2019 Year end accounts checklist

2019 Year end accounts checklist

2019 Year End Accounts Checklist

What are my 2019 Year End Accounts?

A year-end report is the end of a business’s accounting year. Your 2019 year end accounts are a summary of your business’s overall performance for this particular accounting year. If you are a small business, you are legally required to file your year-end accounts with both HMRC and Companies House.

With the Christmas festivities beginning to kick-in and end of 2019 being imminent, now is a great time for business owners and Directors to get a real hold on their accounts. Doing a little bit of housekeeping, preparation and getting your accounts in order will make doing your tax and filing your accounts a breeze. Saving you time and money and getting you ready for 2020 so you can hit the ground running.

 

Below is your Year End Check List from Xero:

 

1. Decide on employee bonus payments

If you decide to reward your employees with bonuses, don’t forget about tax. Bonuses are subject to income tax – just like regular pay. If understandably you want to wait to pay the bonus after year end, simply accrue for the bonus and employers’ national insurance cost and reverse when payment is made. This ensures the cost is included within the correct financial year and lower your Corporation Tax Bill.

 

2. Protect your cash balance

Consider delaying payments to your suppliers by a few days to keep your cash balance high. Whilst the supplier liability will be recorded on your Balance Sheet a higher cash balance is still favourable and helps improve some of the ratios used by Credit Agencies.

 

3. Employee Expenses

Ensure all your employee expenses are processed before year end to include the cost in the correct tax year, and again, reduce your Corporation Tax Liability.

 

4. Review your control accounts – an easy exercise to miss

Review your PAYE, Pension, Wages, VAT control accounts, make sure that these reflect the true position of liabilities. Also check your accruals, prepayments, deferred income etc. If your Balance Sheet is not correct, the likelihood is that your Profit & Loss Account will be incorrect too!

 

5. Scrutinize your balance sheet and P&L report for what you did well – and what you didn’t

Use your accounting software to generate Balance sheet and Profit & Loss reports. Then identify what your business did well, and where there’s room for improvement next year.

 

6. Use your cash reports to understand how much cash you have on hand

Businesses live or die by their cash flow – it’s one of the biggest issues for small companies, so use your accounting software to generate your cash flow statement. Xero apps add-ons such as Float can help you manage your cash flow forecast easily if you prefer to look forward rather than back.

 

7. Estimate your potential Corporation Tax Liability

Too many business owners fail to accurately estimate their tax payments, we recommend to keep this money safe and in a separate bank account. By starting now you should have time to put the right amount of money aside. The current corporation tax rate is 19% of your net profit, this is currently scheduled to reduce to 18% from 01-Apr-20 although this may change depending on the outcome of the imminent election. There will be adjustments that your accountant will make as part of the end of year process, adjusting for Capital Allowances and Research & Development Tax credits but better to be prepared.

 

8. Confirm when your Corporation Tax is due for payment

Make sure you know when the Corporation Tax is due, 9 months after your year end.

 

9. Think about whether you’ll need to request a tax payment extension

HMRC will help you here. Talk to them and check out their website for information about how to apply. Do this as early as you can, because there are penalties for late payment.

 

10. Review insurance policies, cover and rates

Talk to your insurance company to see if they have any recommendations and talk to other insurers too, to ensure you have the best deal. Double check that you have all statutory and recommended insurance cover, professional indemnity, public liability, employers liability, Directors and Officers cover etc.

 

11. Arrange a meeting with your bookkeeper, accountant and/or financial advisor (that could be us!)

Each of these will have work to do for your business at year end. Talk to them, and make lists of tasks that they need to carry out which will help them focus on your business at this busy time of year.

 

12. Review your client list, and make sure all contact information is up-to-date

You can kill two birds with one stone here. Go through your contacts database and make sure everybody’s details are correct. While you’re doing this, send them an email thanking them for their business this year, they’ll remember you.

 

13. Review your goals for the year – and make some new ones for next year

Did you achieve everything you intended to last year? If so, great. If not, try to find out why. Making goals for the coming year can help keep you motivated as your business grows. Review them regularly to stay on track. We can help create a Budget that can be imported into Xero so you can compare monthly progress next year.

 


Now you’re ready for 2020!

If this seems daunting or time consuming, please give us a call. We will be happy to help and can even take this burden off your hands. Simply contact us here or call 01392 495483.

Accounting Tips for a Successful Startup Business

Accounting Tips for a Successful Startup Business

4 [Essential] Accounting Tips for a Successful Start-Up Business.

 

If you’re in the process of setting up or have just set up your new business, you will know how tough it can be. Tough, but incredibly rewarding.

At the startup stage of any business, you wear ALL the hats. Even ones you didn’t know about! Sales, marketing, accounting, bookkeeping, cleaning, IT, admin, customer service, business development… The list goes on. 

One area that needs close and scrutinous attention, is your business finances. All of the great ideas in the world can’t keep a new business afloat if you run out of money. If your primary area of expertise is not in accounting or bookkeeping, then take a look at these accounting tips for startups below: 

 

Accounting Tips for a Successful Startup:

 

Leverage Finance Solutions

One of the biggest hurdles for a small business, especially when trying to gather momentum, is cashflow. However, you can actually avoid potential startup burnout. Don’t skip paying employees, or yourself, because you don’t have the money in the bank. You should also not put off major growth opportunities because you need to have the money first. Discover financing options – so you don’t have to wait on incoming cash. 

 

Use Accounting Software

This is still overlooked by some businesses as unnecessary, with the business owner preferring to work from a spreadsheet. However, the time saved, accuracy, decision making data available completely outweigh the comfortable spreadsheet. 

Using a cloud-based accounting software programme such as Xero, will enable you to have a good, accurate handle on where you stand financially at all times from anywhere in the world (with wifi).

Startup owners carry the weight of their businesses on their shoulders and though there is a lot to keep an eye on, financial health is absolutely fundamental to your business success. Using smart accounting tactics will help you navigate the tricky ground in the early days of your business with ease and reliability.

 

Create Different Bank Accounts

Just like your granny used to do with different pots of money for different events, sent up several bank accounts so that you can keep track of your outgoings. Operating expenses, tax, owners pay and profit. Each pot is then allocated a different percentage of your total income.

Financial analysts suggest having at least 3 months’ operating expenses but we suggest if you can build it up to 6-months you will have a firm buffer should anything happen.

 

Hand it over!

As you will presumably be the technician in your business, trying to learn another trade quickly and competently is time-consuming and will end up eating into your time selling.  Working with a good, reliable bookkeeping or accountant is worth its weight in gold.  Accounting and business finance experts will save you valuable time, will know tricks and tip for saving you money and will warn you when a potential financial hurdle is approaching.

 


FOR MORE INFORMATION ABOUT THE FINANCE DEPARTMENT, PLEASE GET IN TOUCH AND WE WILL BE HAPPY TO HELP.  CONTACT US HERE OR CALL ON 01392 495483.

Should I take a salary or dividends?

Should I take a salary or dividends?

This is a question we often get asked. And to be honest, quite understandably too as it is one question that causes a lot of confusion for small business owners who trade through a limited company.

 

What are dividends?

Dividends are an alternative way of paying yourself using the profits from your company. Limited companies can issue dividends at the end of the financial year (final dividends), and at points throughout the year (interim dividends), which is common when the directors or shareholders rely on this for income.

As long as your company is making a profit, or has reserves from previous years, you should be able to draw dividends to top up your monthly salary. Your company does not need to pay tax on dividend payments, but shareholders may have to pay Income Tax if they’re over £2,000. However, you cannot count dividends as business costs when you work out your Corporation Tax.

Dividends work differently than a PAYE (Pay As You Earn) salary because they are not liable for any National Insurance and you pay less Income Tax than a salary.

So despite paying corporation tax (currently 19%) this makes them a very attractive option for many directors. As an employee taking a salary, you are liable for tax and National Insurance contributions, which will be taken as a proportion of your earnings.

 

Tax on Dividends (above your allowance)

The tax you pay depends on which Income Tax band you’re in.

Tax On Dividends
Dividend allowance £2000 0%
Basic rate £12,500 0%
Basic rate £37,500 7.5%
Higher rate £150,000 32.5%
Additional rate Above £150,000 38.1%

To find out your tax due, add together your income from dividends to your other taxable income to work out your tax band.

The personal allowance rate for salary rose from £11,850 to £12,500 in April 2019 and the dividend allowance remained at £2,000.

These changes mean that it could be more beneficial to pay yourself a slightly larger salary and reduce your level of dividends.

 

Example

For this example, we compare the income after taxes for three scenarios, all of whom have earned £80,000 in gross contracting fee income.
  1. is paying themselves via a salary
  2. has taken an £8,632 salary (2019/20 NiC Primary Threshold) and is taking the rest in dividends, and
  3. is splitting the income via salary and dividends between two equal shareholders
1 2 3
A Gross income 80,000 80,000 80,000
B [A-D] Salary 70,299 8,632 17,264
C [A-B] Gross profit before tax n/a 71,368 62,736
D Employers NIC 8,510 n/a n/a
E Employees NIC 5,373 n/a n/a
F PAYE 15,620 0 0
G Corporation Tax n/a 13,560 11,920
H [D+E+F+G] Tax Sub Total 29,502 13,560 11,920
I [A-H] Net profit, therefore dividends payable 50,498 66,440 68,080
J Tax on dividends n/a 10,311 8,937
K [I-J] Income After Tax 50,498 56,129 59,143

Summary

If you would like us to calculate which formula of salary v dividends is better for you, please contact us at sales@finance-department.co.uk but please remember….

 

Focus on your business and making as much money as possible – tax is a consequence of being profitable and shows you and your stakeholders that the business is doing well.

 

New – Xero CIS (Construction Industry Scheme)

New – Xero CIS (Construction Industry Scheme)

Do you work in the construction industry and use, or are thinking of switching to Xero?

Manually calculating CIS deductions can be time-consuming, and it’s easy to make costly mistakes. So let Xero do the hard work with accurate, automatic calculations and deductions.

One of the biggest developments to Xero recently is the Construction Industry Scheme add on. Xero CIS makes it easy to manage your Construction Industry Scheme obligations including – deductions and payments, managing contractor invoices, subcontractor bills, filing your CIS returns with HMRC and bulk email payments.

Xero Benefits to the Construction Industry

  • Automatically calculate the right CIS tax deductions and file your monthly returns directly from Xero
  • Sync Xero seamlessly with third-party apps for for inventory management, project management, time tracking and more.
  • Invoice clients and pay subcontractors faster with online invoicing.
  • Check on cash flow at any time with the online dashboard.
  • Store all your documents online in Xero in one central, secure and easy-to-access place.

Basic CIS features

  • Automatically calculate and apply CIS deductions to your invoices and bills.
  • Report on deductions you’ve made from payments to subcontractors, and file manually with HMRC.
  • Download payment and deduction statements to manually send to your subcontractors.

CIS Contractor add-on

You’ll need to add the CIS Contractor add-on to your pricing plan to use some features.

CIS Contractor only features:

  • Online filing of CIS monthly returns with HMRC from Xero.
  • Bulk email payment and deduction statements to subcontractors from Xero.
  • CIS Contractor is free until 31 March 2020.

 

Whether you’re a builder, plumber, plasterer or carpenter, Xero is simple accounting software that gives you an up-to-date view of your numbers while you’re on the move. Use it from your office, van or the building site and keep your business healthy.

 


FOR MORE INFORMATION ABOUT USING XERO CIS, PLEASE GET IN TOUCH AND WE WILL BE HAPPY TO HELP.  CONTACT US HERE OR CALL ON 01392 495483.

 

The latest Xero updates–November 2018

The latest Xero updates–November 2018

A rundown of the latest updates to the Xero accounting platform

If you have accounting or Xero OCD you will be aware of the latest Xero update, however for all non-accountants or bookkeepers, here is a rundown of the latest updates to the cloud-based bookkeeping and accounting platform.

  1. Reports: You can now display formula columns as percentages in the new financial reports.
  2. Xero Projects: you can now allocate project time into your own or your employee’s payroll timesheets.
  3. Payroll: You can now add an allowance type to a pay item in payroll so Xero can group allowances when you report them to the ATO.
  4. CIS: Xero has opened up the beta to more participants for filing your CIS Monthly Return directly to the HMRC from Xero.
  5. Xero for mobile: You can now include file attachments when sending invoices on your mobile device.
  6. Xero for Android: Create an invoice, quote or receipt by pressing firmly on the app from your mobile Home screen. View your bank account balances on the Dashboard so you can reconcile faster.
  7. Transactions: Multicurrency columns have been added to the account transactions report and event include a little flag icon for easy visual recognition.
  8. Credit notes: these can now be linked directly to a project. This means you will always see a true and accurate representation of your project’s profitability.
  9. Xero App: You can now get a quick view of your profit and loss, and how your income and spending are broken up, from your Android or iOS dashboard.
  10. Navigation: The Xero navigation bar is being updated (late November 2018) to make it faster and simpler for you to find the tools you need.

Watch this video to find out more about the changes to Xero:


For more information about using Xero to organise your business finances, please get in touch and we will be happy to help. Contact us here or call on 01392 495483.

Making Tax Digital (MTD) starts on 1st April 2019; but no need to panic!

Making Tax Digital (MTD) starts on 1st April 2019; but no need to panic!

Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.

The essential elements for businesses and organisations are:

  • Paper records will no longer be sufficient: It will become mandatory for almost all businesses and organisations (self-employed, partnerships; limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
  • Returns and quarterly reporting: There will be a requirement to submit VAT returns and income tax updates (quarterly and annual) to HMRC, directly from software.

As your accountants we will support you through these changes and provide the ongoing services that you need.

When does it start?

  • VAT: As your business is registered for VAT and your turnover is above the VAT threshold you will be required to keep digital accounting records and to file your VAT returns using MTD compliant software from April 2019 (the first VAT period starting on or after 1 April 2019). The current online VAT return will no longer be available.
  • Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns): MTD is expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.
  • Corporation Tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.

What do I need to do now?

If you already use MTD compliant software to submit VAT returns, contact your software provider to confirm timings and/or additional costs. For the majority of our clients, Xero will be upgraded automatically so that you can easily submit your MTD VAT return to HMRC with no additional cost.

If you’re looking to move to accounting software, we’re here to help you make the transition run as smoothly as possible. This is your opportunity to streamline your accounting and business management, as well as getting MTD compliant.

If you currently maintain records on excel or paper your processes will need to change. You will need to provide records to us promptly after each quarter-end and engage us to do the bookkeeping or acquire and use appropriate software such as Xero.


Please note, all businesses already using Xero (or other MTD compliant software) to submit their VAT returns have nothing to worry about.  Xero will automatically upgrade the VAT functionality so you will be using MTD-compatible software come 1 April 2019 – and there will be no upgrade fees.

If you would like to engage us to implement software for you, please call 01392 495483 or email info@finance-department.co.uk.

Download the factsheet here »