Optimum salary for directors - 2015/16

The extension of Employment Allowance into 2015/16 means that directors of "one man companies" will, once again, be able to maximise the salary they take from their company.

Please bear in mind that it is impossible to give advice that "fits" everyone and you should consult your own professional advisor to check this works for you.

In general, if your company:

1. Qualifies for Employment Allowance;
2. Pays corporation tax; and
3. Has not utilised the allowance elsewhere, i.e. on other employees

you should pay yourself a salary of £10,600 per annum (£883.33 per month).

You will have to pay some National Insurance yourself (£304.80) but this will be outweighed by the extra corporation tax relief (£508.00) on the increased salary.

And finally, don't forget that if your National Insurance is calculated using the special rules for directors, you will not start paying any National Insurance until January 2016.

The Budget - cutting through the cr*p

I listened to the Budget today and I will read the full text of the Chancellor's speech in tomorrow's Financial Times, just like I have for the last 30+ years.

The more I hear though, the more I realise small and micro businesses just don't feature despite what the politicians (of all parties) may say, hence the title of today's post.

If you're self employed or own your own limited company today's Budget isn't as good as George Osborne says it is. On the other hand it isn't as bad as Ed Balls says it is!

It just doesn't help most businesses.

The following measures were highlighted as being of help to business:

1. Corporation tax will be reduced to 20%.
2. Class 2 National Insurance (payable by the self employed) will be abolished.
3. No more Tax Returns.
4. A clampdown on tax evasion and "aggressive" tax avoidance.

The facts paint a different picture:

1. Limited companies with profits below £300,000 have paid corporation tax at 20% for years. Companies with profits larger than this have seen their tax rates fall from 28% to 20% in the last five years.
2.  Class 2 National Insurance is £143 per year. Contrast this with Class 4 National Insurance (also payable by the self employed) which on profits of £25,000 per year is more than £1.500.
3. If HMRC can ever make this work for the self employed and owners of limited companies then I'm a Dutchman. Accounts and tax calculations will still have to be submitted to HMRC and would your really trust HMRC to "get it right"?
4. This "new" clampdown is aimed at multinationals who will just find new ways to avoid paying tax. Don't think it will reduce the tax payable by the rest of us.

Everything you need to know about next week's Budget

If only the Budget was this simple!

What makes a successful business - part three (of three)

Completing yesterday's post the final four characteristics of successful businesses were:

• Continuously reviewed their firm's marketing effectiveness and quality of business image.
• Used financial data for managing.
• Hired and retained good employees.
• Were able to manage the firm's financial resources.

What makes a successful business - part two (of three)

Continuing yesterday's post the next five characteristics of successful businesses were:

• A large number of customers.
• Used formal written long-range (more than one year) plans.
• Used time management techniques.
• Regularly reviewed the suitability or otherwise of their location.
• Continuously updated their product knowledge and the technologies associated with their major products and services.

My thanks to my friend Ric Payne for bringing this survey to my attention many years ago at Boot Camp.

What makes a successful business - part one (of three)

A number of years ago a survey of nearly 14,000 Australian businesses was conducted by Dr Alan Williams, PhD. He found that, in contrast to failed businesses, successful businesses were most likely to have certain characteristics.

The list is quite long so I've split it into three.

Five a day for the next few days!

The characteristics are:

• Better accounting records
• Records which were more frequently made available
• Better preparation for business ownership
• Consulted with a knowledgeable person or other source of information before starting in business
• Conducted a market survey to assess whether or not a market existed for their product or service

My thanks to my friend Ric Payne for bringing this survey to my attention many years ago at Boot Camp. 

VAT Notes 2015 Issue 1

The latest issue of VAT Notes has just been published by HMRC.

It isn't the most exciting of reads but if you're VAT registered HMRC do expect you to read it!

Government denies turning blind eye to tax avoidance #fsog #50sog

A new year, a new blog, a new website and a new emphasis

The more observant of our clients and followers will have noticed that our (old) blog (www.3caonline.com) no longer exists and that our website is being updated.

The start of a new tax year (April 6th) has given us the opportunity to have a new website, incorporating a new blog. This blog is only temporary.

We shall be following this advice:

Hire a web designer and an accountant. You don’t have the time or the skills #GUBiz #Entrepreneur Use @Xero too
— Rich M Brady (@richmbrady) February 23, 2015

We shall now be concentrating on helping businesses become more efficient and profitable. Online accounting programs such as Xero and FreeAgent will allow us to achieve this. Planning to minimise our clients tax liabilities "safely" will be a given.

We won't, however, lose any opportunity to highlight "discrepancies" in the tax system. Our next post will prove this!