GDPR and all that...

These things keep coming along.

It starts with maybe a newspaper article, then a post on Linkedin or Facebook, then more posts and articles. Pretty soon there seems to be a whole industry built around the latest ‘thing’. Recent ‘things’ have been PPI claims, bitcoins, blockchain, crypto currencies and pensions auto enrolment.

The new kid on the block is GDPR. Can we ignore it and hope it just goes away? Well for a while perhaps we can. But the new General Data Protection Regulation (GDPR) comes into effect on 25 May 2018. For all businesses who hold data relating to customers, employees and other contacts there are new rules coming into force and a penalty regime for non compliance. So the time for putting this in the ‘too difficult’ box has passed. Businesses need to act fast to assess what the new rules mean for their business and how they can ensure they are compliant.

The Information Commissioner’s Office (ICO) is responsible for overseeing compliance with the new regulations in the UK. They have published a guide and other reference material which is a useful starting point.

We have also prepared our own summary here GDPR - what is it all about?

If you are still struggling we are running a training event in Hitchin on 18 April which will help you evaluate what you need to do to ensure your business complies with GDPR.

This link provides further details and booking instructions GDPR event Hitchin

On counting things...

Accountants like to count stuff and I'm no exception. Sales, costs, profits, tax, debtors, bank balances etc have all been thoroughly counted over the last few years. I've been very good at counting things that accountants like to count but not so good at counting other things that can be equally useful to keep an eye on.

A little while ago I read a book called 'Better' by Atul Gawande. An interesting read about improving standards in the medical profession. Here's my summary of Better

The author closes by giving some tips on some things to do to get better in your own area of work. One of his tips was 'count things'. He didn't say what you should count. He just said, have a go. Pick a few things you think it might be useful to count and start doing it.

So I did. As well as my usual accountancy things I started counting how many tax returns we filed in a month, how many VAT returns, how many payslips we processed, how many meetings with new prospects we had, how many clients we signed up, how many clients we lost (not many thankfully) and so on.

Well I admit I'm a numbers nerd but I have found this very enlightening. Instead of relying on my gut feel for operational and marketing measures I now have some hard facts. Over time we have built up a trend and year on year comparisons. So I can see growth and areas that need some attention.

I think counting these non financial things has helped me to manage the business more effectively. If you are already doing this, that's great. If not, I can recommend it. Pick a few things to start counting now and see how it goes. Let me know if it works for you - I would be interested in your feedback

www.base52.co.uk

8 things to do before the end of the tax year

It may not feel like it with the UK in the grip of snow and ice but we have already had the first day of Spring and the end of the tax year will soon be upon us. 

A little time spent planning in these last few weeks before the end of the tax year could provide useful savings. The tax year end for individuals is 5 April 2018.  Many self employed people also have their accounting year end as 5 April or 31 March to coincide with the tax year. For private limited companies, 31 March is also a common date for the year end. 

Here are some ideas: 

1) Buy business assets and bring forward business expenditure before the year end 

If you are thinking of investing in business assets - new plant & machinery, vehicles, office furniture, computer equipment it is sensible to make your purchase before the end of current financial year, rather than the start of the next one. 

Timing your investment could mean that you can claim your capital allowances sooner, saving on cashflow. Similarly if you are intending to carry out some repairs or maintenance work, doing this before the year end will reduce your next tax bill. 

2) Manage your income

If you are in the fortunate position of being able to manage your income, plan now to optimise your income for tax purposes. For example, as a company director and shareholder, you may be able to reduce salary or dividends to keep your income below the key tax thresholds of £45,000, £100,000 or £150,000. An income level of £50,000 where child benefit is withdrawn from the highest earner in a household is another key threshold to monitor. 

The £100,000 threshold is particularly unattractive from a tax perspective as the personal allowance is gradually withdrawn at a rate of £1 for every £2 of income. This gives an effective rate of tax at a very painful 60% at income levels between £100,000 and £123,000. So best avoided if you don't need the income and can defer this to another year. 

3) Consider the effect of the dividend Tax 

A dividend tax was introduced from 6th April 2016. This affects people who receive a significant amount of dividend income each year – mainly business owners with their own limited companies. 

There is a £5,000 dividend allowance for 2017/18 where dividends are free of tax. The dividend allowance is reduced to only £2,000 per annum from 2018/19 onwards. It makes sense to use this allowance if you have scope to pay a dividend. Above this level new rates of dividend tax apply for varying levels of income. 

The dividend tax has a significant impact on business owners who may be used to drawing a relatively high proportion of their income as dividends. If possible the higher and additional dividend rates of 32.5% and 38.1% respectively are best avoided by capping gross income at the basic rate threshold of £45,000 if this is feasible. Gifting shares to a spouse so that they can utilise the dividend allowance may be appropriate in some cases. 

4) Contribute to a pension 

Pension contributions before the year end are a tax efficient way of saving for the future and reducing your tax bill. This tax savings are particularly attractive for higher and additional rate taxpayers. Advice should be sought from a suitably qualified Independent Financial Advisor to ensure that your particular circumstances are considered. 

5) Use gift aid for donations 

Using gift aid for charitable donations has the effect of raising the basic rate tax band and saving 20% tax for higher rate tax payers. So for every 80 pence you donate, your chosen charity receives £1.00. 

6) Use your tax free savings allowance 

If you are lucky enough to have surplus cash, make sure that you use your annual ISA allowance. Within an ISA, all income and gains are tax free. You can save up to £20,000 for 2017/18. You can choose how you split this between stocks & shares and cash ISAs. There are also new ISAs such as the Lifetime ISA and ͚Help to Buy͛ ISA which are aimed at first time home buyers and offer additional incentives. 

7) Use your annual capital gains exemption 

If you have personal assets (shares, property etc) and are intending to sell them soon,  consider the capital gains tax implications in advance. You may be able to time the sales of shares for example to spread over 2 or more tax years and utilise your £11,300 annual exemption for 2017/18 effectively. 

For married couples and civil partners consideration should be given to each spouse/civil partner using their allowance. 

8) Set money aside for your tax bill 

If you take some of the steps above you should be able to reduce your 2018 tax bill. It is unfortunate that however much we plan, many of us will still be faced with a tax bill for 2017/18, payable in the following January. Setting aside a percentage of your income to cover your tax bill and placing it in a deposit account is a sensible measure and will help avoid any last minute panics trying to find the funds. 

Another tip is to get your tax return completed as soon after the end of the tax year as possible. This gives you an early warning of any additional tax due so that you have sufficient time before the payment deadline in January. 

If you would like Base52’s advice and assistance with any aspect of your tax planning, please contact us.

www.base52.co.uk