Cloud-based services are changing the way we work
When your income comes in steadily over the year it makes sense to also spread your costs rather than try to cope with large intermittent bills - like having to buy or update your accountancy software; or pay one-off fees to your accountant at the end of the year. That’s why we've recognised that combining the cost of a subscription for the latest cloud-based accounting software with a monthly fee that covers the cost of their annual year-end accounts and tax return work is a more efficient way of providing a service to our clients. It’s also an approach that complements internet banking services and HMRC’s new online systems.
The added value of cloud-based software
Gone is the need for a major purchase to buy accounting software. Cloud-based systems like Xero, Quickbooks or Sage One are effectively rented via a monthly subscription. No more upgrades are needed, you’re always using the latest version so there are never any extra costs. Your accounts are instantly accessible from any internet connected device.
State of the art encryption ensures that your data is always secure – more so than on a dated office PC and, because your data is safely stored across multiple servers, gone is the risk of losing information through a computer crash or the need to constantly back up your hard drive. Replacing your computer or laptop is also no longer a pain – no having to re-install software and no interruptions to your bookkeeping. And the latest mobile technology allows you to have full access to your accounts wherever you are. Cloud-based accounting also allows your accountant to have instant remote access to your books, so help is just a call away if you get stuck; and posting year-end journals online for you ensures your system is always up to date. Perhaps more importantly your accountant can check the figures for your VAT Return or even file it directly for you through the software with HMRC, or prepare management accounts for you and, with full information about your business at hand, immediately help you with key decisions about your business.
“Beyond switching to the latest cloud-based software and spreading the cost of year-end accounts and tax return preparation, a subscription based contract offers many other advantages for Heritage clients”
“You also get year-round advice on-tap and the chance to showcase your business via the networking page on our website. Switching to a subscription-based service, including state-of-the-art cloud-accounting software, is straightforward” Contact us now for a free consultation.
The UK is the only major advanced economy to make major changes to the tax system twice in a year which is why following the Spring Budget 2017 which took place today - 8th March 2017 - the UK will move to a single fiscal event from 2018. The second budget of 2017 will be delivered in the Autumn and continue annually; this timing allows Parliament to scrutinise tax changes before the new tax year when they are most likely to take effect.
So with two budgets in the Tax Year it would be expected that changes would affect the majority!
You usually pay two types of National Insurance if you are Self Employed depending on the Profits which you make.
The main rate of National Insurance (Class 4) is paid by the Self Employed who make a profit of £8060 or more. This is set to rise over the next few years. The first rise from its current level of 9% to 10% takes place in April 2018 and the next rise to 11% happens in April 2019.
All National Insurance (Class 4) contributions payable on earnings above £43,000 will continue to be charged at 2%.
National Insurance (Class 2) which is paid by the Self Employed currently at a flat rate of £2.80 per week for all who make a profit of £5965 or more will be abolished.
The government sees these changes to National Insurance as bringing the rates more in line with Employee National Insurance which is 12% (on earnings over £8060 per annum).
The Tax-Free Dividend Allowance of £5000 per individual which came into effect from April 2016 was introduced alongside a new Tax on Dividends. Dividends which fall within your Tax Free Personal Allowance are not subject to Dividend Tax. Dividend Tax is charged on Dividends depending on your total income. You add your total taxable income to your Dividends received to decide which Tax Band you fall into; you may pay Tax at more than one rate.
The Tax-Free Dividend Allowance will be reduced from £5,000 to £2,000 from April 2018.
Personal Tax Free Allowance
Announced in a previous budget the increase to the Personal Tax Free Allowance to £12,500 by 2020-21 starts to come into effect April 2017. We will see an initial rise from the current £11,000 to £11,500. This is the amount of money which an individual can earn before they pay any tax.
The threshold for the higher rate of tax will go up from £43,000 to £45,000 except in Scotland where due to devolvement powers it will remain at £43,000.
National Living Wage
The National Living Wage is an obligatory minimum wage payable to workers in the UK aged over 25 which came into effect in April 2016. It was implemented at a significantly higher rate than the preceding National Minimum Wage rate and it is expected it will rise to £9 per hour by 2020. The first increase from £7.20 to £7.50 takes effect from April 2017.
The National Minimum Wage remains in place for those under 25 years old.
April 2017 sees Corporation Tax fall to 19% which will be the lowest rate in the G20. Corporation Tax will fall to 17% by 2020. The Government want to encourage business start ups in the UK and ensure that the UK comes out on top as the country of choice to run a business.
MTD - Making Tax Digital
Small businesses have gained one more year to enable them to be better prepared for Making Tax Digital. The Chancellor has pledged that small businesses and landlords who fall under the VAT Threshold of £83,000 will have until April 2019 before MTD becomes mandatory.
MTD introduces digital record keeping and quarterly updates to HMRC, this initiative announced in the March 2015 Budget has driven the rise in Cloud Accounting Software and electronic record keeping for larger firms.
The deferral for smaller businesses and landlords adds them to a group of exemptions which include those with an annual turnover below £10,000 and those exempt with a secondary income of under £10,000.
The government recognises the extra costs and administrative burden implementation could bring to smaller organisations reflected in this additional time to plan and prepare.
We have summarised the main areas of the Spring Budget which we feel are of interest and understand that clients may be concerned about the rising costs of taxation and running their businesses. We would encourage you to get in touch with us to discuss anything contained within this article in more detail, we would be happy to give you advice on how any of the changes coming into effect could impact on you and your business.
Disclaimer: T his information has been prepared for general interest and you should always obtain professional advice on specific issues. While all possible care has been taken in the preparation of this information and we believe it be correct at the time of writing, Heritage Accountancy Ltd can accept no responsibility for loss occasioned by any person acting or refraining from acting as a result of the material contained herein.
The added value of switching to cloud-based systems such as Xero, Quickbooks or Sage One are clear. For starters, gone is the need to spend hundreds of pounds on purchasing accounting software. Cloud-based systems are paid for by monthly subscription, spreading the cost across the year and eliminating periodic upgrade costs. You are always using the latest version and there are no unforeseen future costs.
With cloud-based systems your accounts become instantly accessible from any internet connected device, so you don’t have to use a particular computer and mobile technologies allow you to have full access to your accounts wherever you are. And replacing your computer or laptop is obviously no longer an issue either. No need to worry about re-installing a system or interruptions to your bookkeeping.
State of the art encryption ensures that your data is always secure – more so than on a dated office PC and, because your data is safely stored across multiple secure servers, gone is the risk of losing information through a computer crash or the need to constantly back up your hard drive. With your accountant now able to get instant remote access to your accounts, help is just a call away if you get stuck; and posting year-end journals online for you ensures your system is always up to date. Perhaps more importantly your accountant can check the figures for your VAT Return or even file it directly for you through the software with HMRC, or prepare management accounts for you and, with full information about your business at hand, immediately help you with key decisions about your business .
In fact the advantages of cloud-based accounting are so great that, like the shift away from paper-based accounting 30 years ago, there’s really no doubt that it’s what we’ll all be taking for granted as the norm within a couple of years. To find out more about cloud-based accounting systems and the best solution for your business get in touch