Spring Budget 2020
Chancellor Rishi Sunak has delivered his first Budget in the House of Commons. Here are our the top 10 points:
Personal tax
1. Personal allowance and income tax: The personal allowance will stay at £12,500 for 2020-21, and the current income tax rates will also remain unchanged.
2. National insurance: The threshold for class 1 primary contributions paid by employees will increase from £8,632 to £9,500, which will save £100 a year for almost 30 million employees.
3. Statutory sick pay (SSP): SSP will temporarily be paid from day 1 of sickness instead of day 4, and will be paid out for both those who are sick, and those who are showing no sign of sickness but are choosing to self-isolate.
The Government, has also committed to providing small and medium sized businesses, those with less than 250 employees at 28 February 2020, a refund of any approved SSP payments. However, how this will be processed is still in discussion.
4. Capital gains tax: From 6 April 2020, the annual exemption allowance for individuals will increase by £300, to £12,300. The equivalent allowance for trustees is £6,150, an increase of £150.
5. National living wage: The national living wage will increase from 1 April 2020 from £8.21 to £8.72 for all those aged over 25. There will also be an increase in all other age bands of the national wage. See article below for more details.
Business tax
1. Corporation tax: Corporation tax will remain unchanged at 19%, despite previous plans to reduce this to 17%.
2. Employment allowance: From April 2020, the employment allowance will increase from £3,000 to £4,000 and you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year
3. Business rates: In a bid to support small businesses, the Government has announced that it will increase the retail discount to 100% for properties with a rateable value below £51,000. This currently, only applies to properties in England, the Welsh Government is yet to announce if it will follow suit.
4. Structures and building allowance: From April 2020, the structures and building allowance (SBA) will increase from 2% to 3%.
5. VAT threshold: The present VAT registration limit of £85,000 and deregistration limit of £83,000 will continue to apply for a further two years; until 31 March 2022.
Changes in minimum wage – what this means for you
The National Minimum Wage and National Living Wage are set to increase from 1 April 2020. The National Minimum Wage is currently the amount workers under 25, but out of school age are entitled to. The first National Minimum Wage was set in 1998 by the Labour government. The National Minimum Wage was re-branded to the National Living Wage in 2016 for workers over 25 only. In both cases it is the obligatory minimum amount that workers can be paid in the UK.
The current minimum wage:
- 25 and over: £8.21
- 21-24: £7.70
- 18-20: £6.15
- Under 18: £4.35
- Apprentice: £3.90
With the increase on 1 April 2020 these will stand at:
- 25 and over: £8.72
- 21-24: £8.20
- 18-20: £6.45
- Under 18: £4.55
- Apprentice: £4.15
The rise in the National Minimum and Living Wages will effect 2.8m people including apprentices. The increase for those over 25, who work full-time will enjoy an increase in pay of £930 over the year.
While this is good news for workers, employers are cautious over this steep rise. The Federation of Small Businesses was concerned that the increase could have negative effects, stating that “Four in ten small employers say they will raise prices in response to a National Living Wage increase of this magnitude. One in four say they will recruit fewer workers, one in five will cancel investment plans, and one in ten will consider redundancies.”
How to spot a HMRC scam
With the self-assessment deadline just finished it is really important that you can recognise a fake phone call, email, text message or letter from HMRC.
1. Tax refund and rebates HMRC has issued a warning urging tax payers to be aware of scammers promising tax refunds or rebates. It received over 900,000 reports of suspicious contact in the past year, of which 620,000 related to tax rebates. While the scammers can make it look convincing it is important to remember that HMRC will never send notifications by email about tax rebates or refunds. If you receive one of these do not open any attachments or disclose any personal or payment details.
2. Phone calls requesting of payment If you receive a call from HMRC stating that they have filed a lawsuit against you or there is a warrant for your arrest hang up immediately. The call may go on to request payment details, do not provide any of these, this scam has been widely reported and often targets elderly and vulnerable people. Other scam calls may offer a tax refund and request you to provide your bank or credit card information. It is not unusual for HMRC to call if they need to, however they would have a reference number to hand which you would recognise. If you are unsure in any way, hang up and call HMRC back independently.
3. WhatsApp and social media messages HMRC will never use WhatsApp or social media to inform you of a tax refund. If you receive any communication from HMRC through these portals it is fake.
If you think you have been a victim of a HMRC scam and have lost money it is important to call your bank straight away as they may be able to stop any payments leading your account.
You can also report it to HMRC by forwarding details to phishing@hmrc.gov.uk (and send scam texts to 60599).
The benefits of cloud-based accounting
Cloud based services are already being used in many aspects of our lives, so why not extend this to your accounting systems? Sarah Fairley looks at the benefits of cloud-based accounting software beyond compliance.
1. Cost. Cloud accounting is perfect for start-ups and small businesses as there is no large upfront outlay for software or hardware. Generally, you pay a monthly subscription fee which can be tailored for the size of your business and the number of transactions that you anticipate processing each month. You can start with a basic package and add on functionality as your business grows.
2. Access anytime, anywhere. The cloud-based system is not tied to one individual computer, therefore you can log on and view your information anywhere that you can access the internet. Most cloud based systems also have an available app, so you can get critical information from your smart phone anytime, anywhere.
3. Multi-user functionality. As the software is not tied to one computer, several people will be able to access the same information at the same time. As the system is constantly ‘live’, there is no need to email back up data to other users. This means that it is easy to share real time data with other team members, your bookkeeper or your accountant. If you invite other users to view your data, you can control their level of access and therefore the type of data they can see.
4. Security. The cloud is one of the most secure ways to store information. If your computer is stolen no one will be able to access your information as the data lives in the cloud as opposed to your hard drive. Similarly, if your computer breaks you will be able to process your data with no downtime if you can access the internet from a different computer or mobile device.
5. Accuracy. Compared to maintaining spreadsheets, using an accounting software is much more accurate as they can be full of mistakes caused by copy/paste errors, incorrect formula calculations and human error. They are also susceptible to fraud because it is easy to change information and hard to keep track on who has made the changes. Cloud accounting software reconciles figures using automatic online bank statement feeds, which reduces the amount of manual data entries and potential mistakes.
Cloud-based software gives you the flexibility to run your business from anywhere. Allowing you to review, analyse and scrutinise real time financial data from home, work or on the go. Contact Sarah Fairley Chartered Accountants to find out more.