Frequently Asked Questions

Switching accountants is easy and straight-forward.

It’s usually a case of simply writing to your current accountant, telling them the name of your new accountants and advising them that the new firm will be contacting them shortly to collect your records. When you decide to switch to us, we will fully manage the transition and ensure that the handover is seamless. We will take care of everything including contacting your current accountant and explaining you are moving away, drafting a brief note confirming the move, arranging for the transfer of records, obtaining copies of your accounts and tax computations, and notifying HMRC and other government offices that we are looking after your business affairs.

Firstly, to get a feel of the amount of work involved, we’d need a very brief review of your books and records.

Additionally, we’d need a copy of your last financial accounts prepared by your current accountant to provide relevant advice. If there’s anything you need help with and think it’s relevant for us to know, please mention it to us in your consultation.

• There are no formation costs
• Sole traders are not required by law to have annual accounts nor to file accounts for inspection. However annual accounts are necessary for tax returns
• Sole traders are unrestricted in the amount and purpose of borrowings
• Losses generated by a sole trader can be set against other income in the year or carried back to the previous year.

If you wish to trade and do not use a limited company, you will be personally liable for the debt of your business. If you have assets or savings, they are vulnerable to a claim made against you.

By trading through a limited company, you are literally placing a limit on your liability. That limit is the value of the company, including any money you may have invested in, loaned to or are owing to the company. The company has a separate legal identity from its owners and directors and unless they sign a personal guarantee for its debts, they are not liable for these. There are a number of advantages in becoming a limited company, such as:

• You can give a share of the business to others e.g. family.
• It may be easier to attract people to invest money in your business.
• Obtaining bank loans may be easier.
• There is no higher rate tax bands.
• In the event of a partner leaving or somebody dying it is easier to continue the business.
• It is easier to sell the business.
• You have better standing in the public eye.
• It can assist in the protection of a name.
• People have more confidence in your business as they can check up on your company on the public records at Companies House.
• Subcontractors and agency workers will find it easier to obtain work.

The main disadvantages of becoming a limited company are the extra costs of preparing of annual accounts and some loss of financial privacy. For more information on setting up a Ltd company, please get in touch.

The VAT registration threshold is £85,000 and under current plans, will remain at this level until March 2022.

If your turnover is nudging around the registration threshold, it is vital that you update your bookkeeping records regularly. By doing so, you will be able to predict and prepare for when your business is due to go over the £85,000 mark and can register on time and prevent any late registration penalties. Having registered on time, you can then start accounting for VAT, so you’re not facing any large, backdated payments to HM Revenue & Customs. If you need advice or help about VAT registration, the VAT schemes available to you and how to manage your affairs when you have registered for VAT, don’t hesitate to contact us.

All VAT Registered businesses with a turnover above the VAT registration threshold (£85,000) will be legally required to keep their records digitally and file VAT returns via MTD Compliant accountancy software.

Please contact us for more information.

Business taxes are due for payment at various times through the year depending on differing factors for example your year end. What to do if your cashflow is suffering.

If you cannot pay your tax bill, you should call HM Revenue & Customs’ (HMRC) Business Payment Support Service (BPSS). HMRC will ask you questions about the business and your cashflow, to ascertain why you can’t pay your tax. If they think you genuinely cannot pay your tax they may grant you an extension to settle your taxes in or agree a payment plan. However, HMRC will not reduce the amount outstanding and they will still charge you interest. You should do this as quickly as possible, as they tend not to look so favourable on taxpayers who have already missed the deadline. If they do grant you an extension, you will be expected to set up a Direct Debit. You must keep these payments up to date and pay your other tax. If you don’t, HMRC will normally cancel the arrangement and may take legal action against you. If you don’t feel confident in negotiating with HMRC, feel free to contact us, we would be happy to liaise with HMRC on your behalf.

Marriage Allowance lets you transfer £1,250 of your Personal Allowance to your husband, wife or civil partner. This can reduce their tax by up to £250 every tax year.

To benefit as a couple, you need to:

• Earn less than your partner and have an income of £12,500 or less, and…
• Your partner’s income must be between £12,501 and £50,000 (£43,430 in Scotland)

You can backdate your claim to include any tax year since 5th April 2015 that you were eligible for Marriage Allowance. If your partner has since died you can still claim. If you are eligible you can register your interest with HMRC online. You’ll get an email from HMRC confirming your application. If you would like to discuss your personal tax affairs in more detail, please call us on 01455 292005.

On 6th April 2022 your personal allowance will increase to £12,570 for the 2022/23 Tax Year. This is the amount you can receive before you start to pay any tax.

This allowance is reflected in your tax code and your code will be 1257L for any English or Northern Irish taxpayers. If you are a Scottish taxpayer, then it will be S1257L or a welsh taxpayer it will be C1257L. This is the standard tax code for employees who do not have any other income or have any other adjustments in their tax code.

The total minimum contributions that must be paid for all workers automatically enrolled or opted into your workplace pension from 6th April 2019 are as follows:

From 6th April 2019 the employer must contribute a minimum of 3% and by doing this, it means the employee must contribute 5%, making 8% in total. As an employer, you can choose to pay more therefore reducing the percentage amount your employee has to contribute. We offer a full payroll service to look after your payroll and pension needs, please contact us.

The National Minimum Wage rates from April 2022 are stated below:

• Aged 23 and above (national living wage rate) – an increase from £9.50 per hour
• Aged 21 to 22 – £9.18 per hour
• Aged 18 to 20 – £6.83 per hour
• Aged 16 to 17 – £4.81 per hour
• Apprentices – £4.81 per hour

The new rate will apply to the next pay reference period that begins on or after the date:

• a rate increase begins
• an employee reaches a new age bracket.

For example:

An employee paid on the 25th of each month will start to receive the new rate of minimum wage from 26th April onwards as this is the start of the pay reference period beginning after the increase. So, the employee will not see the increase in their wages until the pay date 25th May 2022.

Failure to file your annual return even after receiving reminders can move Companies House to either prosecute you for criminal proceedings or strike your company off after a month or so for an outstanding Annual Return.

All companies irrespective of size or status, including dormant, flat management and charitable companies get penalised for not filing their annual accounts on time. It would be best to get in touch with us. We will co-ordinate with Companies House on your behalf and set out an appeal process to postpone any action while we get you up-to-date on your annual returns. You might have to pay the financial penalty, but an early submission should lead them to drop any legal action.