 period.
The UK government has recently announced an extension of the Recovery Loan Scheme, which will provide £200 million in funding to assist small businesses to invest and expand. To qualify for the loan, businesses must have a turnover of £45 million or less, must be viable, and should not be experiencing any financial difficulties.
Capital allowances are a great way for businesses to reduce their tax bill. By deducting the value of certain items such as equipment, machinery, and certain business vehicles from their profits, businesses can benefit from tax relief. It’s a smart way to save money and reinvest it back into the business. Full expensing is an allowance which allows companies to use these capital allowances in the year that the investment was made. The chancellor indicated yesterday that at some point in the near future full expensing for leased assets is coming. When? Apparently ‘when affordable to do so’.
At the moment, there is a situation where a household with 2 parents, each earning £49,000 a year, still gets the full Child Benefit, but those with one parent earning over £50,000 will see some or all of the benefit withdrawn. From 6th April 2024 the point at which child benefit will start to be withdrawn will now be at a higher level of earnings i.e. £60,000 not £50,000. Instead of starting to lose child benefit once at least one parent earns over £50,000 a year, it will be £60,000. It will be taken away entirely from £80,000 a year, rather than £60,000. But more importantly, the government is consulting on moving the system from being based on an individual’s salary to a system based on household income. This new system will come in by April 2026. So watch this space!
The government is keen to increase the amount of available housing. It is reducing the higher rate of property capital gains tax from 28% to 24% in April. This will benefit any property owner who is selling a property which is not their home.
The ‘temporary’ 5p cut in fuel duty is being extended for another 12 months.
The alcohol duty freeze is being extended from 1st August to 1st February.
There is a new ISA in town! This ISA gives savers another £5k tax-free allowance, on top of the current £20k that can be subscribed into an ISA. The only restriction is this new UK ISA
needs to be invested in british businesses.
The government is also announcing over £1 billion of new tax reliefs for the UK’s creative industries. This includes introducing a 40% relief from business rates for eligible film studios in England for the next 10 years; introducing a new UK Independent Film Tax Credit; and increasing the rate of tax credit by 5% and removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit. A permanent extension will be made to tax relief for theatres, orchestras, museums and galleries.
The government is abolishing the Furnished Holiday Lettings tax regime from 6th April 2025 and the multiple dwelling stamp duty relief from 1st June 2024. Contracts that were exchanged on or before the 6th March 2024 – i.e. before the budget was announced – will continue to get the multiple dwelling stamp duty relief regardless of the completion date. Any purchase that completes before the 1st June 2024 will also get this relief.
The tax breaks for non-domicilied residents, people who live in the UK, but not domiciled here for tax purposes have been abolished. Currently, foreign nationals who live here, but are taxed in another country, do not have to pay tax on their foreign income for up to 15 years. From April 2025 this is changing.
For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on foreign income and gains arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.
Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of tax residence.
There are transitional arrangements being put in place for existing non-doms.
In Oct 2026 vapers will be taxed more and the tax on cigarettes and tobacco products will go up.
Sadly, the government is not – on the surface of it – making an investment in front-line HMRC staff. It is investing an extra £140m to improve HMRC’s ability to manage tax debts. Think of
this as an investment in identifying where more tax is due and then having the headcount to get this money paid. If you don’t already have tax investigation insurance, now is the time to take it out!
In addition, it was announced that there is a consultation on how best to implement the Crypto-Asset Reporting Framework and amendments to the Common Reporting Standard.
Interested to find out more?
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
Where do I start? When it comes to finances, the construction industry is a bit like a Saturday night out after one too many pints – unpredictable, messy, and sometimes leaves you feeling a bit worse for wear. We all know that feeling.
As a construction firm owner, you’ve often got multiple projects on the go, each with its own unique set of challenges. Customers can sometimes be a right pain in the neck, especially with not paying invoices on time, and then there’s material costs that change more than the weather in Manchester.
And that’s not all… Trying to keep track of your finances on top of all that is enough to drive anyone up the wall. Construction is notoriously known for being a volatile industry. Things like delayed payments and cash flow inconsistency play a massive part in that. It’s also why it comes as no surprise that there’s a high failure rate in construction.
Here’s where I come in and essentially turn all your sh*t situations into roses. But first, let me explain how construction differs from other industries. Understanding this will highlight the importance of why choosing an accountant that specialises in this industry is essential.
Construction vs. other industries
Construction is in a category of its own. It faces completely different challenges to any other industry. Each project has its own individual problems and as a result, construction businesses often struggle to match the efficiency of companies that have more of a repetitive and controlled production, such as factories and certain types of office-based work. But, who wants to do the same thing day in and day out anyway?
Here’s are some of the key differences that you can expect from owning a construction-based business:
Variable costs – For materials, equipment and labour on each individual project. You’ll know from pricing jobs up that the costs vary, it’s not a one cost fits all type of thing.
Location – Construction often takes place at new locations with specific site conditions, each with their own set of challenges. You might well have to deal with local environmental and waste disposal regulations.
Suppliers – Having to rely on specialised suppliers for different projects can affect efficiency and cash flow. Such as, certain types of glass, lifts and escalators, steel beams, cladding etc.
Contracts – Construction contracts often include retainage, where some of the payment is withheld until project completion, even if specific work stages are finished. (Note: these can be negotiated before signing the contract).
Now that you understand the differences in construction in comparison to other industries, it’s time to look at what challenges you can expect to face as a result, and how I can help you overcome them.
Common construction challenges
Given these unique characteristics, construction businesses face several common financial challenges:
How I Can Help
I’m showing my age here, but as an accountant with decades of experience helping construction business owners, I can help you manage these challenges and improve your overall financial situation. Here are the things I would start with:
In addition to all of the above, I’ll be on the other end of the phone whenever you need a bit of advice or just fancy a chat. Something I definitely won’t do is judge, so complete transparency is always encouraged. I’ll work with you so that as a team, we can transform your financial situation from, you guessed it – sh*t to roses.
Interested to find out more?
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
Taxman knocking? And not knocking quietly? Here’s how to handle an HMRC investigation:
Ever had that sinking feeling when you get that brown envelope with ‘HMRC’ written on it drop through your letterbox?
I experienced a similar feeling recently when I went to the doctor and was told I needed to change my diet. Seriously? The weekly Chinese was under threat! Gutted.
You know you should open the envelope. And you know it’s not an unexpected tax rebate. Of course, it could just be that an employee’s personal tax code has changed. But still that feeling of dread is real.
So, what do you do if the taxman is on your case and being a real pain in the backside? I’m no stranger to this topic, although I’ve learned over the years that everybody’s situation is different. Some are more challenging than others. But the one thing that doesn’t change is my advice on how to deal with it. So let’s get into it.
Before you start responding to the taxman’s questions, try to work out exactly why they’re investigating you. Have you missed a deadline? Made a mistake on your tax return? Or is it something more serious? Once you know, you can start to prepare your response. Being honest with me is important when I ask you these questions. Trying to cover up stuff here with me or HMRC can just bring a whole heap of the brown stuff down on you.
Or maybe you already know the reason, and it’s just the inevitable catching up with you. In that case, it’s time to deal with it before it gets any worse. You don’t want to be caught standing in court with all the truth coming out? I’ve seen it happen, and it ain’t pretty. It’s pretty stressful if your case goes to court.
Regardless of whether you know the reason or not, here’s what I would suggest you do next:
It’s important to cooperate with the tax inspector. Answer their questions honestly and provide any documentation they request. I know it’s hard not to get your back up when you’re feeling accused of something, but try not to be too defensive. Remember, the more you cooperate, the easier the process will be for everyone involved. As your accountant, If I can show that you have been cooperative, this could reduce any penalties that the tax man wants to make you pay.
If you’re feeling overwhelmed, consider seeking professional help. Get in touch with someone who knows their stuff. (Hint: I’m right here. I’m just a phone call away, and I wouldn’t judge.) An accountant can provide invaluable guidance and support throughout the investigation, even if it’s emotional support that’s needed. They can help you understand your rights and responsibilities, and they can negotiate with the taxman on your behalf.
A decent accountant should give you peace of mind, ensuring you’re compliant with tax laws and regulations. It’s important to choose wisely if you’re going down this route. Always do your research before you make a decision.
The best way to avoid an investigation is to be proactive about your tax compliance. Here are some of my suggestions:
Remember, the taxman is just doing his job. If you’ve done everything by the book, you should have nothing to worry about. But if you’re feeling a bit anxious, I’m happy to offer you some advice. Sometimes crap does happen to good people.
By following these tips, you can increase your chances of firstly avoiding a tax investigation in the first place and then getting a successful outcome in a tax investigation.
Interested to find out more?
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
Running a construction or hospitality business can be a complete and utter nightmare. You’ve got projects piling up, staff to manage, broken equipment and customers who seem to think paying on time is optional. But the biggest headache of all? Cash flow.
I’ve seen it first-hand. I’ve witnessed the stress of a dwindling bank balance and the fear of not being able to make payroll. Trust me, it’s not a fun place to be. But don’t worry, I’m here to help.
I’ve been in the construction industry for decades, and I’ve seen my fair share of ups and downs in my time. I’ve learned a thing or two about managing finances along the way, so I’m going to share my tips with you.
Separate Bank Accounts
First things first, set up separate bank accounts for your business. This will help you keep track of your finances and avoid mixing personal and business expenses. After all, you don’t want your accountant or bookkeeper to see exactly what nice presents you got for your other half. Let’s just say we’ve seen some ‘interesting’ personal expenditure when sorting out year end accounts.
I recommend using Monzo banking, as they offer this handy feature called “Pots”. You can set aside money for specific things, like tax, rent, or, in my case a pot to fund my golf clubs (which by the way, if you’re not into golf, cost an arm and a leg!). I was recommended to Monzo and wondered what all the fuss was about, but I’ve learned it’s a pretty great app for keeping your finances organised. And, even if digital banking and apps isn’t your thing, it’s pretty easy to use.
Getting Paid Promptly
Getting customers to pay on time is like trying to score a hat-trick against Man City – tough and often impossible, but there are a few things you can do to improve your chances (that’s with getting paid on time, not scoring against Man City – unless you’re Alan Shearer).
Cash Flow Forecasting
A cash flow forecast is a prediction of your future income and expenses. It’s a vital tool for any business, but it’s especially important in the unpredictable world of construction and the seasonally impacted hospitality sector. Projects are great as they are a large lumpy sum of money. But the problem is that projects often come with high upfront costs, i.e. to hire the equipment needed or buy the materials to get started.
Projects can get delayed, costs can shoot up out of nowhere, and we’ve already had a rant in this article, about how slow customers can be when it comes to paying. With a cash flow forecast, you can see these potential problems coming and take steps to avoid them. No more unwelcome surprises.
Minimising Bad Debts
Bad debts can be another major drain on your cash flow. These are, more often than not, due to the long payment terms involved in construction. Of course, it is possible to have a bad debt with a hospitality business but in my opinion this industry is far better at taking payment either at the point of delivery or before an event.
Here are a few tips for minimising your bad debts:
Payment Plans and Instalments
If a customer is struggling to pay, consider offering them a payment plan. This can help you avoid bad debt while still getting paid and it’s more manageable for the customer too, win-win. This option applies more for the construction industry rather than hospitality. Funnily enough we have a few payment plans currently in place for our clients who hit a tough spot trading wise.
Keeping Your Books Up-to-Date
Keep your books in order. By doing this you can see who owes you money, when payments are due, and if you’re heading for some squeaky-bum time when it comes to your cash or money in your bank account.
I’m a big fan of QuickBooks. It means you can run your business from anywhere in the world as long as you have an internet connection. The QuickBooks software tools let you track your cash flow and keep your business running smoothly. But, the best part is saving time on sending invoices, tracking expenses, and preparing your VAT returns. All of the long, boring admin jobs that often get ‘forgotten’ about.
Splitting Finances by Project
Are you working on multiple projects? Do you know which one of these projects are loss making or the ones that are truly making you money? In my experience many construction companies and hospitality businesses don’t know. Everything gets lumped together on one or two lines of the P&L.
In order for you to grow and put more money into your bank account you want to know which ones are bringing in the profits and which ones are costing you money. If you are a hospitality business you can do this by splitting the revenue lines on your P&L between items such as takeaway, table service or create reports using software to analyse which of your tempting desserts are working for your customers’ palates and your bank balance.
One of the reasons I like Quickbooks is it makes it easy to split up your expenditure and income on a project by project basis. This means someone like you or I can see very quickly which projects are underperforming and how to quote better next time.
To summarise
Firstly, don’t put your head in the sands when it comes to cashflow. The sooner you have a problem emerging the easier it is to deal with it. We are here to help you whether you are worried about cash flow or whether you know you have a cash flow crisis.
Interested to find out more?
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
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