Zyla Accountants cannot give any advice for investing in any particular pension scheme or plan since we are not authorised to provide Investment advice. Stated below are the tax benefits and advantages in contributing to a pension plan from the company.
Advantages of setting up pension contributions by the company:
- Not taxable on the pension scheme member on their personal tax return
- Not restricted by the member’s relevant UK earnings in the tax year
- Counts towards the member’s annual pension allowance of £40k per year but you also have to include all payments (employer and employees) into any other pensions you hold while calculating the total contribution
- Usually, deductible expenses for the business when calculating its taxable profits, saving 19% corporation tax in 2021-22 on pension contributions
- There is no Employers National Insurance of 13.8% to pay on pension contributions which have to be paid on salaries. Hence the saving overall is 32.8%.
- Contribution to the scheme cannot exceed the earnings of the company in that financial year
A popular pension scheme is SIPP: Self Invested Personal Pension Scheme. Many providers like Aviva, Pension Bee, Hargreaves Lansdown etc offer pension plans.
The main advantages are you can control the investments, offer you the flexibility to choose the assets the fund invests in and the ability to manage your deductible portfolio if you wish.
Withdrawing money from pension scheme on reaching age 55:
Most personal pensions set an age when you can start making money from them. It’s not normally before 55. You can take up to 25% of the money built up in your pension as a tax-free lump sum. You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on.
HMRC link for further information: https://www.gov.uk/personal-pensions-your-rights/how-you-can-take-pension
Tax advantages on pension are shown below as examples with an efficient structure:
|Employers NI 13.8%
|(No employers NI to £8840)
|Employees NI (No EEs NI)
|Tax on salaries 1257L code
|Tax on Dividends – £2k not taxable and balance @7.5% tax
|Net to Director
|£5000 is set as Employer only contribution pension plan where the company contributes. Deductible expense from business income for Corporation Tax.
£[email protected]% = £950.00 tax saving.
|There is no tax to pay on Self Assessment on the Pension contributions
For more information, contact Zyla Accountants:
+44 7535 6176 81
Good cash flow management keeps a business above water, whereas poor cash flow can sink it. Cash flow is a big issue among SMBs in the UK. As per a study done by Intuit QuickBooks, Roughly 57% of UK entrepreneurs have encountered issues with cash flow. What’s more, 38% of SMEs have had cash flow issues that have left them incapable of paying their debts.
Cash flow is the amount of money coming and going out of your business. Cash flow is a vital need for the growth of any business and late payment are the principal factor compelling entrepreneurs to not have the option to put resources into their own business.
Delay in payments can likewise affect the organisation’s financial risk profile, which can influence their potential to get loans from banks and make it harder to persuade investors.
What are the common cash flow issues and how to solve them?
When entrepreneurs need to worry over how they will discover the cash just to keep surviving, it makes it difficult to boost efficiency. Consistent cash flow can ease pressures, and assist with focus on core business exercises. Here we have talked about all such cash flow issues that a business faces and how you can solve them to thrive?
Poorly Managed Accounting Records
Numerous entrepreneurs put their accounting aside since they’re so occupied with the responsibility of doing core business activities. That is reasonable, however, when books aren’t managed properly, upsetting occasions will undoubtedly arrive.
At the point when an organisation begins to fall behind with handling its bills, invoices and data entry; they will see their cash running out at a fast pace.
Leveraging a professional accounting services specialist can help you save time and effort on managing your books with accuracy. The specialist will invest energy reconciling the ignored invoices to appropriately figure out what cash is owed and what is due.
The specialist would then be able to invest energy in helping you install a powerful system, which means a more grounded cash flow.
For most organisations, the best approach to get the books managed is by utilising bookkeeping software and staying up with the latest. The approach of Making Tax Digital means that firms should use the compliant tools and the specialist can give guidance regarding it.
Neglected Credit Terms
When the credit terms you have made for your clients are out of sync with the credit terms set by your providers, cold cash flow can develop and affect adversely after some time. For instance, if your clients have 30 days to pay you, however, your providers need to be paid within 14 days, a problem of the cash flow will undoubtedly occur.
The answer in this circumstance would be to reevaluate terms with your clients and additional suppliers. However, it isn’t easy and possible. In cases like these, there are a few things you can do.
- Factoring – This is the place where a financial institution loans your business transient cash that is gotten against the worth of the invoices you have generated.
- Early Settlement Discounts – Provide early settlement discounts on your invoices which will give your clients an incentive to pay you early.
Figures from Bacs, the organisation that runs Direct Debit, show that UK SMEs are confronting a bill of £2.16 billion to pursue late payments. The absolute obligation total debt remains at £14.2 billion and 39% of organisations are going through up to four hours per week pursuing these invoices.
Bad debts can be devastating for a company and can happen easily if an appropriate credit control framework isn’t set up. A credit-control framework is a process a business uses to gather cash owed by its clients. It is fundamental that you set up an exhaustive credit control framework when starting up a business.
Inaccurate cash flow forecasting
Poor cash management forecasting can leave your business accounts empty and force you to make wrong decisions about whether to cut expenses or not.
After a proper cash flow forecast, you’ll have the option to see which months you can hope to see a cash deficit, and which months you can anticipate an excess. You’ll likewise have the option to find out how much cash your business will need for the coming year.
Recently, Zyla Accountants partnered with Fluidly to help SMEs solve their cash flow issues and get instant funding anytime. We can pair you with the UK’s top lenders to get you instant funding grants.
How Zyla Accountants can help you?
To guarantee your firm isn’t losing cash and to keep a solid cash flow, approaching a certified expert is an excellent idea. Zyla Accountants have been helping SMEs to understand their cash flow issues and driving solutions to flourish in their industry.
Contact us today to know more!
+44 7535 6176 81
Making Tax Digital (MTD) is the HMRC initiative intended to get all organisations, whether small or large and people to begin keeping their bookkeeping and tax records on a computer. The process to get organizations to report everything to do with tax electronically and get everything back the same way is going at a fast pace.
Fundamentally, this isn’t just about filling in forms. The records that back up VAT and tax returns should be computed through proper accounting software and the tax returns should be reliant on those records.
Recently there was a study conducted by accounting software company FreeAgent, that revealed just 14.6% of bookkeepers and accountants are sure that they know everything about all stages of Making Tax Digital (MTD) and its effect on the UK tax framework.
Everybody knows that in 2023, MTD will be allowed for Income Tax Self Assessment (ITSA) as well and it’s significant to shed some light on myths and bust them so that people would understand the necessity to go electronic.
Myth #1: MTD for ITSA means 4X workload on accountants & bookkeepers
While a few bookkeepers and accountants may see MTD for ITSA and the shift from yearly to quarterly recording as an increment to their responsibility, this will not really be the situation. While the work is going to increase undoubtedly, as pursuing clients to go digital with their information and reconciliation.
With the transition to quarterly digital tax recording, accountants & bookkeepers will actually want to urge their clients to utilize MTD-viable bookkeeping software to handle and even automate a portion of tedious tasks.
Myth #2: Software companies are leading the initiative
MTD is a drive that plans to change and digitize the UK’s tax framework. It is HMRC’s vision to make it simpler for entrepreneurs, landowners, individual taxpayers and self-employed individuals, to get their taxes accurate. While software firms are working closely with HMRC to foster software solutions, they’re not leading the initiative.
Myth#3: MTD can be handled only by accountants and bookkeepers
Although, it is advisable that with the help of an accounting & bookkeeping services firm, you can get peace of mind as your tax returns and bookkeeping tasks will be handled by certified experts, but it is nowhere mentioned that you need a certified accountant only concerning MTD for ITSA.
Myth #4. Free MTD-compatible software alternatives aren’t available
It’s just a myth that all MTD-compatible software charge money from their users.
Did you know, as a feature of their business current account services, Royal Bank of Scotland, Ulster Bank NI and NatWest offer the FreeAgent software (full version) totally free to every business current account holder.
Myth #5. MTD for ITSA will put a load on my pocket
MTD for ITSA will probably enhance your responsibilities as you invest more energy in communications and encourage them to set up MTD-viable software.
You may be hesitant to change your pricing model to quote the additional work engaged with the shift to quarterly recording and MTD-related workload. But, it’s completely sensible to add this additional work in your pricing model as it’s probably going to affect how long you’ll pay attention to other client work.
Myth #6: It’ll damage relationships with Clients
When you’ll move towards annual to quarterly, it’ll take time to adjust from the client’s side. You need to tell them about all the advantages and disadvantages that will accompany the new process. When there’ll be open and unbiased communication, the chances of harming relationships will get less.
Myth #7: Not much difference between spreadsheets and a bookkeeping software
When your SMB clients utilise spreadsheets to deal with their records, they could be investing undeniably more energy and time than they need to on their everyday tasks. Clients who keep up digital records can achieve efficiency in their cycles and also get a clear view of their business finances and transactions.
Myth #8: It’s absolutely impossible to share information among the various software needed to agree with MTD for ITSA
Software firms are working closely with HMRC to make sure that information can flow easily without any hindrances between systems and make working effortless for clients with different sources of income.
Myth #9: MTD for ITSA isn’t that beneficial for clients
While MTD for ITSA will bring a change to how you work with your clients, there are still a number of benefits for them. For example, by keeping their accounting records in order throughout the tax year, your clients can avoid the sudden rush to meet their filing deadlines.
How easily clients will adapt to this new way of working may depend on the software they’ll use. MTD-compatible software can provide your clients with a clearer picture of their business finances without any confusing jargon.
Myth #10: It’s not possible to get ready on time
Getting your team ready for MTD for ITSA as quickly as possible will place you in an advantageous position in the market before April 2023. This may feel like a test, especially in the case when you have a huge client base.
To sum up:
MTD for ITSA will be perhaps the greatest change to the UK tax framework, influencing both practice and their clients. It’s advisable if you start doing your research and begin preparing for this in advance.
Zyla Accountants continue to build on excellent reliability for giving top Accountancy & Taxation Advice. Get in touch with our certified experts!
+44 7535 6176 81
Also read: Changes to the furlough scheme from 1 July 2021: What you should know
“ICAS has published its report Tomorrow’s Tax Administration.”
Good tax administration is essential, even though it may not feature at the top of many political wish lists. It has a role to play in fulfilling the UK Government’s ambition for an open, business-friendly economy post-Brexit. If society as a whole does not trust the tax system because it does not function properly, voluntary compliance is undermined and the consequences for government revenues are serious.
The Government needs tax administration to work effectively, to deliver the money it needs to pay for COVID recovery and to fund ambitious initiatives around tackling climate change and levelling up. Based on our Members’ experience – working in business, and in practice as agents – a more effective and taxpayer-friendly tax administration should be an urgent priority for the Government.
HMRC’s functions have expanded beyond ‘pure’ tax in recent years but its resources have not kept pace and are insufficient to cover all its responsibilities adequately, even in ‘normal’ times. Events, such as Brexit or the pandemic, rapidly lead to significant problems with service levels. Funding for the digital systems required to modernise the tax system in a way that works for taxpayers has also been inadequate and needs to be increased.
In 2020, the Government published its 10-year strategy for creating a tax system ‘fit for the challenges and opportunities of the 21st century. ICAS is broadly supportive of the three key strands of work that make up the strategy: the extension of Making Tax Digital, exploring tax payment mechanisms and reform of the tax administration framework. However, timely delivery will be critical; this will require the provision of adequate HMRC resources and the funding to build an integrated digital tax infrastructure.
The 10-year strategy is about the future but there is an immediate need to address the poor service levels, patchy digital systems and problems which cause issues for taxpayers and agents on a day-to-day level. Pushing ahead with major, complex projects, like Making Tax Digital, whilst failing to ensure that basic tax administration works properly for everyone who has to engage with it, is unacceptable and will not deliver what the Government or taxpayers need.
We have called for urgent government action to address problems in ten areas of tax administration that are impeding the smooth running of the tax system.
Tomorrow’s Tax Administration: top ten priority areas for action:
- Powers and safeguards – striking the right balance
- Facilitating the work of agents in supporting their clients
- Supporting high standards for all agents
- Swift access to the right HMRC support and expertise
- Meeting the standards set out in the new HMRC Charter
- Making Tax Digital – making it work for businesses
- Personal income tax – roadmap required
- Support and access for the digitally excluded and digitally challenged
- A user-friendly legislative framework
- Tax Simplification”
For more information, contact us at:
+44 7535 6176 81