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Salary and Dividend Strategy 2014

As a director and shareholder of your own company you can decide how much salary to pay yourself each month in order to use your tax-free personal allowance in the most tax efficient way. Any further funds you need can be extracted as a dividend if the company is making a profit.

If you are a director of your company and you don’t have a contract that sets out terms of employment with the company, you don’t have to pay yourself the national minimum wage. So how much should you pay yourself?

For 2014/15 if you were born after 5 April 1948 you have a tax free personal allowance of £833 per month (£10,000 per year). You could take a salary at that level and pay no income tax, assuming you have no other taxable benefits from the company such as a car.

However, you will pay national insurance (NICs) on that salary as the NICs threshold is only £663 per month. From a gross salary of £833 the company must deduct NI of £20.40 and set-aside employer’s NI of £23.46 on top. The company will have an employment allowance of £2,000 for the year to set against its employer’s NI due on all its employees, so it won’t have to pay over employer’s NI until that £2000 is used up.

If you take a salary of just above the NI lower earnings threshold of £481 per month, you will get an NI credit towards your state pension, but you don’t pay any tax or NI. However, at that annual salary level (£5,772) you will be “wasting” £4,228 of your tax free personal allowance, unless you have other income to cover it.

Claiming Motor Expenses for a Self-Employed Client

You  can calculate their business-related motoring costs by either:
a) Take the proportion of business miles to total mileage driven in their vehicle in the year and apply that proportion to their total motoring costs for the year; or
b) Use the fixed expense of 45p per business mile for the first 10,000 miles driven in the year and 25p per mile for additional business miles in the year.

If your client uses method a) they can also claim capital allowances on the cost of your vehicle, restricted for the private use of that vehicle. However, if they use method b) they can’t claim capital allowances for their vehicle but they can claim the interest amount of any finance lease used to purchase the vehicle.

Employment allowance

In the tax year beginning April 6th 2014.  HMRC are giving UK employers a help.  This is in the form of an Employers NI.  In that tax year the first £2000 of Employers NI will be waived.

For those of you that use Sturgess and Co for payroll this will be automatically calculated and reflected in the quarterly P30.

Do bear in mind that employees NI is not waived, so before you get carried away and put a higher amount through PAYE!

However you should be paying employees the minumum wage which equates roughly to £13,500 a year.  On this example a saving of £765.12 Employers NI will be made each employee.  Total tax and NI due £1363.28 per employee if standard tax code.

please refer to:

https://www.gov.uk/employment-allowance

Capital Allowances on Fixtures

There are a number of capital allowance claims firms targeting businesses which have recently bought or sold commercial property. These ‘experts’ suggest the business needs to pay for a special survey to claim all the capital allowances they are entitled to, and this must be done quickly in order to claim all the allowances due.

In most cases a special survey is not needed. However, it is true that for commercial building sales made since 1 April 2012 the vendor and purchaser must take formal steps (usually an election) to agree the value of fixtures included in that building. This value must be agreed within two years of the transfer of ownership. If agreement cannot be reached the two parties can go to the tax tribunal where the judge will make a decision.

The agreed value for fixtures is brought into the capital allowance pool as the disposal value for the vendor and is added to the capital allowance pool for the purchaser.

There is another change on its way for transfers of commercial buildings from April 2014. The value of fixtures and fittings must be claimed as part of a capital allowances pool by the vendor in an accounting period prior to the sale of the building. If the vendor does not make this claim, the purchaser is barred from claiming any capital allowances for the fixtures it acquires.

http://www.cloudbookkeeper.co.uk/530/

Plans are underway to allow bank customers to pay cheques into their account by taking photos on their smartphones. Rather than going to the bank in person, customers will be able to photograph the cheque and then send it electronically. Currently, the law states that a bank must demand to physically see the cheque before they honour it.

Compared to many other European countries, the UK has a sluggish cheque clearing process. At the moment, it can take up to six days, whereas on the Continent, it normally takes two. This new system will bring us in line with our cousins across the Channel.

Businesses accounted for more than 370m cheque transactions in 2012. A total of 25 per cent of payments made by small businesses in 2012 were made by cheque.
Screen Shot 2014-01-11 at 04.38.31

 

John Allan, chairman of the Federation of Small Businesses, said: “Many of our members, and their customers, still rely on cheques so will be pleased with the investment and innovation to ensure their continued use. Speeding up cheque payments into business accounts is to be welcomed as many find the current process frustratingly slow. Using smartphones is an interesting idea which should allow some firms in areas, particularly where bank branches are closing, to be able to accept cheques as a method of payment.”

QuickBooks Online Accountant — work easily with your clients

Intuits new cloud bookkeeping software looks like its set to be a winner with bookkeepers, accountants and small businesses

Powerfully simple, completely intuitive and lightning fast

QuickBooks Online is easier, faster and better organised than ever. The streamlined design makes it easy for you and your clients to find information and get work done in fewer steps.

Wherever. Whenever. And always in real time.

Your office becomes wherever. Your hours become whenever.
And you can always work with clients in real time.

Improved Collaboration

Improved collaboration
When you share data with clients
in the cloud, you get fewer mistakes
and better insights.

Ditch The Desk

Ditch the desk
Anywhere access means you don’t
have to be at your desk to work.

Uncover More Insights

Uncover more insights
With up to date, reliable data,
you can discover and harness
powerful business insights.

The power of the cloud

By storing your data in the cloud instead of your computer, your work is always accessible,
up to date and secure. That means you can save time, rest easy and rest more often.

Always Up-To-Date

Always up to date
QuickBooks Online keeps itself updated to the latest version, so you get new features automatically.

Always Secure

Always secure
The cloud uses the same encryption as leading online banks, keeping your data safe and sound.

Always Backed Up

Always backed up
Your data is backed up for you, so if your computer crashes
your work stays safe.

Always Accessible

Always accessible2
You can sign in from any location, giving you flexibility in when and how you work.

Used and trusted by companies around the world
QuickBooks Online has over 450,000 small business users around the world.3

A cloud full of features

QuickBooks Online Accountant will help you save time, so you can get more out of business. More satisfied clients. More growth opportunities. More time to develop your accountancy practice.

“Navigating through QuickBooks Online creates a seamless and intuitive
experience, delivering almost immediate results.”
CPA Practice Advisor: It’s “Game On” for Intuit, August 27, 2013.

Access the cloud

So you’re ready to join the cloud. But is your computer? Odds are the answer is yes, but check below
to ensure that you’ll be able to use QuickBooks Online Accountant.

Browser Windows Mac OS X
Google Chrome Any version Any version
Firefox Version 7 or later Version 4 or later
Safari 4 Version 4.1.1 or later
Safari 5 Version 5.0.1 or later Version 5.0.1 or later
Internet Explorer Version 10 or later
Software requirements
You or your client must have a subscription to QuickBooks Online in order to create or work on a company file.
QuickBooks Online Accountant provides accounting tools which you can use with your clients’ QuickBooks Online data.
Network connection
We recommend a high-speed internet connection, such as an ADSL broadband or fibre connection. You can use a slower
connection, but it will take longer to get things done.

Tax Treatment of the Office Christmas Party

Christmas Party Tax implications

It’s about that time of the year when your clients start planning their annual Christmas parties! The great news is that the cost of a staff party or other annual entertainment may be allowed as a deduction for tax purposes.

As an employer you can pay for an annual event, and there are no personal tax implications if the total does not exceed £150 per head.  This doesn’t need to be one Christmas event either, just ‘annual’.  So you  could have a Christmas party and a Summer party, and both would be allowable for tax purposes provided the total of both does not exceed the £150 per head limit.  If you spend just £1 over the £150 limit, then the whole amount becomes a benefit in kind.  Here are the rules:

  • the event must be open to all employees
  • the cost is only tax deductible for employees and directors of a limited company, but not for sole traders
  • an annual event offered to staff is not taxable on those attending provided that the cost per head does not exceed £150
  • all costs must be taken into account including VAT, costs of travel to and from the event and accommodation provided.  If the limit is exceeded then individuals will be taxed on the full cost per head.  And there will be no taxable deduction for the company.

You can also provide a small gift to the employees as an employer, they are allowed to provide each team members with a gift, such as a bottle of wine or box of chocolates.  These gifts are considered to be trivial and as such are not taxable.

To read the HMRC guidance please use the link below:

http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

Sage One – Cloud Accounting Software

Sage One Accounts

Sage One is an online accounting service that helps accountants to work with their micro or small business clients.

You can view all of your Sage One clients in one place, making it easy to manage and access.

Sage One Accounts – Features

Say goodbye to late nights in the office

Online accounting software gives you the freedom to work when and where you want. Your data is secure and backed up so you never need to worry about losing your accounts data.

No software to install – ever

Get started easily – no need to ever download updates and get more out of your accountant by inviting your accountant to work with you.

With Sage One Accounts, you can invite your accountant to work securely on your business finances. Less time spent in meetings means more time that your accountant can spend helping you keep your business on the right track.

Affordable monthly subscription

Spread the cost of your accounting software, paying a small amount each month means you can spread the cost of your accounting software.

Use Sage One Accounts as much as you like

No transactions or invoice limits, Sage One Accounts has no limits on how many transactions you can process each month.

Will it work on my computer?

Access Sage One Accounts from anywhere at any time

You can access Sage One Accounts from anywhere at any time, using an internet connection. Sage One Accounts is an online accounting service; it’s web browser-based so you don’t need to download or install any software. Just go online and head to this website. We simply recommend that you use the latest browser to access Sage One Accounts.

 

The National Insurance Contributions (NICs) Employment Allowance

The Chancellor announced the creation of a NICs Employment Allowance in the 2013 Budget. This is planned to start on 6 April 2014 and moved a step closer to becoming law with the First Reading of the Bill on 14 October 2013.

Businesses, Charities and Community Amateur Sports Clubs will be able to reduce their Employer Class 1 NICs bill by up to £2,000 per year. The Employment Allowance will be straightforward to claim using standard payroll software.

More details on how to claim the Employment Allowance will be available in the New Year – there is no need to call HM Revenue & Customs or do anything to claim the Employment Allowance now.

IRIS buys cloud accounts company KashFlow

Accounts and payroll firm IRIS has bought cloud-based bookkeeping software company KashFlow, creating a combined user base of more than 60,000 accountancy firms and smaller businesses in the UK.

According to IRIS, it will continue to provide its OpenBooks product to existing customers through online accounting company FreeAgent but expects to add functionality through a “close tie-in” between the IRIS Accountancy Suite and KashFlow bookkeeping in the cloud.

The acquisition, the terms of which were not disclosed, brings IRIS expertise in cloud bookkeeping software and gives KashFlow greater sales, marketing and support resources.

KashFlow was set up in 2006, initially selling software to Federation of Small Businesses and Prince’s Trust members.

“Around half of all UK accountancy firms already use IRIS to run their business. Now they will be able to collaborate with their clients through tight integration with the KashFlow cloud bookkeeping system,” its CEO, Duane Jackson, said in a statement.

“Being part of the wider IRIS Software Group not only gives us direct access to a significant section of the UK accountancy and SME sector but it also makes us part of a wider suite of cloud offerings.”

IRIS Software Group CEO Phill Robinson said KashFlow’s cloud services fitted well with his company’s existing suite of products.