Business News England January 2023
More time to prepare for Making Tax Digital for Income Tax Self-Assessment
The mandatory use of software for Making Tax Digital for Income Tax Self-Assessment is being phased in from April 2026.
Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) was due to be phased in from April 2024. However, the government, recognising the current economic environment and the significant change that a transition to Making Tax Digital represents, has pushed this back to April 2026. In addition, the previously announced £10,000 threshold for self-employment and property income has been raised, as detailed below.
Under MTD for ITSA, businesses, self-employed individuals, and landlords will keep digital records, and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. In response, they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information and finalise their tax affairs. This will replace the need for a Self-Assessment tax return.
Making Tax Digital from April 2026
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
Making Tax Digital from April 2027
Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.
Income below the £30,000 threshold
The government has also announced a review into the needs of smaller businesses, particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
Mandating of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced. Our tax accountants can help with all your tax queries.
What are your business resolutions for 2023?
We often make resolutions for ourselves at this time of year, but what about your business?
Below are a few examples of business resolutions; maybe they will help you think about your strategy for success in 2023 and your cashflow management.
1. Resolve to track your spending
Where does all the money go each month? You know about the big regular bills such as rent, rates, telephone and internet, suppliers, employees, tax, heat, and electricity, but for most businesses, budgets never quite seem to add up. Make sure you list all the little things such as sundries and other smaller expenses into your budget. Look through last year’s accounts to check you have every type of expense included.
Having a budget has become more important than ever. Resolving to stick to a set budget can be vital and could even mean that we have surplus cash left over at the end of each month.
2. Resolve to deal with debt
A cash surplus is vital when running a business, because one of the most important things to avoid in 2023 might well be debt. Following the Covid-19 government support, debt was easy to get into, but hard to get out of. Remember, debt goes on costing money because it means interest payments each month. Your cash surplus could help pay off your debts. Resolve to pay off as much as you can, starting with any variable interest debt you have.
3. Resolve to build up an emergency fund
Reducing your debt feels as though you have had a cash bonus each month, because you no longer have repayments to make or interest to cover. It may be tempting to splash out, but if you resolve to save instead of spend, it could be the first step towards building resilience against outside influences to your business. In 2023, interest rates are on the up, making a savings account more rewarding.
4. Resolve to make the most of your company pension
Your pension is a special kind of investment, and thanks to the tax relief provided by the government, it could be the most rewarding you ever make. Resolving to make some extra contributions into your pension fund in 2023 could make a big difference to your wealth in the years to come.
5. Resolve to be flexible with your plans
Few predicted the Pandemic or the war in Ukraine and these types of events are outside our control. Who knows what 2023 will bring, so it is worth remembering a quote from the singer Celine Dion: “Life imposes things on you that you can’t control, but you still have the choice of how you’re going to live through this”.
It is a good idea to look at where you are now and plan for a range of scenarios “good and bad” so that you can be flexible about the direction you should take.
Ask us about our One Page Analyst, a “what if” scenario planner which takes your projected 2023 figures and allows you to work out the effect on profit of reducing expenses, increasing sales, increasing or decreasing prices.
If you need help during the next few months, then please call us – we are here to support you!
Creative Catalyst 2023
UK registered micro and small businesses in the creative industries sector, can apply for funding up to £50,000 with a package of support to grow their business.
The aim of this competition is to support business innovation within the creative industries by providing a package of targeted and continuous support to help businesses to grow.
Your project must:
- be related to and for the benefit of the creative industries in the UK;
- demonstrate a clearly innovative and ambitious idea;
- be new to your business, with a demonstrable impact to your growth plan;
- create a new revenue stream, for example new products, services or IP;
- respond to the changing market conditions, such as new modes of audience consumption, or the adoption of new technologies within the sector;
- be market ready within 12 months of receiving support; and
- demonstrate value for money.
The competition closes at 11am on 15 February 2023.
Remaining resilient in a shrinking economy
Despite a small growth in the economy in November of 0.1%, the UK has been struggling under the weight of high inflation and rising borrowing costs. Most economists are predicting a contraction in the economy in the next six months. Conditions are likely to remain challenging for businesses and individuals alike, so now is a good time to focus on resilience.
Resilience is the process of adapting well in the face of adversity, trauma, tragedy, threats, or significant sources of stress — such as business, workplace, and financial stressors. It means "bouncing back" from difficult experiences.
So what actions can you take now to remain resilient to any downturn in the economy?
Here are a few suggestions to help you think about your business:
- Review your Budgets and set realistic and achievable targets for 2023/24.
- Be careful with ‘can’t pay’ customers and get rid of ‘won’t pay’ customers.
- Review your debtors list and chase up overdue invoices (if appropriate).
- Offer existing debtors extended payment terms and/or discounts (if applicable).
- Make sure your terms of business contain explicit payment terms.
- Assign responsibility to one individual for invoicing and collections.
- Agree extended payment terms with all suppliers in advance (if applicable).
- If appropriate, review banking facilities and discuss future needs.
- Put extra effort into making sure your relationships with your better customers are solid.
- Review and flow-chart the main processes in your business (e.g. Sales processing, order fulfilment, shipping etc) and challenge the need for each step.
- Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about efficiencies and cost reduction).
- Review your staffing needs over the next few months.
- Review your list of products and services and eliminate those that are unprofitable or not core products/services.
Establish your key performance indicators (KPI’s) and measure them on a weekly basis, e.g.:
- Sales Leads generated,
- Orders supplied/fulfilled,
- Cash balance,
- Stock Turnover,
- Debtor Days,
- Gross Profit, and
- Net Profit.
The good news!
The important thing to remember is that the vast majority of people will not lose jobs, the majority of businesses won’t fail and, eventually, we’ll recover. (NatWest Bank, Key economic predictions for 2023).
Talk to us about your business; we have many clients who have changed the way they do things and some really innovative stories to share with you!
Remaining resilient in a shrinking economy
The new tax year starts 6 April 2023, so you have a couple of months to consider your options, once we pass this date the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned before the 6 April.
Do you fall into any of these categories?
- You have or are thinking about a change in your personal status (single, married, separating, joining or dissolving a civil partnership).
- You are thinking about selling a capital asset, such as shares or a property. From 6 April 2023 the Capital Gains Tax annual exempt amount reduces from £12,300 to £6,000.
- You or your child’s other parent claims Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2022-23;
- Your annual income is approaching or above £100,000;
- You have not yet topped up your pension contributions for tax year 2022-23;
- You are self-employed with a 31 March 2023 year-end;
- You are self-employed and are thinking about the purchase of equipment or vehicles; or
- You are the director and/or shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2022-23.
If you do we can help you discuss your options ahead of the 6 April deadline!
The above list is not comprehensive, and we specialise in helping clients with all taxes including PAYE, NIC, VAT, Corporation, Capital Gains, Income and Inheritance tax. Please contact us now!
Last chance to pay your self-assessment tax bill
The deadlines for paying your tax bill are usually:
- 31 January - for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on account
- 31 July for your second payment on account
Make sure you pay HM Revenue and Customs (HMRC) by the deadline. You will be charged interest and may have to pay a penalty if your payment is late. The time you need to allow depends on how you pay.
See: Pay your Self Assessment tax bill: Overview - GOV.UK (www.gov.uk)
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