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The new Labour Government are announcing their first major Budget on Wed 30^th October. They keep talking about a £22bn black hole and that those with the broadest shoulders will bear the brunt of any changes. They have already pledged not to make any changes to the headline rates of Income tax, NIC, corporation tax, VAT. It is hard to think where significant amounts of money could be raised from other areas, and there have been few rumours / leaks so there isn’t much definitive opinion in the profession about what changes might be imminent.

We’ve considered where we think the changes might come, and what action might be worth considering before then.

1. Missing tax. Apparently there is a tax gap of some £40bn between the amount of tax that should be collected, and what actually is. These days, the tax rules are very tight so we imagine that amount is spread between: a) payment default; b) non declaration (black market); c) bending of rules, eg. R&D claims. We’ve already seen a huge HMRC effort in reigning in R&D claims and we wonder if this might be extended to other areas, and that the Gov’t might commit resources to tackling the black economy and other areas of abuse.
2. Pensions. It is possible that tax relief on pension contributions might be restricted to basic rate. There is talk that the 25% tax free lump sum could be attacked. Also, a pension can be passed on to dependents free of IHT, on death. There are rumours that this could be attacked.
3. CGT. Rates could be aligned with income tax. Areas where reliefs are given could be targeted, eg Business asset disposal relief, EIS, SEIS, holdover reliefs, Private Residence Relief. On death, assets transfer to recipients at market value – this rule could be attacked and instead, passed on at original cost.
4. IHT. The Nil Rate Band of £325k could be reduced, and the Residential NRB (up to 175k extra) could be removed. Business Relief (you can get 100% relief on business assets / shares) could be restricted / removed.
5. Other. It is hard to imagine any area above where changes would make huge differences. There could be surprise announcements in other areas, for example:

What actions could you look to take in advance?

• It would be sensible, if you can, to bring forward pension contributions to before the budget.
• If you are over 55, you might consider taking your pension tax free lump sum (25%) but bear in mind that this might bring those funds into an IHT charge.
• If you have any control over timings of events, it might be worth trying to bring forward asset sales, or business investments, to before the budget

Overall, we think we just keep our fingers crossed, but most of the talk is around pension changes so we’d urge you to consider that aspect and discuss options with your financial adviser… not forgetting that Elsby have a very good team at Elsby Wealth Management who could help if you need it.

Running a successful business involves more than just day-to-day operations; smart tax planning can significantly reduce your tax burden and improve cash flow. A thorough understanding of your financial statements—balance sheet, profit and loss account, and cash flow statement—is key to effective tax planning. These documents provide a clear view of your business’s financial health and can help identify opportunities to minimise your tax liabilities. In this blog post, we’ll break down these financial statements and share practical tax planning strategies to help your business save money.

1. Understanding Key Financial Statements

Before diving into tax-saving strategies, it’s important to understand the three key financial statements that give a full picture of your business’s financial position.

Balance Sheet

The balance sheet provides a snapshot of your business’s financial position at a specific point in time. It outlines your assets, liabilities, and shareholders’ equity, answering the question: What does the business own, and what does it owe?

Key Components:

• Assets: Resources owned by the business, including cash, receivables, stock, and equipment.
• Liabilities: Debts owed by the business, such as loans, accounts payable, or outstanding tax.
• Equity: The value remaining after liabilities are subtracted from assets, representing shareholders’ investments and retained earnings.

How to Use the Balance Sheet for Tax Planning:

• Capital Structure: Understanding your debt-to-equity ratio can also help with tax planning, by tracking any debt your business owes. Interest on business loans is tax-deductible and therefore reduces your profits and your available income. Reducing your balance of debt, will increase your profits and this in turn improve the viability of the business in aiding any future applications for funding.
• Asset Depreciation: Fixed assets like machinery and vehicles, wear out over time. Replacing them can give you tax relief on purchases via claiming capital allowances on qualifying assets, which can lower your tax bill. So, it’s worthwhile tracking the life of your assets and timing the replacements.

Profit and Loss Account (Income Statement)

The profit and loss account summarises your business’s income, costs, and expenses over a specific period. It shows whether your business is operating profitably.

Key Components:

• Turnover (Revenue): Income from the sale of goods or services.
• Cost of Sales: Direct costs of producing goods or services.
• Operating Expenses: Overheads like rent, wages, utilities, and insurance.
• Net Profit: The final profit after all costs, including tax, have been accounted for.

How to Use the Profit and Loss Account for Tax Planning:

• Deducting Expenses: The P&L statement highlights allowable expenses (such as salaries, rent, utilities, travel and admin supplies), all of which reduce taxable profits, so it’s important to make sure you are claiming all of the costs you have incurred.
• Timing of Income and Expenses: When possible, strategic planning around the timing of revenue and expenses can help defer tax liabilities. For instance, accelerating capital purchases near the end of the financial year, brings forward the cost into the earlier year and therefore lower your current tax bill.
• R&D Tax Relief: Certain activities, such as research and development, may qualify for tax credits or relief under the UK’s R&D tax scheme.

Cash Flow Statement

The cash flow statement details the inflows and outflows of cash over a period. It’s divided into three categories: operating activities, investing activities, and financing activities. This statement shows how well the business manages its cash.

Key Components:

• Operating Activities: Cash generated from the core business.
• Investing Activities: Cash used to purchase or sell assets.
• Financing Activities: Cash flows related to borrowing or repaying loans.

How to Use the Cash Flow Statement for Tax Planning:

• Managing Cash Flow for Tax Payments: Ensuring you have enough cash to cover your tax liabilities can prevent penalties for overdue payments or underpayment.
• Deferring Income: If your business has strong cash flow, you could consider deferring the start of work for a customer into the next tax year, to delay the work to the following tax year.
• Maximising Capital Allowances: If you are considering the purchase/replacement of assets towards the year-end, then bringing forward the purchase can allow you to claim capital allowances sooner, reducing your taxable profit.

2. Tax Planning Strategies Based on Financial Insights

Once you understand these financial statements, you can start using them to inform tax-saving strategies. Here are some practical steps:

1. For smaller businesses using Cash Accounting – Accelerate Payment of Expenses, Delay Receipt of Income

• Accelerate Expenses: If your income is high this year, paying for next year’s expenses (such as supplies or rent) in advance can reduce your current year’s taxable profit as it bring the cost into this year.
• Defer Income: Delaying invoicing can mean payment of your income falls in the following tax year, which will move income into a later period, reducing this year’s tax burden.

2. For all businesses, maximise Capital Allowances

• UK businesses can benefit from the Annual Investment Allowance (AIA) and full expensing, which allows for the full cost of qualifying capital assets to be deducted. Bonus tax relief through first-year allowances on new qualifying equipment, can also provide additional saving opportunities.

3. Claim Relevant Tax Credits

• R&D Tax Relief: Available for companies investing in innovation, the R&D tax relief allows you to claim enhanced deductions on qualifying expenditure.
• Employment Allowance: If eligible, this can reduce the amount of National Insurance contributions your business has to pay.

4. Optimise Your Business Structure

• Limited Companies: Although the tax benefits are narrowing, in the right circumstances, structuring as a limited company can still offers tax efficiencies, such as lower corporation tax rates compared to personal income tax.
• Salary and Dividends: Business owners can reduce their tax liability by paying themselves a combination of salary and dividends, as dividends are taxed at a lower rate than income.

5. Contribute to Pension Schemes

• Contributions to a company pension scheme can reduce taxable profits, offering both a retirement saving benefit and a tax saving.

3. Maximising Tax Savings Through Regular Financial Review

Regularly reviewing and interpreting your financial statements can uncover additional tax-saving opportunities. By staying on top of these reports, you can:

• Spot areas for claiming deductions or allowances.
• Identify opportunities to defer starting customer work, or accelerate purchase of capital equipment.
• Monitor your cash flow to ensure you have funds available for tax payments.

Final Thoughts

Tax planning is an ongoing process that should be revisited throughout the year, not just at tax time. By regularly reviewing your financial statements—balance sheet, profit and loss account, and cash flow statement—you can implement strategies to minimise your tax burden, maximise deductions, and improve your overall financial health.

At Elsby & Co, our team of accountants can assist with interpreting these statements, implementing tax-efficient strategies, and helping you make the most of your business finances. Get in touch today to find out how we can help save your business money through proactive tax planning.

This approach combines a deep understanding of your financial situation with actionable tax strategies, ensuring your business remains financially efficient and compliant with UK tax laws.

Leona Bateman, Partner at Elsby & Co, explains why preparing for the future is important now.

Research published earlier this year revealed only nine per cent of UK businesses have succession planning fully integrated into their strategies, leaving many companies exposed to the risk of sudden leadership changes when owners decide to leave or retire.

Recognising that clients needed support in this area, Rushden-based Elsby & Co launched Elsby Corporate Finance service. It aids companies with succession and exit planning by helping them in areas such as business valuations and sales, inheritance tax planning, identifying their future needs and managing and developing key employees.

Partner Leona Bateman said: “Selling a business or handing it over to the next generation tends to have complex and unusual issues that can take time to implement.”

“The ultimate goal of exit and succession planning is to ensure a smooth and profitable transition for the business owner, whether they’re retiring or moving on to other ventures.

“Effective exit and succession planning is crucial to helping companies maintain the continuity of their operations, retain institutional knowledge and reduce the risks linked to leadership gaps.”

“It is also an important aspect of talent management and can significantly contribute to organisations’ long-term success.”

Elsby’s team ensures business owners have considered all sale options, including employee ownership, where a company’s staff hold shares or a stake in the ownership of a business, and management buy outs where a firm’s existing management team buys a majority or all of the ownership stake from the current owners.

Elsby has experience of business sales in many different markets and discretely supports clients through the whole process. It helps business owners to maximise their company’s value in the event of a sale or implement a smooth handover that all family members and shareholders feel comfortable with.

Once an agreement is found, Elsby can manage the process through due diligence to completion and then into the transition.

Leona added: “Elsby & Co has been supporting clients for more than 30 years and over the decades it has grown into an organisation which offers so much more than traditional accountancy services alone.

“Elsby and its complementary businesses can support clients with everything they need – from the start of their journey to the end and beyond.”

 

For further information, visit www.elsbyandco.co.uk  or contact us on 01933 312950.

As a business owner, your focus is often on growth, innovation, and day-to-day operations. However, in the hustle and bustle of running a business, financial management can sometimes take a backseat. This can lead to costly mistakes that might affect your bottom line. At Elsby & Co, we believe that routine financial reviews are key to maintaining your business’s financial health. Regular reviews not only help you spot errors before they escalate but also enable you to make informed decisions that drive your business forward.

Why Routine Financial Reviews Matter

Regular financial reviews are more than just a best practice—they’re essential to ensuring the long-term success of your business. Here’s why:

• Early Detection of Errors: Mistakes in your accounts can range from simple data entry errors to more significant issues like unrecorded transactions or incorrect tax filings. A routine review allows you to identify and correct these mistakes before they lead to financial discrepancies or legal complications.
• Improved Cash Flow Management: By regularly reviewing your financial statements, you can monitor your cash flow more effectively. This helps you anticipate any potential cash shortages and take proactive steps to manage your liquidity.
• Better Budgeting and Forecasting: Routine reviews provide you with up-to-date financial information, making it easier to create accurate budgets and forecasts. This, in turn, helps you plan for future growth and avoid unnecessary expenses.
• Enhanced Decision-Making: With a clear understanding of your financial position, you can make informed decisions about investments, expansions, and other strategic moves. Regular reviews ensure that your decisions are based on current and accurate data.
• Compliance and Risk Management: Staying on top of your finances helps ensure that you’re meeting all regulatory requirements and reducing the risk of non-compliance penalties. It also helps you identify potential risks before they become serious issues.

Common Accounting Mistakes to Watch Out For

While routine reviews are crucial, it’s equally important to know what to look for. Here are some common accounting mistakes that many businesses make—and how you can avoid them:

• Not Reconciling Accounts Regularly: Failing to reconcile your bank accounts and ledgers can result in missing or duplicated transactions. Make it a habit to reconcile all accounts monthly.
• Incorrectly Categorising Expenses: Misclassification of expenses can distort your financial statements and lead to inaccurate tax filings. Ensure that all transactions are categorised correctly according to your chart of accounts.
• Overlooking Depreciation: Depreciation is a non-cash expense that reduces the value of your assets over time. Failing to account for it can overstate your profits. Regularly update your asset records and calculate depreciation accurately.
• Neglecting Tax Deadlines: Missing tax deadlines can result in hefty penalties and interest charges. Set up reminders and keep track of all important tax dates to ensure timely filings.
• Underestimating the Importance of Documentation: Proper documentation is essential for audit trails, tax filings, and legal compliance. Keep all receipts, invoices, and financial records organised and accessible.

Financial Health Checklist for Business Owners

To help you assess your business’s financial health, we’ve created a simple checklist that you can use during your routine reviews:

1. Cash Flow Statement: Do you regularly review your cash flow statement? Are there any trends or irregularities in your cash inflows and outflows?
2. Profit and Loss Statement: Are your revenue and expenses accurately recorded? Have you identified any areas where costs can be reduced or revenue increased?
3. Balance Sheet: Is your balance sheet up-to-date? Are all assets, liabilities, and equity accurately represented?
4. Bank Reconciliation: Have all bank and credit card accounts been reconciled? Are there any discrepancies that need investigation?
5. Accounts Payable and Receivable: Are all invoices recorded and tracked? Are there any outstanding payments that need to be followed up on?
6. Tax Compliance: Are all tax obligations being met? Are there any upcoming deadlines that require attention?
7. Expense Categorisation: Are all expenses correctly categorised? Have you reviewed your expense categories for accuracy?
8. Asset Management: Are your fixed assets recorded and depreciated properly? Have you conducted a recent review of your asset register?
9. Debt Management: Are your debts being managed effectively? Have you reviewed your debt repayment schedule and interest rates?
10. Budget vs Actuals: Have you compared your actual performance against your budget? Are there any significant variances that need to be addressed?

 

Routine financial reviews are an indispensable tool for business owners who want to maintain control over their financial health. By regularly assessing your financial position, you can avoid common accounting mistakes, ensure compliance, and make informed decisions that support your business’s growth.

At Elsby & Co, we’re here to help you navigate the complexities of financial management. Our team of experienced accountants can assist you in conducting thorough financial reviews and provide you with the insights you need to keep your business on the path to success.

Don’t wait for mistakes to happen—schedule your financial review today and take the first step towards a more secure financial future.

Drop us an email – help@elsbyandco.co.uk

Read all about the services we offer here – Accountancy Services Northamptonshire | Elsby & Co (elsbyandco.co.uk)

 

Getting my placement with Elsby & Co

Near the start of the academic year, my school launched our work experience programme for all year 12 students to go out mid-July 2024, to gain practical knowledge of the working environment, in an industry more specific to the one we are interested in pursuing in the future, than previous opportunities. Therefore, as I know I want to become an accountant in the future, I researched all accounting firms locally to me. After a vast span of emails sent out, a few letters and phone calls, and a lot of ignored contact, I had a response from Ann Phillips at Elsby & Co, showing me the Work Experience Road Map. My first impression was how organised and professional their system was, detailing when applications close, the screening and so on.

Soon after, I had contact from Nikki at the recruitment agency, organising a phone call with me. This was my first experience at an interview style like this and I feel it went very well, as she asked me questions and we had a chat about my future goals and ambitions. I then was told that I was successfully shortlisted through to a group activity interview. This is where a group of us came in and completed an activity under observation, to see how we work together, which was a fun experience, even if my team were far from the correct answer! Not long later, I was offered a placement at Elsby and Co. in Rushden, with details of activities to be completed. All throughout the process, I was very impressed by the structured approach, with formalities and professionalism during the whole thing, with easily approachable contacts for any queries or questions.

Prior to the start of the week, in the post I was amazed to receive a package from Elsby, with postcards detailing my weeks timetable and policies, on-brand stationary, and a lovely, branded flask.

How my week started

Once the week began, on arrival I was greeted by Ann who explained to me the week’s arrangements and we had a chat about me. Any nerves I may have had previously soon went away, as everybody was so kind and welcoming, big smiles and introducing themselves. I felt valued straight away and with a well-designed,  loaded timetable ready, knew that this placement was going to be more than just making people cups of tea! This is supported by them giving me a laptop to use software for the week, in a professional environment.

I started my week in Admin, learning the crucial role they play in booking client’s information in, taking phone calls, sorting post and emails constantly. Sophie showed me clearly the systems they use, how to do certain processes and explained what is happening at every stage as we went through a typical morning’s work. In the afternoon I went to Payroll, where Tina showed me the ropes of dealing with client’s payroll that they’ve outsourced to Elsby & Co., with weekly, monthly or quarterly pay, where she thoroughly went through National Insurance and pensions coming out of a payslip, which you don’t learn in school. I liked how payroll was a structured process from one thing to another, working with lots of numbers and functions in software!

I spent an afternoon in Bookkeeping, with Lorraine and team, watching the fundamental precursor to the accounts team, where I learnt about the software that they use to complete their spreadsheets, to provide the accounts team the most efficient way of processing client’s information to build up their work. I liked how professional the team were, often working together on client’s information, helping each other out to be the most efficient at operating possible.

Learning the ropes

I then spent a couple of days with the Accounts team, where Warren had built specialist work experience examples, learning the fundamentals of accounts, with for example, credits and debits, balance trails and profit/loss accounts. I loved how everybody clearly cared about giving me a good experience, taking the time to build up these systems and looking after me well. We then looked at real client work, completing a full tax return and making up spreadsheets with specific information pulled from client’s data to give them a comprehensive analysis and advice, but learning at the same time about how for example, VAT or personal tax allowances work.

To finish off my week, I spent time with Katy in Marketing, learning about advertising and operating media, with the best ways to reach clients effectively. I did a few practical activities, for example designing a social media campaign. It was nice to see this side of the business too, considering it is an essential part to gaining clients. Without clients, nobody else has any work to do!

How my week went

I learnt a lot this week! My highlight was being with accounts, working with numbers and spreadsheets in order to do actual clients work, helping them and advising what would be best considering their current state as I love working with people. That’s another great thing about Elsby & Co, not only does each person work with a small group of clients, having personal connections, they work in a friendly, fun but productive environment. With everybody around being so warm and friendly, it is easy to talk to them and get advice from the professional’s opinion about how is best to enter the field.

After completing this week with Elsby & Co, I will be sad to go as I have enjoyed every part. When I applied, I expected to be bogged down with numbers all week, but it was a great experience to see every part of how Elsby & Co operates, giving me as much exposure as possible to all different avenues of the business and finance world, to see what I enjoy and therefore giving me a better insight as to what I want to do in the future. They haven’t scared me off from accounting though! This week has given me so many opportunities to see aspects of the business world and has given me a better idea of what I want to do in the future, which potentially includes returning to Elsby & Co. but maybe more permanently, as I have had such a good time!

From start to finish, I have had such an organised, professional and pleasant experience with Elsby & Co. and would recommend them to anybody who may be interested in work experience, their financial accounts doing or training to be an accountant themselves! Overall, 10/10, 5 stars, a great company and I am so grateful that they have made this experience possible for me.

 

Written by Brandon Saul – Work Experience Student July 2024

Whether you’re managing your personal finances or handling the books for your business, accounting can sometimes feel like navigating a maze. To make your journey a bit easier, we’re here to highlight some common accounting errors and share tips on how to avoid them. Let’s dive in!

1. Mixing Personal and Business Finances

The Error: A common mistake among small business owners is combining personal and business finances. It might seem convenient at first, but it can lead to chaos when it’s time to do your accounts or file taxes.

The Fix: Open a separate bank account for your business transactions. This makes it much easier to track expenses, manage cash flow, and prepare for tax season. Plus, it’s essential for maintaining clarity and professionalism.

2. Neglecting Regular Reconciliation

The Error: Failing to regularly reconcile your accounts can result in discrepancies that are difficult to rectify later. Reconciliation ensures that your financial records match your bank statements.

The Fix: Set a monthly routine to reconcile your accounts. Tools like QuickBooks, Xero, or FreeAgent can automate much of this process, saving you time and reducing errors. Regular reconciliation helps you catch mistakes early and maintain accurate records.

3. Poor Receipt Management

The Error: Misplacing receipts or not keeping them at all. This can be problematic when you need to verify expenses or claim deductions.

The Fix: Develop a system for managing receipts. Use apps like Receipt Bank or Expensify to capture and store receipts digitally. Make it a habit to record and categorise them immediately to avoid a last-minute scramble during tax season.

4. Inaccurate Data Entry

The Error: Human error in data entry can lead to significant inaccuracies in your financial records. A single misplaced digit can create a huge discrepancy.

The Fix: Double-check entries for accuracy. Use accounting software that integrates with your bank to download transactions automatically. Regular reviews of your entries help catch and correct mistakes promptly.

5. Overlooking Small Expenses

The Error: Ignoring minor expenses because they seem insignificant. These small costs can add up over time and affect your overall financial health.

The Fix: Record all expenses, no matter how small. Using accounting software helps ensure that nothing slips through the cracks. Remember, even those daily coffees and postage stamps matter!

6. Failing to Backup Data

The Error: Not backing up your financial data. Data loss due to computer failure, theft, or other issues can be disastrous.

The Fix: Implement a robust backup system. Cloud-based accounting software often includes automatic backups. Alternatively, regularly backup your data to an external drive or cloud storage service to safeguard your information.

7. Lack of Professional Help

The Error: Trying to handle everything yourself without seeking professional advice. While DIY approaches can save money upfront, they can lead to costly mistakes in the long run.

The Fix: Don’t hesitate to consult with a professional accountant, especially during tax season or when making significant financial decisions. An accountant can provide valuable insights, help you navigate complex regulations, and ensure compliance.

8. Ignoring Tax Deadlines

The Error: Missing tax deadlines, which can result in penalties and interest charges.

The Fix: Keep a calendar of important tax dates and set reminders. Consider using tax preparation software or hiring a tax professional to ensure you meet all deadlines and take advantage of available deductions. HMRC’s website is a great resource for keeping track of important dates.

9. Misclassifying Employees and Contractors

The Error: Incorrectly classifying workers as independent contractors when they should be employees. This can lead to significant tax issues and potential penalties.

The Fix: Understand the criteria set by HMRC for classifying employees and contractors. Ensure you are correctly categorising your workers based on their employment status. When in doubt, seek advice from an accountant to avoid costly mistakes.

10. Not Keeping Up with Changing Regulations

The Error: Failing to stay updated on changing tax laws and regulations. The financial landscape is always evolving, and staying informed is crucial.

The Fix: Subscribe to accounting and finance newsletters, follow relevant industry updates, and consult with your accountant regularly to stay informed about any changes that may impact your business.

Final Thoughts

Accounting doesn’t have to be a headache. By being aware of these common mistakes and taking proactive steps to avoid them, you can maintain accurate financial records and keep your finances in good shape. Embrace the tools and resources available to you, and don’t be afraid to seek professional advice when needed.

Remember, good accounting isn’t just about compliance—it’s about making informed decisions that help your business grow and thrive. Happy accounting, and here’s to your financial success!

At Elsby & Co, we’re here to help. Let us take away the strain and financial headache. Drop us an email at help@elsbyandco.co.uk

Find out more about our services here.

A THRIVING firm of chartered accountants has enhanced its comprehensive staff benefits package to attract even more of its industry’s brightest talents.

Rushden-based Elsby & Co celebrated its 30^th anniversary last year and is systematically growing its award-winning team.

The firm is already accredited as a Living Wage Employer and by the Good Business Charter which celebrates organisations that are committed to the highest standards in relation to things like wages, fairer hours, employee wellbeing and diversity and inclusion.

It has now also extended its staff benefits package and has delivered a range of initiatives focussed on mindfulness and its staff’s wellbeing this year.

Partner Leona Bateman said: “Growth is only possible if you have the right people to drive it which is why we’ve created a culture and reward structure that enables our staff to thrive.

“In recent months, we’ve enhanced our staff benefits package so we offer significantly more than many of our peers.

“Our extensive package includes support with studying, health, wellbeing and environmental benefits, retail discounts and rewards and recognition for hard work.

“We’re also keen to help our staff with things that are important to them. In the past we have rewarded a team member with extra holiday and the flight cost for long service so they could visit family abroad.

“In addition, we offer flexible working options to enable people like parents who are returning to work the opportunity to have great career prospects.”

Highlights of Elsby & Co’s benefits package include an ACCA gold accredited study support package for trainees which features a range of support for Elsby apprentices, including ringfenced learning time, structured learning, flexible access to courses, support from a mentor and a recognised qualification at the end of the programme.

It also offers a community support scheme, an electric car company car scheme for managers, a bonus scheme, a long service holiday award and the firm is part of a benefits scheme which provides staff with discounts via an app to a range of supermarkets, department stores, cinemas and popular restaurants and bars.

Its health and wellbeing package includes access to a free GP 24/7 service and a confidential Employee Assistance Programme.

This year it launched Mindful May and gave every employee either the choice of an hour off to do something for themselves – such as an exercise class or a walk with a friend – or up to £100 to spend on a wellness activity.

During the summer it also organised an Employee Team Building Day at The Falcon at Castle Ashby, which included a wellness session, team building activities and the chance to take part in an open water swim, a yoga session or a hike.

Find out what it is like to work at Elsby at www.youtube.com/@elsbyco4874/videos

Anyone interested in finding out about careers at Elsby should go to www.elsbyandco.co.uk  or contact recruitment@elsbyandco.co.uk

Content taken from article in the Business Times – Growing accountancy firm boosts its staff benefits offer – Business Times (business-times.co.uk)

Labour won a landslide victory in the general election on 4 July 2024 and Rachel Reeves made her first speech as the incoming Chancellor of the Exchequer on 8 July 2024, promising a ‘new approach to growth’. But how do Labour expect to achieve this growth and what are the priorities of the incoming government? Here, we look at some of the main pledges from the manifesto and the Chancellor’s speech which impact tax and business.

Britain is a place to do business

Kickstarting economic growth was the first of Labour’s five key manifesto missions and a central tenet of the Chancellor’s speech.

A new National Wealth Fund will be launched to invest (and attract) private sector investment in new and growing industries. The Chancellor stated that the next steps to establish the National Wealth Fund would be announced in short order. An Industrial Strategy Council will also be established to provide expert advice with a view to end short-term economic policy making.

The manifesto states that, for investors, ‘it is not just the rates of tax that matter, but also certainty’. Labour aims to provide this certainty in a number of ways. As well as committing to only one major fiscal event per year, the manifesto pledges to introduce a roadmap for business taxation for the next parliament. Labour have also pledged that the main rate of corporation tax will be capped at 25% for the next parliament. This is expected to keep the UK main rate the lowest in the G7 countries and Labour commits to ‘act if tax changes in other countries pose a risk to UK competitiveness’.

Labour have committed in their manifesto to retain the full expensing regime for companies and annual investment allowance, which also applies to self-employed individuals. Both full expensing and the annual investment allowance give an accelerated rate of deduction for capital investment. Firms will also be given greater clarity on what qualifies to aid investment decisions.

The current business rates system will be replaced in England in order to ‘level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship’, though we will have to wait for further details as to how this will be achieved.

Small business will also be supported by Labour taking action on late payments and a reform of the British Business Bank to make it easier for small and medium enterprises to access capital.

Labour will not increase taxes on working people

The manifesto ruled out increases in National Insurance Contributions and the rates of income tax or VAT, and this was confirmed in the Chancellor’s speech. However, not mentioned in the manifesto were any changes to the thresholds for income tax, so we may still see the impacts of fiscal drag in continuing to freeze the thresholds and personal allowance until 2028/29. In March 2024 the Office for Budget Responsibility calculated that the personal allowance and higher rate threshold freezes would raise £33.6 billion per annum by 2028/29.

There was also no mention made on the rates or thresholds of employers’ NIC, nor was there specific mention of Capital Gains Tax and Inheritance Tax rate rises despite rumours in advance of the manifesto. It is possible that the Labour government may look to increase the rates of or reduce the availability of reliefs, particularly if the tax gap measures below don’t generate the required income.

Non-domiciles

Abolishing the non-domicile regime has been part of Labour’s promises for some time and it is likely that they will continue with some of the measures announced by the Conservatives at the Spring Budget 2024. Although not covered specifically in the manifesto, Labour published a paper in April 2024 which included its response to the Conservative announcements. The paper included broad agreement to the four-year time period before an individual becomes subject to UK taxation of overseas income and a ten-year period of residence before worldwide assets become subject to Inheritance Tax.

However, the paper suggested that Labour would remove the 50% reduction in foreign income subject to UK tax in 2025/26 under the transitional rules as well as targeting the Inheritance Tax protection for offshore trusts. On the flipside, Labour will consider incentives to encourage investment in the UK during the first few years of UK residence, although it is noted that this was not strictly covered in the manifesto.

The manifesto additionally pledged an increase in the stamp duty land tax surcharge paid by non-UK residents purchasing residential property of 1%. This would result in a surcharge of 3%.

Tackling the tax gap

One of the key revenue generators of the manifesto was from closing the tax gap through closing non-dom tax loopholes and investment in reducing tax avoidance, contributing £5.23 billion of the £8.54 billion to be raised per annum by 2028/29. The tax gap is the difference between the tax which is thought to be due and that which is collected; latest figures for the tax gap in 2022/23 published by HMRC estimate the total tax gap to be £39.8 billion or 4.8% of total theoretical tax liabilities. This is expected to be achieved partly by a £855 million annual investment in HMRC. Labour states:

‘We will increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC. This, combined with a renewed focus on tax avoidance by large businesses and the wealthy, will begin to close the tax gap…’

The manifesto also pledged to close the loophole in the private equity industry where ‘performance related pay is treated as capital gains’. Although there was little additional information in the manifesto we expect to see more detail in the coming months; Labour calculate that this change will raise £565 million per annum by 2028/29.

On a global scale, Labour also state they support the implementation of the OECD global minimum rate of corporate taxation.

Reforming the planning system

Much of the Chancellor’s speech concerned actions to ‘fix’ the planning system and kickstart economic growth through infrastructure development and housebuilding. Before the end of July, the Chancellor pledged to consult on reforming the National Planning Policy Framework, including the restoration of mandatory housing targets. Further measures will accelerate stalled housing sites, support local authorities with 300 additional planning officers and use governmental intervention in planning applications where ‘the potential gain for the regional and national economies warrant it’. Brownfield and grey belt land will be prioritised for development to meet housing targets where needed.

The ban on new onshore wind in England will be ended and decisions on large developments will be taken nationally and not locally.

Employment and skills

Some legislation which we may see in advance of a budget is around employment rights; the manifesto commits to introducing legislation for consultation within 100 days, including banning zero hours contracts, ending fire and rehire and introducing basic rights such as parental leave and sick pay from day one.

Labour has also committed to ensuring the minimum wage is a ‘genuine living wage’ and removing the age bands so all adults are entitled to the same minimum wage.

Labour plans to replace the Apprenticeship Levy with a more flexible Growth and Skills Levy and ensure qualifications offer value for money. Labour also pledges to establish a youth guarantee of access to training, and an apprenticeship or support to find work for all 18- to 21-year olds.

VAT on private school fees

Although Labour pledged to not increase VAT, the manifesto did promise to end the VAT exemption on private school fees and business rates relief for private schools. These measures are expected to raise £1.51 billion in 2028/29. We will have to await legislation for full details, but key considerations include how the measures will be implemented to ensure only private school fees are targeted. Any schools required to register for VAT as a result of these changes are expected to also have to comply with the Making Tax Digital rules.

Energy Profits Levy

The manifesto pledged changes will be made to the Energy Profits Levy, which is the windfall tax on oil and gas companies. These include:

• Extending the sunset clause (when the levy will end) until the end of the Parliament.
• Increasing the rate of the levy by 3%.
• Removing ‘unjustifiably generous investment allowances’.

These measures are expected to raise £1.2 billion per annum by 2028/29.

When can we expect a Budget?

Previously an incoming government would often hold an Emergency Budget in order to quickly implement their manifesto pledges. This is not expected with this government; Labour have committed to accompanying any fiscal statement with a full forecast from the OBR, which typically requires ten weeks’ notice, and the Chancellor’s speech stated that a date would be confirmed ‘in due course’.

As a result, we are likely looking at mid-September at the earliest for the Budget but it is possible we will see certain measures introduced sooner such as the roadmap for business taxation or National Wealth Fund and legislation released for consultation on employment rights and the non-domicile regime.

At Elsby & Co, we are dedicated to helping business owners navigate the often confusing world of taxes. Today, we’re diving into a topic that can save you money and stress: tax deductions for small businesses. Grab a cup of coffee, get comfy, and let’s demystify tax deductions together!

What Are Tax Deductions?

First things first: what exactly are tax deductions? In simple terms, tax deductions reduce your taxable income, which in turn reduces the amount of tax you owe. They are legitimate expenses that you can subtract from your gross income to arrive at your taxable income. Think of them as the government’s way of acknowledging the costs of running your business and giving you a break for those expenses.

Home Office Deduction – If you run your business from home, you may be eligible for the home office deduction. This deduction allows you to write off a portion of your home expenses, such as mortgage interest, rent, utilities, insurance, and repairs, based on the percentage of your home used for business purposes. Remember, the space must be used exclusively and regularly for your business.

Business Use of Your Car – Do you use your car for business purposes? You can deduct expenses related to its business use. There are two methods to calculate this deduction:

• Standard Mileage Rate: Deduct a set amount per mile driven for business purposes.
• Actual Expense Method: Deduct actual expenses such as gas, oil, maintenance, insurance, and depreciation based on the percentage of business use.

Supplies and Equipment – From office supplies like pens and paper to larger equipment like computers and printers, these expenses are deductible. For more significant purchases, consider the Section 179 deduction, which allows you to deduct the entire cost of qualifying equipment in the year it’s purchased rather than depreciating it over time.

Travel Expenses – Business travel can be costly, but many of these expenses are deductible. This includes transportation (flights, trains, car rentals), lodging, and meals (subject to a 50% limit). Keep detailed records and receipts to substantiate your deductions.

Meals and Entertainment – Entertaining clients and having business meals can also be partially deductible. Generally, you can deduct 50% of the cost of business meals if they are ordinary, necessary, and directly related to your business activities.

Employee Salaries and Benefits – If you have employees, you can deduct their salaries, wages, and other forms of compensation, such as bonuses and commissions. Additionally, employee benefits like health insurance, retirement plans, and other fringe benefits are deductible.

Rent – If you rent office space, that expense is fully deductible. This also applies to rented equipment or vehicles used for business purposes.

Utilities – Utility costs such as electricity, water, gas, phone, and internet used for your business are deductible. If you have a home office, only the portion used for business is deductible.

Insurance – Various types of insurance premiums are deductible, including property, liability, malpractice, workers’ compensation, and business interruption insurance.

Professional Services – Fees paid to accountants, lawyers, consultants, and other professionals who help you run your business are deductible. This includes tax preparation fees and fees for financial advice.

Marketing and Advertising – Expenses related to marketing and promoting your business, such as website development, business cards, online ads, and promotional events, are fully deductible.

Education and Training – The cost of courses, workshops, seminars, and other educational resources related to your business is deductible. This includes books and materials required for the training.

How to Maximize Your Deductions

Keep Accurate Records – One of the most crucial steps in maximizing your deductions is keeping detailed and accurate records. Save all receipts, invoices, and proof of payment. Use accounting software to track your expenses and categorize them correctly.

Separate Personal and Business Expenses – Maintain separate bank accounts and credit cards for your business and personal finances. This separation simplifies record-keeping and ensures you don’t miss any deductible expenses.

Consult with a Professional – Tax laws can be complex and change frequently. Working with a professional accountant can help you identify all possible deductions and ensure you’re in compliance with tax regulations. Our friendly team is always here to help!

Final Thoughts

Understanding and taking advantage of tax deductions can significantly reduce your tax burden and increase your business’s profitability. By keeping meticulous records, staying informed about deductible expenses, and seeking professional advice, you can navigate the tax landscape with confidence.

At Elsby & Co, we are passionate about helping businesses thrive. We hope this guide has provided you with valuable insights into tax deductions and empowered you to make the most of your business expenses. If you have any questions or need personalized assistance, don’t hesitate to reach out to us. Happy deducting!

Feel free to contact us for a consultation or any accounting needs – email us at help@elsbyandco.co.uk

The next generation of aspiring accountants is being given a huge boost by an established accountancy firm in Northamptonshire.

Elsby & Co, which is based in Rushden, has launched a comprehensive apprenticeship programme to recruit and develop the brightest new talent in its industry.

It guarantees apprentices a structured learning programme, ringfenced learning time, flexible access to courses, support from a dedicated mentor and a recognised qualification at the end of the scheme.

Head of Operations Ann Phillips said: “Everyone’s lives have got busier which means it’s harder to study in our own time than it used to be. Our trainees attend learning and revision courses during work time, to help them prepare for their exams, because we want to protect our teams’ work-life balance.”

“Our approach to study dovetails with our approach to wellbeing and one of our key values – caring for your experience – and for us that starts in the office.”

Elsby & Co works closely with First Intuition, Northampton College and Bedford College to provide AAT apprenticeships for 16 and 18-year-olds, as well as graduate ACCA apprenticeships.

Audit Senior Manager Sue Halsall worked as an audit manager for 22 years and as a training manager before joining Elsby & Co last year where she is a mentor to other staff members.

She said: “We have a fantastic team, ranging from trainees at the start of their career to more senior members of staff, and I relish sharing my years of experience with them. It truly is a collaborative team – everyone trains one another and shares their knowledge generously.”

Elsby apprentice Niamh Standen said: “I didn’t think an apprenticeship was the route I wanted to go down, and had my sights set on university. I now urge anyone thinking about an apprenticeship to apply for work experience because the week I had here changed my mind completely. Everyone wants the best for you at Elsby & Co and I truly feel part of the team.”

Staff also receive regular 1-2-1s with their line managers and soft skills training delivered through lunchtime learning sessions, podcasts and recorded presentations.

In addition, the team benefits from a comprehensive support package, including flexible working options, a community support scheme, an electric car company car scheme for managers, a bonus scheme and a long service holiday award.

It is also part of a benefits scheme which provides staff with discounts via an app to a range of supermarkets, department stores, cinemas and popular restaurants and bars and its health and wellbeing package includes access to a free GP 24/7 service and a confidential Employee Assistance Programme.

To find out more about joining the firm, email elsbyrecruitment@elsbyandco.co.uk

For information about Elsby & Co, visit https://www.elsbyandco.co.uk/

Read a full version of this article here – Firm unveils new study package for aspiring accountants – Northants Life | News | Events | Advertise | Northampton Magazine

You want to erect a cabin in your garden to use as a home office. You and your family will also use it for private purposes. Will it be more tax efficient for you or your company to pay for it?

No tax exemption

If your company provides you with as asset, e.g. a computer, solely for the purpose of work to use when you’re away from your normal workplace it isn’t a taxable benefit in kind. This exemption applies even if there’s private use as long as it’s not significant. Consequently, if the private use is significant there is a taxable benefit in kind.

How much tax?

The taxable amount depends on two factors: the cost of providing the asset and any additional expenses, e.g. for maintenance of the asset.

Example. Carol is an owner manager of Acom Ltd. She wants to spend less time commuting and so arranges for Acom to pay for a fancy garden office so she can work at home. It pays £25,000 for the installation. The taxable benefit is 20% of this, i.e. £5,000 each year. Assuming the structure is used for 15 years Carol will be taxed on a whopping £75,000. In addition, Acom pays Class 1A NI on the same amount. If Carol is a higher rate taxpayer throughout the 15 years, and assuming the tax and NI rates stay as they are, the tax and NI cost would be £40,350 ((£75,000 x 40%) + (£75,000 x 13.8%)).

Alternative tax charges

If in our example Acom rented or leased the structure, the taxable benefit in kind for any year will not be 20% of its cost but the amount of rent etc. paid by Acom. Carol pays for lighting and heating the office personally. If Acom paid these costs it would increase the taxable benefit. Despite this it could be more tax and NI efficient for Acom to pay them.

Reduction for unused periods?

Some days Carol won’t use the garden office at all. The bad news is that this doesn’t reduce the taxable benefit. The benefit applies to any day where the office is “available” for private use, even if it’s not used. Unless Acom is able to prevent its use, the garden office will always be available.

Reduction for business use?

The tax rules for employment income include various exemptions and deductions relating to benefits in kind where there is business use associated with the benefit. We’ve already mentioned one which applies where private use of a benefit is insignificant. However, in our example, the private use is significant so the exemption cannot apply. Also, while a reduction in the taxable amount is allowed where there’s business use of some types of benefit, this rule doesn’t apply to use of an employer-owned asset.

More tax efficient alternative

The long-term use of employer-owned assets can result in a disproportionate tax and NI bill.

Tip. Rather than making an asset available to a director or employee for long-term use, the NI cost can be reduced if a dividend is paid. In our example, the tax cost to Carol would be just under £15,300 with no NI for Acom to pay. Even though Acom will lose corporation tax relief on the cost of the asset (up to £7,500), the overall tax bill is far less. When providing use of an asset always consider the tax and NI cost over the expected period for which it will be used.

If private use of the home office is significant, an annual taxable benefit will apply equal to 20% of the cost of the office. Over many years the resulting tax and NI can easily exceed the original cost of the asset. It would be more tax and NI-efficient for your company to pay you a dividend to enable you to purchase it.

 

If you want advice on tax efficiencies, get in touch – help@elsbyandco.co.uk

Read more about how our expert team of tax accountants can advise clients on their personal tax affairs – Personal Tax Accountants Northampton | Elsby & Co (elsbyandco.co.uk)

A Northamptonshire accountancy firm which prides itself on offering far more than the traditional compliance service provided by most accountancy companies is helping its clients to drive forward their recruitment plans. During the past few years, Elsby & Co has nearly doubled its workforce thanks to its relationship with fellow Northamptonshire-based firm, recruitment consultancy Exceda.

Exceda has helped Elsby to grow by finding it good candidates and overhauling its recruitment and retention policies, so it secures and keeps the right people. The relationship has proved so successful for Elsby, its team now signposts clients it identifies as in need of recruitment help to Exceda so they can also benefit from its advice.

Partner Carl Elsby said: “I often feel that traditional recruitment agencies are trying to fill vacancies as quickly as possible to get their fee whether the person is right or wrong. With Exceda it’s not like that. They want to place the right person with you.”

He continued, “Successfully growing our workforce has meant our senior team has more time to focus on business development and our services and the complementary businesses we’ve launched as a result are helping our clients to thrive. This is why we see Exceda as a key part of our own growth plan and we realised they could help our clients to grow too. It’s unusual for accountancy firms of our size to put clients in contact with recruitment experts but knowing our clients can speak to Exceda reassures us they have somebody who has their best interests at heart.”

 

Exceda is owned by Nikki Sargent who has worked in recruitment for around 20 years, across a range of industries. She works with a variety of clients, including Elsby and its customers, on permanent contract recruitment for roles at all levels.

Nikki said: “The most important thing in a competitive market is candidate experience. From the outset when candidates make an enquiry to their induction and onboarding – the whole process has got to be slick. Candidates will often have two or three job options and the experience they have with a company will be the differentiator. If you make them feel special that can make all the difference.”

Exceda offers a flexible payment model to clients, a retainer contract for firms with regular recruitment needs and can help companies with their recruitment and retention policies.

To find out more about Exceda, visit https://www.exceda.co.uk/

For more information about Elsby & Co email help@elsbyandco.co.uk, call 0330 053 9189 or visit www.elsbyandco.co.uk