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Quarterly snapshot for business owners who want to be in the know June 2019
The Benefits of Having Multiple Bank Accounts
For every £1 that comes into your business – do you know what percentage is yours???
another time) but first I’ll talk you through how we structure our accounts here at TIA.
Having all your money in one bank account is like having your family’s clothes in one drawer … it would be very untidy and cause havoc.
So, without further ado let’s get to it..
But so many business owners do this. I used to! I used to worry about paying bills during the months in case there wasn’t enough in the account at the end of the month to pay my staff as I felt that they were my most important outlay. I used to feel that over the quarter my account would grow and I’d feel I was getting somewhere and then suddenly the VAT bill would come my bank account would depleted. If this sounds familiar then I have an easy solution for you – get more bank accounts! There are numerous benefits of having multiple bank accounts (we’ll discuss those in detail
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First things first, we have a bank account that we call the Income Account. All our sales go into this account then every Friday we split it across four other bank accounts. The first percentage goes into the Salary Account. As I said my team are my most important outlay and a large percentage of my costs so I have it in a separate account. This pays my teams salaries, my salary and the teams bonuses every year. Now I never worry if I can afford to pay the team as the money is always there at the month end. The second percentage goes into the Tax Account. This covers the VAT, PAYE and Corporation tax so this does get higher over the 3 month period for VAT and 12 months for www.tiaccountancy.co.uk
The Benefits of Having Multiple Bank Accounts Corporation tax but I never worry about the VAT bill as the money is always there. The third percentage goes into the Profit Account. By having this percentage it ensures I reap the rewards of my hard work. I am not paying everyone else first and seeing what is left .. as the business owner I’m paying myself first. I use this account to pay my dividend or reinvest into the business as I choose fit – the mental benefit of having this account is so inspiring.
Sole Trader & Working from Home? What can you claim?
The last percentage goes into the Expense Account. This is the account I have all my direct debits and one off bills coming out of. Having this account helps us to not over spend as you can see how much money is in the account. If you still have all your money in one bank account then this is something you can implement to help your business run smoother and give yourself a better nights sleep. You can work out the salary and tax percentages from historical data and then you get to pick the profit percentage to suit your needs. The expense percentage should be the “what’s left” after you have calculated the others. If your regular expenses are more than what’s left then you know there is something wrong with your business numbers and you need to either increase turnover of decrease costs. If you feel you need a bit of hand holding through this or numbers are daunting for you then we offer a package to help people with this method.
Tracy x TI Accountancy: Tip The Wink - Jun 2019
If you’re one of the many self-employed people in the UK who is working from home, there’s some good news for you! You’re entitled to claim tax relief on part of the running costs of your home. Here’s a quick guide on what you can claim. What running costs can I claim? • Mortgage – you can only claim a proportion of the interest, not the capital repayment. • Rent – only if you are renting your home from a landlord. • Council Tax – this depends on how much you use your home for business as you may then need to pay business rates. • Light & Heat • Telephone & Broadband – this is not apportioned on the basis of number of rooms but on what actual business usage is.
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• Property Repairs – must be on the part of the house you use for business. • Water – can only claim if use is significant. How do I claim? There are 2 ways you can calculate your allowable expenses: the simplified flat rate method or the analysing the costs method. Simplified Flat Rate Method Simplified expenses are a way of calculating your business expenses using flats rates, however, you can only use this method if you are a sole trader or partnership that does not have any partners that are companies. With this method you simply calculate how many hours a month you spend running your business at home and then include the corresponding fixed amount in your accounts: • 25-50 hours – £10 per month • 51-100 hours – £18 per month • 101+ hours – £26 per month This method is a lot quicker than working out your actual costs, but the figure might not be as high meaning that you could save time but pay more tax. Also, it is important to note that the flat rate method only covers costs for light, heat and power – you will still need to work out how much you can claim for your other costs. Analysing the Costs Method The analysing the costs method, which is the method you’ll have to use if your business is not eligible to use the simplified method, allows you to claim part of the actual running costs of your home in your business accounts, however, how much you can claim depends on the type of business you have and what work you actually do at home. For example, if you’re a painter & decorator you
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might only spend a couple of hours a week doing your invoicing at home and spend the rest of your working hours at your customers’ properties. Whereas if you’re a self-employed PR consultant or web designer, you may do most of your work at home and only occasionally visit clients. HMRC says that you need to apportion the running costs of your home on a “fair and reasonable” basis between the private element of that cost – the part that relates to you actually living there – and the business element. So how do you do this? 1 Count all the rooms in your house (exclude bathrooms/hallways) 2 Identify the rooms that you work in and work out the percentage of time spent in each room which is business related e.g. you spend 10 hours in your living room but only 5 hours is business related then 50% is your business use percentage. 3 Divide the cost of your bills between the rooms in your house either by dividing the cost evenly between the number of rooms in the house (e.g. £500 bill/5 rooms = £100 per room) or by working out the percentage of floor space for room each and multiplying that by the total bill cost (e.g. office is 10% floor space x £500 bill = £50). 4 Apply the percentage of work use to the relevant room costs e.g. £100 x 50% = £50 as business expense, or, £50 x 50% = £25 as business expense. Claiming costs for working from home is not as simple as it initially sounds. If you would like any further information, please contact us at admin@tiaccountancy.co.uk
Lucy www.tiaccountancy.co.uk
A Company Profile
Trusting Sarah to give me correct advice and get the best deal on all my business and personal insurances has helped me massively in knowing my business is compliant and will continue to be through its growth.” Neil Burnett From Music and Mayhem to the Peace of the Lake District Fells. After 23 years in the design industry Neil Burnett took the plunge into self-employment and hasn’t looked back. With 10 years as a designer in London for the Music industry Neil decided he wanted to move out of London and explore digital design. As an active person, who loves fell running and cycling, there is no surprise he ended up in Cumbria. He eventually started his business ‘Burnett Design Limited’ in 2016. Offering both website and print design, helping businesses communicate with their customers using logo and brand creation, website design and development, SEO, email marketing and
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printed materials. Never owning a business before Neil says the journey of building his company has been a big learning curve and says that networking has been an enormous benefit. As a member of the InGroup in Kendal, he feels that seeing 20 other business owners once a week helps him feel cushioned by specialists where he can get trustworthy advice, see how they run their business and use the services they offer knowing he is in competent hands. Neil is proud of the scale of businesses he has accumulated; working with large and small clients, some having 100 plus staff, but all requiring professional and quality work. He enjoys being able to accommodate all of their creative needs by
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Frustrated with HMRC’s PAYE Department? working with a team of 4 other design and developers remotely, who add their expertise to Burnett Design. He said that so many of businesses he talks to have had bad experiences with other designers and that by doing a good job, fulfilling the tasks they have paid you to do, and giving great customer services can make a huge difference to a client.
You’re not alone!
With being new to business he said that his biggest challenge is juggling everything you have to do as a business owner, between working on your business and working in it. The day to day running of the business by making sure bills are paid, proposals are done, marketing for new work etc. while making sure you have time to execute the work you have in for your clients. Neil said having Sarah at TI Accountancy taking care of all his insurance needs helps with this. When he started his business, he didn’t know his legal insurance requirements and as Sarah was one of the experts he networked with. He says having her there to manage his insurance needs saves him money as it gives him time back to concentrate on growing his business. As a moderately new business, Neil is learning about business all the time and has started to think about where he sees the business long term. He would like to eventually grow his studio and have full time staff as he sees a gap in the market for this size of design business. He said trusting Sarah to give him correct advice and get him the best deal on all his business and personal insurances has helped him massively in knowing his business is compliant and will continue to be through its growth.
Everyone has their off days but trying to get support from HMRC is getting more and more frustrating. Here in the office we deal with HMRC almost everyday and we understand how hard it is to get an unambiguous answer or for a simple fix to a problem. So, if you’re having problems with HMRC we can relate. Last year our own business started to receive outstanding payment letters for PAYE Liabilities that we had already paid. I contacted the employer helpline and we went through the details together, between us we worked out that HMRC had lost several payments in the system and they said they would open a dispute to investigate. After hanging up the phone, I thought that the matter was now dealt with until they found the payments, but I was wrong. Although this was a fault on their part, we were
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Frustrated with HMRC’s PAYE Department? You’re not alone! still bombarded with letters chasing payment. Every time I called, I spoke to a different person and I had to go through the whole scenario again and again.
system can be sensitive which causes problems if the account needs to be corrected, let’s hope their PAYE system gets more robust in the near future.
Always being given a different answer, I was going around in circles and receiving very little help or support. To this day the situation still isn’t resolved even after complaining, we haven’t received a response.
If you feel like you have taken your case with HMRC as far as you can and still haven’t resolved the situation, you can contact the ombudsman to take your case further.
I understand how frustrating it can get but if you are going through a similar experience you need to be persistent until your problem is fixed.
Kelly
It also helps to keep a record of everything that has been sent or spoken about, that way you have a paper trail to look back at if you find yourself in the same situation we have. Tips to try and avoid problems with HMRC: – Always check the figures you are submitting to HMRC against the reports for that period. If the payroll needs correcting for any reason don’t submit an FPS/EPS on the same day, for the same period. If you do it will go through as a NIL and it won’t correct the figures. On occasions it has also come to light that the NIC figures have been corrected but the Tax figure has been deducted from the figure previously submitted. Always make payments by the 19th of the next month and keep a record of when it was paid. Don’t ignore letters that you receive even if you think you have already dealt with the problem as it may be that HMRC haven’t updated their records correctly and you could end up with one of their debt collectors in your office. HMRC have admitted themselves that their
TI Accountancy: Tip The Wink - Jun 2019
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Home Insurance just won’t cut it if you have tenants . . .
Landlords insurance provides protection for property owners who are renting to tenants, that regular Home insurance just wouldn’t cover. Landlord insurance can protect the property owner from financial losses connected to the rental income, damage caused to the building such as fire or weather damage and can be extended to include coverage for things like unpaid rent and malicious damage by tenants. Landlord’s insurance is not a legal requirement although a mortgage lender may require that you, at least, insure the building. Equally, any tenancy agreement may require certain responsibilities of you that are best served by an insurance policy. As being a landlord means you earn money through rent, for insurance purposes you are classified as business. Therefore, a standard home insurance would not be suitable. There would be gaps in cover and won’t provide adequate cover for the liability, legal and loss of
rent options available on a landlord’s policy. Insurers also class tenants differently. All insurers will generally cover professional lets. However, it can be more difficult to obtain insurance if you let to tenants receiving housing benefit from the council. It is also the same if your property is let to students. • Landlord’s insurance typically provides cover for • Buildings • Property Owners’ Liability • Loss of Rent • Landlord’s Contents • Optional covers may also include accidental damage and legal cover. If you would like a quote to cover your rental property, please do not hesitate to get in touch.
Sarah www.tiaccountancy.co.uk
Profit First Professionals Business Growth Accountants Payroll Ninjas Commercial Insurance Gurus
01229 490343 www.tiaccountancy.co.uk