Monthly Archives: November 2016

Digital tax: ‘HMRC wants a direct link to everyone’s bank accounts’

Digital tax: ‘HMRC wants a direct link to everyone’s bank accounts’

HMRC have announced that they want to build, “the most digitally advanced tax system in the world”. This includes in particular a direct link to your bank account, making self employed taxation almost automatic. What are the benefits of this system? What will it change for you? Let’s explore this.
How do they do it currently?
The way that self employed tax is collected now is through a yearly return, with records being kept by each individual business. Of course, HMRC doesn’t have the time or resources to go through each and every invoice or expenditure that a business generates. To a certain extent, they trust your word on the tax return. However, HMRC reserve the right to audit your business at any time, requiring you to provide evidence for any tax calculation you have submitted.
What are they planning on introducing?
The proposed system from HMRC, although not explained in great detail at this point will essentially digitize the entire tax process. This thus means that in theory that they can view your business bank account in real time. This will allow them to monitor the activity throughout the year and make it easier to spot potential tax fraud when tax time comes.
Another feature that they are discussing is the possibility of logging all payments and earnings in real time. Through the release of some apps that are integrated with various systems any invoice that you receive can be simultaneously logged by the HMRC system. This also is true for any revenue you receive, thus giving HMRC an approximate idea as to how much profit you are making before you even send your tax return.
HMRC claim that this is not an attempt to gather all our information like the, “stasi” but a way to streamline their processes, and make the collection of tax pounds easier.
Why are they doing this?
It makes sense that in an era where technology is advancing very rapidly, the government will start using it more and more. Another large reason will be that hiding some income will be increasingly difficult. This includes people who work in a mainly cash based business. Eventually you are going to put the money in your bank account, and when you do, it will show up on the HMRC system.
It will also mean that computer systems can be set up to spot fraud or irregularities and flag them quicker. This will save man hours in terms of auditing or other admin tasks that a computer could handle.
What will it change for you?
If you are already paying your taxes on time, not massaging your accounts and generally being honest, then nothing really should change. What some people are worried about is that HMRC may start demanding tax more regularly throughout the year. This is something that HMRC have categorically denied, stating that the current once per year model will remain. We should always bear in mind that they are the government, and the government doesn’t always have a good track record for keeping their word!
One fear that people are voicing include the idea that the technologically slow will suffer with this new technology. Obviously, as time goes on, this factor will become less and less important. It does mean however that the tech non-savvy will have a period of adjustment to this new process. HMRC will probably provide good help and guidance for these people, and of course hiring a good accountant will be very important in these cases.
How can you prepare for it?
There is nothing that can especially be done to prepare for this new technology. What is important is that you are making sure you are currently paying your taxes properly. Since, when this new technology comes into place, you may end up with less money in your pocket than you are used to. As mentioned previously, hiring an accountant will save you plenty of headaches in the long run.
If you are currently diligent about your taxes, then there isn’t anything to worry about, this technological trend isn’t going to end anytime soon, it is going to transform almost every area of our life, so we just need to get used to it!
Wrapping Up
This isn’t bad news for people who are honestly paying their taxes. It can be alarming to think that the government will have a prying eye into our personal accounts, but the boring truth is that it is probably just a cost saving exercise on their part! Sit back, relax, the robots are taking over!

GM professional accountants based in London and Essex.

Allowable self employed expenses

Allowable business expenses

You want to only as much tax as you have to, no more no less. This means that when you are submitting your self employed tax return, you need to know what you can, and what you can’t claim back. Let’s talk about what that means, and what you can deduct from your yearly tax.
What is an “allowable expense”?
This is a term used by HMRC to discuss expenses that you are allowed to deduct from your tax return. So for instance, you earn £50,000, and your expenses are £20,000. What this means is that you only have to pay tax on the remaining £30,000. This saves you a lot of money!
Let’s walk through which expenses are allowable according to HMRC.

Office Costs

If you work from home, things like the heating, the rent, the mortgages, and the electricity can potentially be claimed back. You will have to declare exactly what is used for work, and what is used for everyday life, but you could claim a lot of this back.

Stationary Costs

Pens, paper, printer toner, special software for your business. All the small details that you need to run your business effectively, you can claim back. This can be broad, so long as you are not using these programs and items for your home life exclusively, you can claim them back.

Transport

If you drive alot, need a van or travel generally, these are considered as expenses. The fuel you use, the hotel rooms you stay in and even part of the car you drive. Again, you cannot claim for journeys that are personal in nature, but everything that is business related is fair game.

Clothes

No, not your new trainers…unless you are a runner. Many self employed workmen need special equipment to work properly. This can all be taken away from your tax return. This also applies to any uniforms, or outfits if you are an entertainer!

Employee Expenses

If you are employing people, then their salaries, any fees or benefits you give them can also be taken off the tax return. Again, the theme here is anything that is a business expense, you can claim back.

Reselling Items

If you have left over stock, raw materials or production costs, these are all fair game too. Not claiming these can really eat into your profit margins.

Legal and Financial

Lawyers, accountants and anyone else who will help you with your business. This means that if you get an accountant to help you with your tax return, you can claim that back too!

Marketing Costs

This is a great one for entrepreneurs, since these costs are all considered as an expense that can be written off. Marketing is a huge part of a business, especially in the beginning. This means that your business has a better chance of survival early on!
Wrapping Up
By making sure that you are not overpaying your taxes, you will have more money in your pocket and your business. This will mean that in the years to come you can earn more, invest more and not have to worry so much. If you are unsure whether an expense you have would be regarded as tax exempt, then a good idea would be to get in touch with a local accountant and they will have all the answers, and potentially some new ideas about other savings you can make!

The Scientific Reason Why Dressing for Success Works

 Dress for success.

It sounds like a cheesy phrase rolled out by salesmen of the 1980’s, but is there some truth to it?

Overwhelmingly, all research done on this matter has concluded that yes, dressing can have a direct impact on your success in business. What are some areas that science shows us are directly impacted by how you dress? Let’s take a look.

Negotiation

An experiment that asked people to negotiate the same deal, but the two test groups were made to wear different clothes. One group wore a track suit, the other a smart suit. The difference was astonishing. On average, the group who were dressed smartly would walk away with 4 times more profit that the previous scruffy group. This is not a small amount, and it can show that the skills that you are able to employ when dressed for success can include negotiating a much better deal than you thought was possible.

First Impressions

A large study found that based off who we appear, people will make conclusions about our character that are quite detailed. For instance, whether you look like you are on your way to a promotion, whether you are successful, intelligent, adventurous or trustworthy. This means that making sure that your dress matches the message you want to send is very important. If you an accountants firm that is hoping to attract the business of a small tech firm who all wear hoodies, then maybe a three piece suit will send the wrong message.
Dressing for success can depend on the situation. However, in general, a smart, well fitting suit will get you noticed in good ways.

Confidence and Self worth

There are hundreds of studies that confirm a strong correlation between dressing well and your confidence level. If you feel attractive, then it will show on your entire body. Your walk, your voice, your posture, it will all change. This might be exactly the advantage that you need over your competitors. There is a reason why most people walking around London aren’t in jeans, but in suits.
This is a good lesson to learn, since your self worth can often become how much you are worth. Think about how you feel after a new haircut, with new shoes, with that new perfume on. You feel unconquerable, you feel like you are walking as a god among men! This feeling, if then applied to your work, can bring in new levels of success.

If you are self employed

If you work from home, it can be tempting to just wear whatever you find in your wardrobe, however this isn’t always the best idea. If feel sloppy, untidy and generally unfit for public, how are you going to create something that is fit for public? Your work is always affected by your own perceptions of self worth.
This being the case, making sure you are dressed well, even if no one sees you is a very important for your continued success in your business. Your work will most likely improve, your productivity will most likely improve, and as a result, you may be earning more money.
All this from putting on a shirt in the morning instead of that coffee stained Batman t-shirt with holes in!

 

GM professional accountants based in London provide small business accounting and tax services

Common Tax return questions

Common Tax return questions

Far from being the mysterious entities that are completely impossible to understand by mere mortals, they are quite simply really! There are so many questions that people consistently ask about their tax returns. So let’s take a look at these, and give a clear precise answer!
Your tax return troubles are over!

1) How long do we have to keep business records?
Good that you are asking this question firstly! Most people don’t even consider keeping their records when it comes to their business. However, there is an obligation on your part to keep your records for 5 years if you are self employed.

This is so HMRC can review any data that you may have over the past 5 years as they might have questions.
If you are a limited company, they you should keep them for at least 6 years. There are some exceptions, for instance, if you have some data that spans more than one tax year, then you should keep that for longer. In general, keep them all for 6, and the very important ones keep a hold on indefinitely.

2) How much does it cost to get an accountant to do your tax return?
This all depends on where you live, and what type of accountant you choose. The nationwide average (not including London) is around £200 -300 for a tax return. However, remember that you can reduce this from the tax you pay.
If you go to a large accounting firm, then the price could be even higher, and in London, often accountants can charge a lot more. The best practice in this case would be to look for a reputable local accountant. You want quality and not just a cheap price, it could save you more money!

3 ) How much does it cost to get an accountant?

So this question refers to hiring an accountant in general to assist with all manner of financial dealings in your business. This rate is generally applied by the hour, and the rate can be anywhere from £70 per hour up. However, again, talking with local accountants, and negotiating some sort of deal is possible. Remember, when approaching an accountant you should have a good idea as to how much you will use them over the course of a year, this can then be budgeted into you business.
4) How long do you have to keep receipts for tax purposes?
The receipts that you have from your day to day business activities should be kept with the rest of the accounting information. This would then fall under the rules stated in question 1. So keep a neat file with the receipts in, and then dispose of them after you are no longer legally required to have them.
5) What is meant by self assessment tax?
The term is fairly self explanatory when you understand it. Essentially, unlike when you are an employee, your tax is not automatically calculated for you by the government. You are in charge of your own calculation, therefore, you “assess” the level of tax that you pay. This obviously doesn’t mean you can pay as little as you want, what it means is that the calculation process falls on your shoulders.
6) Who has to fill out a tax return?
If you are self employed or own a business, you have to fill one out. This means if you do a little work on the side, it all needs to be declared and answered for! So if you are not an employee of a company, and make money another way, then you have to fill one out. Simple.

7) What is the annual return?

The annual return is something that is submitted to companies house, and it is solely for the purpose of taxing limited companies. Many self employed people do run a limited company, and this means that they are required to do exactly this.

8) What is a short tax return?

A short tax return is something that only specific types of people have to fill in. One such person would be someone who started trading in July, something happens, and they cease trading in September. HMRC will then usually ask that person to fill in a short tax return. It is a condensed version of the regular tax return. However, don’t worry excessively about these, since if you need to fill one out, HMRC will ask you directly.
Hopefully this has answered some

GM professional Accountants are Accountants based in London, our Tax advisors are specialists in small businesses and self employed individuals. we offer the whole package from registering you as self employed to bookkeeping services as well as the final accounts and tax returns. Manor park office address, 47 Gladstone Avenue, Manor park, London, E12 6NR, Ilford office address, Unit 14 Clements Court, Clements lane,Ilford,Essex,IG1 2QY Tel: 0208 396 6128,