Autumn Budget 2024 - A Record Breaker!

Today marked the first budget presented by a female chancellor of the exchequer and the biggest tax raising budget since 1993, raising £40bn.

Here we summarise the key changes you need to know about:

National Living Wage

The rate will increase by 6.7% to £12.21 per hour, with the 18-20 year old rate also increasing to £10.00 per hour.

Both of these changes are from April 2025.

Employers National Insurance

The rate is increasing by 1.2% to 15% from April 2025.

The threshold at which employers start to pay contributions on an employees salary is to be reduced from £9,100 down to £5,000.

The employment allowance will be raised from £5,000 to £10,500 ( A company with one director being the only employee on the payroll is still not eligible for the employment allowance).

Capital Gains Tax

The lower rate of 10% is set to increase to 18%. 

The higher rate of 20% is to increase to 24%.

This increase aligns with the current higher rates on disposals of residential properties.

Business asset disposal relief

This is the relief that limits the tax rate on the disposal of your business to 10% provided it has been operating for at least 2 years and is a qualifying business.

The lifetime allowance of £1,000,000 remains in place.

The rate of tax on the first £1m of capital gain increases from 10% to 14% for disposals after 6 April 2025 and to 18% for disposals after 6 April 2026.

The rate of tax on capital gains tax on gains over £1m on business assets will be the normal rates above.

Inheritance tax

Inherited pension pots are currently exempt from Inheritance tax, however they will form part of an estate and be subject to Inheritance tax from April 2027.

Business property relief and agricultural property relief is reduced to 50% on the value of assets over £1m in an estate. This will take effect from April 2026.

Corporation Tax

The rate of Corporation tax rate will be capped at 25% 

Full expensing and £1m annual investment allowances will remain.

R&D rates remain unchanged.

These rates will remain for the duration of the parliament.

SDLT (Stamp Duty Land Tax)

The higher rate on the purchase of additional residential properties will increase from 2% to 5% from 31 October 2024.

VAT

There are no increases to the VAT Rates.

The widely publicised introduction of Vat on private school fees will go ahead from 1 January 2025.

No Changes

Income tax - No changes to the tax rates and thresholds, however the thresholds will be unfrozen from 2028/29 and then rise with inflation.

Employees and self employed National insurance.

Electric company car tax rates beyond 2028.

We will provide more detail on some of these key points shortly but if you want to discuss your own situation, get in touch.

Bookkeeping: A Balancing Act of Balls

Bookkeeping is often compared to juggling multiple balls in the air, each representing a different aspect of a business's financial health. It requires focus and a keen eye for detail to keep all the balls in motion and prevent them from dropping.

Here are some of the balls that bookkeepers must juggle on a daily basis and multiply this over several clients when working in an accounting practice:

• Accounts receivable: Keeping track of invoices, payment due dates, and outstanding balances.

• Accounts payable: Managing bills, supplier  payments, and ensuring timely payments to avoid late fees.

• Cash flow: Monitoring the flow of money in and out of the business to ensure sufficient liquidity.

• Payroll: Calculating salaries, wages, taxes, pensions and other deductions for employees.

• Financial reporting: Generating financial statements such as profit and loss statements, balance sheets, and cash flow statements for internal decision-making and external reporting.

• Internal controls: Implementing and maintaining systems and procedures to efficiently collect data and ensure the accuracy and reliability of financial records on a real time basis.

• Data entry: Recording transactions, reconciling bank accounts, and updating financial databases.

While juggling multiple balls can be challenging, bookkeepers play a vital role in ensuring the financial stability and success of businesses. Their ability to keep track of all the moving parts and maintain accurate records is essential for making informed decisions.

Bookkeepers are the unsung heroes of the business world, working diligently behind the scenes to keep the financial balls in the air, allowing business owners to focus on their core operations and drive growth.

Link My Books Insights: Unlocking the Power of Your eCommerce Data

In the fast-paced world of eCommerce, knowledge truly is power. That's where Link My Books' 'Insights' feature shines. It takes the raw data from your connected sales channels and accounting software and transforms it into actionable information to help you make smarter business decisions.

What can Insights do?

• Profit & Loss at a Glance: See your true profit and loss, taking into account all your sales channel expenses, not just the cost of goods sold. This is crucial for accurate financial planning. (Note this doesn’t replace Xero as it doesn’t account for overheads or corporation tax, but is useful for a snapshot of Gross profit)

• Profit & Loss by Sales Channel: Get a better understanding of your sales and Gross profit across all sales channels. This knowledge can help you assess which sales channels work best for you and where you should focus your energy.

• KPI’s: Insights shows KPI’s that are relevant for ecommerce businesses such as Refund rates, return on investment, Sales growth and Fee ratio. This allows you to track the movement on these KPI’s over time, analysing how changes made in the business are affecting the financial data.

• Benchmarking: See how your KPI’s stack up to the ecommerce industry overall. This allows you to sense check whether movement in your KPI’s are as a result of changes you’ve made in your business, or changes in the overall ecommerce landscape.

Why is this important?

The Insights feature takes the guesswork out of eCommerce. Instead of relying on gut feelings, you can make data-driven decisions that lead to increased sales, improved profitability, and better overall business performance.

If you're serious about growing your eCommerce business, Link My Books is a tool you can't afford to overlook. Not only does it seamlessly bring all the data from your sales channels into Xero, it goes above and beyond to provide insights into that data, enabling you to make informed decisions about your business.

Ready to unlock the power of your data? Get in touch to give Link My Books a try today!

What can we expect from the new government's first budget?

On 29 July the Chancellor Rachel Reeves revealed the first budget will take place on 30 October 2024.

In her speech she painted a grim picture of the country’s finances so what can we expect from the budget?

• Personal Taxes - the Labour party manifesto pledged not to raise the Income tax and National Insurance rates so we shouldnt see any changes there but Capital Gains tax rates and Inheritance tax could be targeted with Capital Gains tax rates being lower than Income tax in most cases.

• Business taxes - Labour pledged that they would not increase Corporation tax rates above 25% for the term of their government so it's possible we could see a change to the small companies rate of 19%.  The business rates system may also see an overhaul.

• VAT - Again there was a pledge not to increase VAT rates, but see below for the changes on private school fees. 

• Pensions have been in the spotlight with a new Pension Schemes Bill mentioned in the King's speech  so we may see some changes to the rules on how pensions are taxed.

What we already know

• The much publicised addition of Vat to private school fees will go ahead - draft legislation has been issued for this to start on 1 January 2025 with anti avoidance rules to stop forward paying of fees between now and then. The intention is that nurseries will remain exempt and before and after school clubs and holiday clubs which are childcare based (not education based) will remain exempt 

• Furnished holidays lets - The previous government announced that the favourable tax treatment of holiday lettings was to be abolished from 6 April 2025 - this will remain with draft proposals of the changes now being released.

• Non-domiciled individuals - The previous governments plans to remove the domicile concept from the tax system and move to a residence based system for offshore income and gains will remain and start from 6 April 2025.

• Winter fuel payments are abolished for all pensioners except those receiving pension credits and means tested benefits.

• The new government want to tackle the “Tax gap” and have promised to invest in HMRC capacity to improve service levels and address non-compliance so we can expect to see an increase in HMRC activity in these areas

Streamlining E-commerce Accounting: The Power of Dext Prepare, Xero, and Link My Books

Running a successful e-commerce business isn't just about selling great products; it's also about keeping your finances in tip-top shape. The trio of Dext Prepare, Xero, and Link My Books creates a smooth and efficient accounting system that gives you unparalleled control and insight into your financial health. Let's dive into how this powerful stack can transform your e-commerce operations.

Why This Software Stack is an E-Commerce Dream Team

• Automation is King: These tools focus heavily on automation. From data capture and expense management to seamless syncing with your accounting platform, this trio frees up valuable time and minimizes manual errors.

• Data, Data Everywhere: Dext Prepare, Xero, and Link My Books make it easy to consolidate e-commerce data from multiple sales channels. This means you'll get a comprehensive view of your finances from a single dashboard.

• Scalability: Whether you're just starting out or a seasoned e-commerce pro, this setup scales with your business. It allows you to handle growth, new platforms, and increasing complexity without needing a complete accounting system overhaul.

• Collaboration Made Simple: Modern e-commerce often involves teams working remotely. These cloud-based tools promote real-time data access and collaboration between accountants, bookkeepers, and business owners.

The Players in the Game

1. Dext Prepare: Your Digital Data Extractor

   • Dext Prepare takes the pain out of document collection. Snap photos of receipts and invoices, forward emails, or connect your suppliers – Dext extracts all the crucial data automatically.

   • Advanced optical character recognition (OCR) technology ensures high accuracy, even for complex invoices.

   • Customizable categorization features let you tailor data extraction to match the way you manage your business accounting.

2. Xero: The Accounting Powerhouse

   • Xero is a beautiful cloud-based accounting platform designed with small and medium businesses in mind. It's user-friendly, yet packed with features.

   • Handle invoicing, bank reconciliation, tax reporting, financial analysis, and more, all within Xero's intuitive interface.

   • Xero's extensive add-on marketplace lets you further customize it to your unique business needs.

3. Link My Books: The E-commerce Connector

   • Link My Books is the bridge between the sometimes messy world of e-commerce marketplaces (think Amazon, eBay, Shopify) and your pristine accounting data.

   • It translates complex sales reports into clear, Xero-compatible invoices, capturing every single fee and deduction.

   • Automatic VAT calculations for marketplaces take the headache out of tax compliance.

How They Work in Harmony

Picture this:

1. A customer places an order on your Shopify store.

2. Dext Prepare snaps up any invoices or receipts related to the order, organizing costs.

3. Link My Books analyzes Shopify settlement reports and creates detailed invoices in Xero, accurately reflecting income and associated fees.

4. Xero seamlessly handles bank reconciliations and financial statements, painting a complete picture of your e-commerce business health.

The End Result

• Less Time on Accounting, More Time on Growth: Stop wasting hours on data entry or chasing down receipts. Let this tech stack do the heavy lifting, so you can focus on building your business.

• Crystal Clear Financial Insights: The data synchronization these tools provide lets you make informed business decisions based on a complete understanding of your margins, inventory, and cash flow.

• Peace of Mind: When tax season rolls around, you're prepared. Everything is categorized, reconciled, and ready to go.

Are you ready for an e-commerce accounting upgrade? Get in touch with us so we can help you set up and integrate Dext Prepare, Xero, and Link My Books for a bulletproof financial system that powers your success!

Boost Your State Pension: New Digital Service Makes Filling National Insurance Gaps Easier

For anyone nearing retirement age or reviewing their retirement planning in the UK, you'll want to take note of a recent change to how you can manage your National Insurance (NI) record.

The government has launched a completely digital service that lets you quickly check for gaps in your NI contributions and easily make voluntary payments to fill them and increase your State Pension.

Why Voluntary NI Contributions Matter

Your National Insurance contributions directly impact your eligibility for and the amount of State Pension you'll receive. You typically need at least 10 qualifying years on your NI record to receive any State Pension, and to get the maximum amount, you'll need 35 years.
Circumstances like job changes, unemployment periods, or time spent caring for loved ones might have left you with gaps in your contributions. These missing years could leave you with a reduced pension in your retirement.

How the Digital Service Works

The beauty of the new service is that it's easy and hassle-free:

• Check Your Forecast: Access the "Check your State Pension forecast" service on GOV.UK or the HMRC app.

• See the Impact: The service will show how much your State Pension could increase if you filled in specific gaps in your NI record.

• Choose Your Years: Decide which years you'd like to make voluntary payments for.

• Pay Online: Make a secure payment directly within the service.

• Get Confirmation: You'll receive notification that your payment has been received and your NI record is updated.

Important Things to Note

• Time Limit: You have until April 5th, 2025, to make voluntary contributions for tax years between 2006/07 and 2017/18.

• Six Year Rule: After the deadline, you can generally only fill gaps for the previous six tax years.

• Cost vs. Benefit: Carefully consider the cost of voluntary contributions in relation to how much your State Pension would increase. You can find more info on GOV.UK.

Take Control of Your Retirement

This new digital service puts more control over your retirement planning in your hands. It's a simple, straightforward way to see where your NI record stands and take action to potentially boost your State Pension.

If you're approaching retirement age or reviewing your retirement planning, make sure to check it out!

Reduced HMRC phone services - are you set up for online services?

HMRC announced yesterday permanent changes to their self assessment, PAYE and VAT helplines, forcing a shift to more use of online services. 

The changes being made are:

• Self assessment

  • the service will only run from 1‌‌‌ ‌‌October to 31‌‌‌ ‌‌January each year for customers who need help with their tax return or to make a payment. 

  • During February and March the helpline will be available to customers with queries about penalties and appeals.

  • From 8‌‌‌ ‌‌April 2024 to 30‌‌‌ ‌‌September 2024 the helpline will be closed and taxpayers directed to online services and webchat.

• PAYE

  • will no longer handle calls about PAYE refunds.

  • Customers and agents will be directed to the online service.

• VAT

  • will only be open for five days every month ahead of the deadline for filing VAT returns – outside of this time, customers will again be directed to use HMRC’s online services.

For businesses and individuals without an agent, this move will make it more difficult than ever to get guidance from HMRC with the emphasis being on using the online tools and webchat. So now is the time to get your HMRC online account and App activated so you have access to the online services.

As accountants we have access to an agent dedicated helpline where we can speak to HMRC about our clients where we have agent authority in place and there are currently no plans to change this.

HMRC have said that taxpayers who need extra support, either because they cannot use online services, or if they have a health condition or disability, will be asked to call a separate number to access specialist support but there are no further details on how this will be accessed yet.

In summary, it’s more important than ever to ensure you have access to your online services so get set up today if you’re not already. 

Budget 2024

Yesterday saw Jeremy Hunt deliver what is expected to be his pre-general election budget with the main focus remaining on tackling inflation, boosting economic growth and rewarding hard work.

There were several headline grabbing announcements mainly aimed at workers and property owners, keep reading for the main announcements with more detail to follow

High Income Child Benefit Charge

The current thresholds are being increased with effect from 6 April 2024. The income threshold when the Child benefit clawback starts has been increased from £50,000 to £60,000 and the Income level when all Child Benefit is clawed back has been increased from £60,000 to £80,000

To reduce unfairness in the current arrangements the government wants to move to a household based income threshold rather than basing the charge on the higher earner’s income as we do now. There are no details on how this will work or what the household income threshold will be at the moment. This is planned to start in April 2026 so we will keep you updated as and when more detail becomes available.

National Insurance Contributions (NIC’s)

Employed

The main rate of employee’s NIC is reduced from 10% to 8% from 6 April 2024.

This is in addition to the reduction from 12% to 10% which came into effect on 6 January 2024. So overall a reduction of 4%.

The additional rate of NIC for earnings over £50,270 remains at 2%

Employers

The rate of employer’s NIC is not changing and remains at 13.8%, the employment allowance also remains unchanged at £5,000

Self employed

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4. 

The main rate of Class 4 NIC was cut from 8% to 6% in the budget yesterday starting from 6 April 2024, this is in addition to the 1% cut announced in the Autumn statement 2023 so an overall reduction from 9% to 6%

It was also announced in the Autumn statement 2023 that Class 2 NICs will effectively be abolished, saving £179.40 per annum.  If your profits exceed £6,725 in 2024/25 you will continue to accrue entitlement to state benefits despite not paying Class 2 NICs. If your profits are less than £6,725, or you make a loss, you may need to pay Class 2 NICs on a voluntary basis to maintain your state benefit entitlement

Capital Gains Tax (CGT)

Since 2016 we have had increased Capital Gains Tax rates when a residential property is sold (that is not your main residence) From 6 April 2024, the residential property Capital Gains rate will fall from 28% to 24% for individuals with residential property gains falling outside of their basic rate band. The rate of Capital Gains Tax for for basic rate taxpayers remains at 18% 

As announced previously the CGT annual exemption will drop to £3,000 from 6 April 2024, down from £6,000 in 2023/24. 

Furnished Holiday Lets

Qualifying furnished holiday lets (FHL) have enhanced tax reliefs available to them.

It was announced in the Budget that, from 6 April 2025, the concept of FHLs and their beneficial tax treatment will be abolished and going forwards they will be taxed in the same way as any other rental property profits. For FHL owners this will mean the loss of the full mortgage interest relief deduction and the ability to claim the 10% tax rate on a future sale, plus changes to the way tax relief is claimed on furniture and other items.

This change is not due to happen until 6 April 2025, but note that there will be measures in place from Budget Day (6 March 2024) to prevent tax planning steps that artificially accelerate the disposal date of an FHL to a date before 6 April 2025. 

Please get in touch for a more detailed analysis of how the withdrawal of the FHL status will affect you.

Vat Registration Threshold

From 1 April 2024, the VAT registration threshold will increase by £5,000 to £90,000

The deregistration threshold will also increase by £5,000 to £88,000. 

There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.