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Pre-Budget Report 2009
December 15, 2009
In his last Pre-Budget Report before the general election, Chancellor Alistair Darling unveiled a number of measures aimed at bringing about economic recovery in the UK economy.
For individuals, the allowances will remain frozen at 2009/10 levels, although the pledged increase in income tax for those earning over £150,000 will be introduced on 6 April 2010.
There will be a rise in National Insurance of 0.5% from 6 April 2011, affecting all those with earnings over £20,000. The temporary VAT rate cut will cease on 31 December 2009 and at the same time the stamp duty holiday will end. Due to a lack of rise in property prices the inheritance tax allowance will be frozen at £325,000 until 2011.
For businesses there will be a deferral of the increase in corporation tax and an extension of the empty property relief and of the Enterprise Finance Guarantee for a further year.
Income tax rates and allowances
Income tax rates and thresholds for 2010/11 will be unchanged from 2009/10, with the notable exception of a new 50% rate that will apply to income above £150,000. With the tax thresholds static, the effect of any inflation will cause a real terms reduction on net income.
Pension contributions
The proposals to restrict the pension relief on contributions for those earning over £150,000 were confirmed for 6 April 2011. The Chancellor also announced an immediate measure to prevent high earners from avoiding the restriction by receiving pension payments instead of salary before the new rules take effect. This anti-avoidance move applies to those with income over £130,000.
National Insurance
The increase of 0.5% in National Insurance planned for 6 April 2011 has increased to 1%; double the amount announced in the 2008 Pre-Budget Report. The higher rates apply to employees, employers and the self-employed from 6 April 2011. The limit at which an individual starts to pay national insurance will also increase by £570 on the same date. As an overall effect, those with earnings below £20,000 will not be any worse off.
Corporation tax
At last – some good news. The 1% rise in corporation tax for small companies, which was due to take effect on 1 April 2010, has been postponed until 1 April 2011.
VAT
The VAT rate will revert to 17.5% from 1 January 2010, but no other VAT changes are proposed. For businesses using the flat rate scheme, the percentages are also changing on 1 January 2010. Most flat rates will go back to being the same as they were before 1 December 2008. For certain businesses it may be beneficial to leave the scheme in the new year, which can be done voluntarily. We can help you to decide whether it will stay worthwhile to use the flat rate.
Business rates
The exemption from business rates will be extended one year to 31 March 2011 for all empty properties with a rateable value below £18,000. The increase in the threshold from £15,000 to £18,000 reflects the rise in rateable values from 1 April 2010.
Furnished Holiday Lettings
The tax benefits available to furnished holiday lettings will be removed from 1 April 2010 for companies and 6 April for unincorporated businesses. The changes will not affect hotels or bed and breakfasts. The withdrawal of the treatment will mean that with respect to furnished holiday lettings:
- Losses will only be available to reduce profits from other property income.
- Profits will not count towards income on which pension relief can be obtained.
- Special treatment for capital gains tax purposes will no longer continue.
Stamp duty
The increase in the limit on which an individual starts to pay stamp duty, announced in September 2008, will finish at the end of the year. From 1 January 2010, stamp duty will be payable at 1% on residential properties over £125,000.
Stamp duty is normally charged at the completion date or the date on which an individual takes possession of the property. To avoid stamp duty of 1%, transactions on properties between £125,000 and £175,000 will usually need to be completed before 31 December 2009.
Inheritance Tax
The threshold on which an estate is exempt from inheritance tax was due to rise to £350,000 on 6 April 2010, but it will now be left at £325,000 for a further year. The government has sited a lack of improvement in the property market as a reason for the change.
Other tax changes
Backing from the government for loans to small businesses through the Enterprise Guarantee Scheme will be extended by another year to 31 March 2011.
Banks will pay tax on all discretionary bonus over £25,000 at 50%. The 'super-tax' will be payable by banks in addition to income tax and will take immediate effect.
An employee's use of an electric car will be a tax-free benefit in kind for five years from 6 April 2010. In addition, where a company acquires a new electric van from 1 April 2010, it will be able to deduct the full cost from its profits for tax purposes. Meanwhile, the tax cost of providing non-electric cars and vans as a benefit will increase from the same date.
Review YOUR 2009!
December 14, 2009
Have you actually considered what you did achieve this year? Whether it’s in business or your personal life, what can you honestly say you are proud to have accomplished in 2009?We’re fast approaching the end of the year. Who’s going to admit it? At least one of us has said “I don’t know where it went!” It’s almost as traditional as putting mince pies out for Santa! Have you actually considered what you did achieve this year? Whether it’s in business or your personal life, what can you honestly say you are proud to have accomplished in 2009? The beginning of a year can start with great intentions filled with New Year’s Resolutions and comments such as “this is the year it will happen”. The question is, at what point do we review the last twelve months, allowing ourselves to celebrate successes and use our experience to improve? The answer is NOW! Allow yourself at least half an hour to consider the following points, which will enable you to make your plan of action for 2010 a lot more effective.
- What were your three principal ambitions for this year? Write them down followed by the answers to the following:
- How successful were you on a scale of 1 to 10?
- What would have made the difference between the score you gave and a 10....or an 11?
- How often did you monitor your progress? Would it have been helpful to have done this more often?
- If your priorities changed throughout the year, did you adapt your goals to ensure they were still realistic and achievable?
- Did you use all resources available to you? What or who else could you have used?
- Take five minutes away from these questions to make a cup of tea, check your email or make some calls.
...go on, put the kettle on! Now, imagine the answers you have in front of you are not yours, but those of a colleague who has requested your help. They’ve asked for your opinion on each of the points and are in need of complete honesty to help them improve for the future. What would you say to them?
- Do you think the scores they gave were reasonable?
- If they say that they did not adapt during change, or they didn’t use all available resources – ask them why? Was something holding them back? What obstacles prevented them from achieving each of these goals and how could they have overcome these?
- In what way have you seen them progress and grow this year? What do you see as their main achievements?
Finally, I’d like you to raise your mug (you did make that tea, didn’t you?) and congratulate yourself on everything you achieved during such a testing year – here’s to even more success in 2010...CHEERS!! To find out more about hgcoaching please visit www.hgcoaching.wordpress.com, follow me on Twitter @hgcoaching or contact Holly at hollygordon@btinternet.com
If you enjoy something – don’t go into business to do it
December 11, 2009
I set up my first business during the recession of 1990. At the time I was given some great advice, though initially I didn’t fully appreciate its value. I thought it might be useful, given the current economic climate, to pass this advice along…
“If you enjoy something and are good at it, don’t go into business to do it. Go into business so that you can do the thing you enjoy and are good at.”
It took me a while to figure out the gem of wisdom here. Excited as I was to be setting up my own business, and taking control of my own destiny; what was motivating me was that I would be doing something I enjoyed and felt I was good at. The problem with this is that it puts the “going into business” aspect of your new venture into second place. Whereas it should come first.
You may be a good web designer, or chiropractor, or recruitment consultant, or even helicopter pilot. But if you are not prepared to be a good business person, you best stay on someone else’s pay-roll. Or if no one is prepared to pay you to be a web designer, chiropractor etc keep these skills as a hobby.
You need to be thinking “I am going into business and will be a business person first.” A by-product of your business is that you get to do something that you enjoy. If you do not focus on being a business person first: areas such as cash-flow, sales, market research, administration etc. are likely to come second to the delivery of your product or service. And those wrong priorities can easily lead to business failure.
Now, I am sure that you are a good web designer, or chiropractor, or recruitment consultant, or even helicopter pilot – but what makes you think you are a good business person?
Are you legal and decent?
December 08, 2009
Like every area of business these days, there’s lots of red tape and ecommerce has its own rules and regulations. Just remember, though, it’s up to you to comply with the law. Here are my tips to help you ensure your online store meets UK regulations.
1 VAT
If your annual revenue exceeds £68,000 you must be VAT registered. If you're below this threshold, you don't have to worry about charging VAT and it would actually be against the law to do so. There are some finer points to be aware of, too. For instance, if your products are a mixture of those requiring VAT to be charged, and those exempt from VAT, VAT charged on shipping should be in proportion. Make sure your ecommerce solution can handle all of the tax rules.
2 US import rules
The UK is part of the EU, obviously, so we’re bound by its rules. It’s not the same when handling US orders. The individual US states might want to charge tax on sales into their area, but it’s their responsibility to levy this tax. You don’t have to charge this “use tax”, which is between the buyer and the state where they live. As a UK business, you can sell into the US tax free – but you should make your customers aware that they may be charged tax on the goods when they’re imported.
3 EU Distance Selling Directive
Under this Directive, you must provide full contact details – including an address, phone number, email and company and VAT registration numbers – where applicable. Do it anyway – it helps to build trust.
The same Directive dictates that you must accept return of any items purchased within seven working days and failing to inform buyers of their rights has penalties. But why not make this a selling point?
4 Data Protection
You must register with the Information Commissioner’s Office if you hold data on people (eg customers). Registering takes some time and effort, but is inexpensive and fairly straight forward.
5 Email opt-in
If you want to email newsletters or offers to prospective customers, you must gain their consent in the form of a statement that the customers agree to receive communications. You must also give them an option to decline.
Emails involved in fulfilling orders or answering specific sales enquiries do not need this provision. When you send marketing messages there must be a free method of opting out each time you send an email. This itself can be by email. The regulations apply to communications with individuals, not businesses.
6 Disability legislation
Since 2004, by law, businesses have had to take “reasonable” steps to provide access to people with disabilities – and this includes your website. Ensure all images have alternate text tags, so visually impaired people can still navigate your site.
7 Libel on social media
Libel laws also apply to blogs, Twitter, Faceback, etc. Remember also that your words remain on record forever – so think before you type that competitor put-down.
8 PCI DSS
Protecting payment card data is crucial and the banks require compliance under the Payment Card Industry Data Security Standard (PCI DSS). Compliance is compulsory for anyone who accepts and stores debit/credit card details either on computer or on paper.
More information on PCI DSS can be found at https://www.pcisecuritystandards.org.
You can meet PCI DSS in one of two ways:
- Use a payment service provider (PSP) such as PayPal, WorldPay or SellerDeck Payments (if you use my company’s shopping cart). Your customers and employees only ever enter card details into the site of the PSP. That way, the PSP does most of the worrying about compliance and you are left with some straight forward actions. This is the best option for small retailers.
- Make your own infrastructure fully compliant. This is a difficult route and for the majority of smaller businesses, achieving proper compliance will probably not be practical or cost-effective. The total one-off cost is likely to exceed £45,000 plus ongoing fees.
9 3D Secure
3D Secure – known as “Verified by Visa” and “Mastercard SecureCode” – is a sort of online chip and PIN system. Online buyers are prompted to enter a password whenever they use their card. The password is sent directly to Visa or Mastercard and they approve the transaction (or decline). This is gradually becoming compulsory and you should consult your bank and PSP on how to comply.
10 Let the world know
Finally, assuming you are legal and decent, let the world know. Anything that adds to your credibility will help you online, so list all of the things that you have done under the heading “We comply with the following legal and tax regulations”.
If you are a start-up, these rules may seem to big a mountain to climb. But there are two things to remember. Firstly, do your best to comply. Secondly, if you’re correctly challenged, then immediately take corrective measures. With the exception of VAT transgressions, in most cases this will be enough to avoid business damage or prosecution.
Lifting the lid on accountants’ fees
December 07, 2009
Historically, accountants have charged large fees for preparing the accounts and completing the tax returns for businesses.
In these changing times are these high fees a thing of the past?
All businesses, regardless of size, must prepare accounts and submit a tax return to HMRC. The traditional view is that preparing these returns is a complex procedure resulting in sky-high accountancy fees.
However, two key factors have evolved over recent years that challenge this and as a result the fees charged by accountants should reduce dramatically.
Advances in technology
In all areas of life, there have been huge advances in technology over the past decade. At last the accounting profession is catching up.
Computer-based bookkeeping packages have become easily accessible to business owners at an ever-reducing cost and ever-increasing ease of use.
This means the quality and completeness of information made available to accountants at year-ends is constantly improving.
Coupled with this, accountants now use accounts production software that greatly simplifies the preparation of annual accounts and tax returns.
Logic would dictate that the evolution of technology would have led to a reduction in accountancy fees.
Increase in the number of small businesses
There are nearly five million businesses in the UK. Small, non-complex businesses account for 99.9 per cent of this number. In fact, the growth of small businesses is at its highest level since statistics were recorded.
The accounts and tax affairs of these businesses are simple. They do not demand many hours of tax advice. Most of the time is spent in what is generally known as compliance duties. For example, preparing the accounts, filing the tax return and making sure all deadlines are met.
The accountant’s fee should reflect the level and complexity of the work required.
The accounting profession is gradually waking up to the changes in technology and businesses over the past decade.
This is very good news for small businesses out there that should be able to benefit for dramatic reductions in their accounting fees. A great help in these tough times.
Elaine Clark, www.cheapaccounting.co.uk
A tiny piece of technology could grow a massive business
December 04, 2009
The amount of free resources available to entrepreneurs is truly remarkable when compared to the business world of the 90s. The growing popularity of web apps – and in particular free web apps – is allowing small business owners to benefit from tools and technology which used to come with a hefty price tag. Some of the most useful web apps available today are those concerning search and networking. Regardless of your industry, finding quality leads or prospects is one of the most important elements in growing your business.
In this video, we’ve searched the internet for the top web apps around. These six businesses tell us how they’ve used web applications and online networking to get in touch with the right type of prospect for their business.
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