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What tax do I need to pay by 31 January 2021?

The self-assessment tax return for 2019/20 must be filed by midnight on 31 January 2021. If you miss this deadline, you will automatically receive a late filing penalty of £100, regardless of whether you owe any tax, unless you are able to convince HMRC that you have a reasonable excuse for filing your tax return after the deadline.

You must also pay any outstanding tax that you owe for 2019/20 by 31 January 2021, unless you have agreed a Time to Pay agreement with HMRC. The amount of tax that is outstanding for 2019/20 will depend on whether you opted to defer payment of the second payment on account for 2019/20, which would ordinarily have been due by 31 July 2020

To help taxpayers who were struggling financially as a result of the Covid-19 pandemic, self-assessment taxpayers could opt to delay payment of the second payment on account for 2019/20, paying it instead by 31 January 2021. Where this option was taken, the balance owing for 2019/20 will be the total liability for the year (tax plus, where relevant, Class 2 and Class 4 National Insurance), less any amount paid on account by 31 January 2020.

If you decided instead to pay your July payment on account as normal (or if you paid it later than normal but have now paid it in full), you will only owe tax for 2019/20 if the total liability is more than what has already been paid on account.

Payments on account

If your total tax and Class 4 National Insurance liability was at least £1,000 for 2019/20 and less than 80% of your total liability is collected at source, for example, under PAYE, you will need to make payments on account for 2020/21. Each payment is 50% of the 2019/20 tax and Class 4 National Insurance liability. The first payment is due by 31 January 2021, along with any tax owing for 2019/20. The second payment should be paid by 31 July 2021.

Struggling to pay

For many, 2020 has been a difficult year financially. Where the option to delay the July 2020 payment on account has been taken, taxpayers may struggle to pay the higher than normal January tax bill in full by 31 January 2021. Where this is the case, they can agree with HMRC to pay the tax that they owe in instalments over the year to 31 January 2021.

If the amount that is owed is £30,000 or less, an agreement can be set up online. Where the amount outstanding is more than £30,000 or the taxpayer needs more than 12 months to pay, contact HMRC to discuss setting up an arrangement to suit.

As payments on account for 2020/21 are based on pre-pandemic profits, consider reducing the payments if profits for 2020/21 are likely to be lower.

For more information to self assessment tax return, Book a Free Consultation

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Letting a property at less than market rent

This year has been difficult for many and landlords may not have been able to secure the full market rent for a property. Landlords may have reduced the rent charged to long-standing tenants struggling as a result of the pandemic. Alternatively, they may have allowed family or friends to occupy the property, either rent-free or for a notional rent.

Letting a property at a rent that is below the commercial rent will reduce the landlord’s income. It will also impact on the extent to which they can claim a deduction for expenses associated with the property and the let.

General rule for deduction of expenses

The general rule is that expenses can be deducted in calculating the taxable profit for the property income business to the extent that they are revenue in nature and incurred wholly and exclusively for the purposes of the business.

Where the expenditure is capital in nature, relief will depend on whether the accounts are prepared under the cash basis or accruals basis. Under the cash basis, which is the default basis for most unincorporated landlords, most capital expenditure can be deducted in working out profits, unless it is of an excluded type, such as cars or land.

Lets not at a commercial rent

If a landlord does not charge the full market rent for a property, HMRC take the view that it is unlikely that the expenses of the property are incurred wholly and exclusively for the purposes of the business. As a result, the general rule for deductibility is not met. This means that, strictly, they cannot be deducted in arriving at the taxable profit. Taking the strict position would mean that the landlord would be taxed on any rental income received without relief for any associated expenses.

However, fortunately, HMRC do not take such a harsh line. Where a property is let at below market rent, the landlord can deduct expenses incurred up to the level of the rent received. Where the expenses are more than the rent, the net result is neither a profit nor a loss. However, no relief is given for expenses in excess of the rent – these cannot be deducted to create a loss, nor can they be carried forward to be used in a later tax year. Consequently, no relief is available to the extent that the expenses exceed the rent.

House sitting

A landlord may allow a friend or relative to house sit between commercial lets. If expenses are incurred in this period, they will be deductible as long as the property remains genuinely available for commercial letting and the landlord is actively seeking tenants. However, expenses incurred in a period where the property is occupied by a friend or relative rent-free and the property is not available for commercial letting are not deductible.

Timing of expenses

If there are likely to be periods where the property is occupied rent-free orf at below market rent, where possible the landlord should seek to incur expenses related to the property while it is being let at a commercial rent to preserve their deductibility.

Period of grace election

Where the landlord intended to let the property at full want but was unable to do so, for example, as a result of the pandemic, a period of grace election could be considered,

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/letting-a-property-at-less-than-market-rent/

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Using your own car in your property business

A landlord running an incorporated business is likely to need to use their own car for the purposes of the business. Where this is the case, what can they claim by way of expenses?

Two options

Costs incurred wholly and exclusively for business purposes can be deducted when working out the profits of a property business. When it comes to cars, a deduction can be claimed for the cost of fuel and associated running costs. There are two options for working out the deductible amount:

using the simplified expenses system; or

by reference to actual costs.

Depending on the method used to work out the deductible amount, it may also be possible to claim capital allowances in respect of the cost of the car.

Simplified expenses

As the name suggests, the simplified expenses system is an easy way to work out the allowable deduction. The landlord only needs to keep a record of business mileage for the year and calculate the deduction by reference to the permitted mileage rates. However, it is not an option if capital allowances have been claimed for the car – the rates include an element to reflect depreciation.

The system can also be used where a van or motorcycle is used for the purposes of the property business.

The mileage rates used to calculate the deduction are as follows:

VehiclesRate per mile

Cars and vansFirst 10,000 business miles45p

Subsequent business miles25p

Motorcycles24p

Actual costs

The landlord can instead claim a deduction by reference to the actual costs. This will necessitate more work but may give a higher deduction.

Where the car is used for both the business and privately, the costs must be apportioned – a deduction is only given to the extent that they relate to the business.

When working out a deduction based on running costs, the following should be taken into account:

fuel;

insurance;

repairs;

servicing;

MOT;

tyres;

breakdown cover; and

road tax.

If the cash basis is used to prepare the accounts, the deduction is given in the period when the expenditure is incurred; if the accruals basis is used, the expenditure must be matched to the period to which it relates.

Capital allowances

Capital allowances can only be claimed if simplified expenses have not been used to work out the deductible amount. Where the deduction is based on actual costs, writing down allowances can be claimed for the cost of the car. As with expenses, if the car is used both for business and private mileage, an apportionment is necessary.

Cars do not qualify for the annual investment allowance or a deduction under the cash basis capital expenditure rules.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/should-i-reduce-my-payments-on-account/

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Should I reduce my payments on account?

The deadline for filing your 2019/20 tax return is fast approaching, as is the due date for the first payment on account for 2020/21. Now is the time to think about whether you can reduce your payments on account.

Need to make payments on account

If you pay tax under self-assessment you may need to make payments on account. These are advance payment towards your tax and Class 4 National Insurance bill.

You will need to make payments on account if your last self-assessment bill was at least £1,000 unless you paid at least 80% of what you owe under deduction at source, for example, under PAYE.

Payments on account based on previous year’s liability

When making payments on account, the assumption is that the current year’s liability will be roughly the same as the previous year’s liability. Thus each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. Class 2 National Insurance contributions are not taken into account in working out payments on account.

When are they due?

Payments on account are due on 31 January in the tax year and 31 July after the end of the tax year. Consequently, payments on account for 2020/21 are due on 31 January 2021 and 31 July 2021.

Falling profits

Payments on account for 2020/21 are based on profits for 2019/20. Thus, where a business has been adversely affected by the Covid-19 pandemic, the payments on account will not reflect this because they will be based on pre-pandemic profits.

Where pandemic has taken its toll, cashflow is likely to be tight and there is little sense in making higher payments on account than are needed. You can elect to reduce your payments on account so that they better reflect your likely taxable profits for 2020/21. However, when working out your projected profits for 2020/21, remember to take into account any SEISS grants and other taxable Government support payments that you received.

Reduce your payments on account

There are various ways in which you can tell HMRC that you want to reduce your payment on account. This can be done by signing into your online personal tax account via the Government Gateway and using the ‘reduce payments on account’ option or by completing form SA303 and sending it to HMRC. You can also tell HMRC that you want to reduce your payments on account in the other information box on the self-assessment tax return. You will need to specify what you want to pay and the reason for the reduction.

Beware paying too little

Where cashflow is tight, it may be tempting to reduce payments on account to reduce your outgoings in January and July. However, if you reduce your payments below the actual amount that is due (i.e. 50% of the liability for that year), you will be charged interest on the shortfall between what you should have paid and what you have paid. Remember, if you are struggling to pay tax due on 31 January 2021, you can set up a ‘Time to Pay’ agreement to pay your tax in instalments. As long as you do not owe more than £30,000, this can be done online.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/should-i-reduce-my-payments-on-account/

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Grants for businesses affected by national restrictions

Many businesses have been forced to close as a result of the national and local restrictions introduced to slow the spread of Coronavirus. Where this is the case, the business may be eligible for a grant from their local authority.

The following grant support is available to businesses in England during the second national lockdown. Grants to businesses in Wales, Scotland and Northern Ireland are subject to devolved rules.

Businesses closed due to national retractions

Business that were previously open as usual, but which were required to close between 5 November 2020 and 2 December 2020 as a result of the second national lockdown in England may be eligible for a grant from their local council for the 28-day period for which the national lockdown applies.

A business may qualify for a grant if it meets the following conditions:

it is based in England;

it occupies premises in respect of which it pays business rates;

it has been required to close between 5 November 2020 and 2 December 2020 as a result of the national lockdown; and

it has been unable to provide its usual in-person service from those premises as a result.

Businesses that qualify may include non-essential shops, leisure and hospitality venues and sports centres.

Business that normally operate as an in-person venue but which have had to modify their services as a result of the lockdown also qualify. An example here would be a restaurant that is not allowed to provide eat-in dining but which stays open for takeaways.

Businesses are only entitled to claim one grant for each non-domestic property.

Amount of the grant

The amount of the grant is based on the rateable value of the business premises on the first day of the second national lockdown.

Where the rateable value of the business premises is £15,000 or less, the business will receive a grant of £1,334 for each 28-day period for which the restrictions apply.

Where the rateable value of the business premises is between £15,000 and £51,000, the business will receive a grant of £2,000 for each 28-day period for which the restrictions apply.

Where the rateable value of the business premises is £51,000 or above, the business will receive a grant for each 28-day period for which the restrictions apply.

Applications should be made to the local council following the application procedure on the relevant council’s website.

Excluded businesses

A business is not eligible for a grant if it can continue to operate during the restrictions because the business does not depend on providing in-person services from their premises. Businesses that would fall into this category would include accountants and solicitors.

Businesses that are not required to close, but which choose to, are also ineligible for a grant.

A business which has exceeded the permitted state aid limit – set at €200,000 over a three-year period – is not eligible for further funding but may qualify for help under temporary Covid-19 measures.

Local restrictions

Where local restrictions are in force, businesses may qualify for separate grants if they are either forced to close or, where they can remain open, their business is severely impacted as a result of those restrictions. Details of the grants available where local restrictions apply can be found on the Gov.uk website.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/grants-for-businesses-affected-by-national-restrictions/

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Utilise the trivial benefits exemption to provide tax-free Xmas gifts

The Covid-19 pandemic has placed the office Christmas party firmly off the menu this year. Regardless of what restrictions are in place over the Christmas season, many employers will want to take the opportunity to spread some seasonal cheer amongst workers, who may have been furloughed or working from home for much of 2020. The impact of any goodwill gesture is somewhat diminished if it comes with an associated tax bill. This is where the trivial benefits exemption can come into its own, enabling employers to provide employees with tax-exempt Christmas gifts, while keeping the costs low at a time when many businesses are struggling financially. Personal and family companies can similarly make use of the exemption.

Nature of the exemption

Under the trivial benefits exemption, a benefit is exempt from income tax and National Insurance if all of the following conditions are met.

The cost of providing the benefit does not exceed £50.

The benefit is not in the form of cash or a non-cash voucher.

The employee is not contractually entitled to the benefit.

The benefit is not provided in recognition of, or in anticipation of, services performed as part of the employee’s employment duties.

Where a benefit is provided to a group of people and it is impracticable to work out the exact cost of providing it to each recipient, the average cost is used to determine whether the benefit is trivial.

Directors of close companies (together with members of their family or household) can only receive tax-free trivial benefits to a maximum value of £300 in a tax year. For other recipients, there is no annual limit (but each individual trivial benefit must cost £50 or less).

Seasonal gifts

The following example illustrates how the trivial benefits exemption can be utilised to provide tax-free Christmas gifts to employees.

Example 1

An employer purchases 100 turkeys to be given to employees at Christmas. The total bill is £4,800. The turkeys vary slightly in weight but are not priced individually.

As it would be impracticable to work out the exact cost of the turkey provided to each individual employee, the average cost of £48 is taken as the cost of the benefit. Assuming all the other conditions are met, the gift of the turkey falls within the trivial benefits exemption and is free from tax.

Gift card trap

Care should be taken using gift cards which are topped up on several occasions. Rather than evaluating each use of the card separately for the purposes of the trivial benefits exemption, HMRC looks at the total cost of providing benefits via the card in the tax year in question. The following example illustrates the trap.

Example 2

An employee is given a gift card at Christmas which can be exchanged in a particular store for a gift. The card costs the employee £30 to provide. The card is topped up by a further £30 on the employee’s birthday. Although each top-up costs the employer less than £50, the total cost of providing the employee with a gift card is £60 for the tax year. As this exceeds the £50 trivial benefit limit, the exemption does not apply.

Instead, the employer should give the employee separate gifts costing £30 each, both of which would be exempt.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/utilise-the-trivial-benefits-exemption-to-provide-tax-free-xmas-gifts/

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Postponed VAT accounting from 1 January 2021

The Brexit transitional period comes to an end of 31 December 2020 and various changes come into effect from 1 January 2021. One of these changes is the introduction of postponed VAT accounting. This will affect you if you are a VAT-registered business and you import goods into the UK, particularly if you do not use duty deferment.

Nature of postponed VAT accounting

Under postponed VAT accounting, you declare and recover VAT on the same VAT return. This is beneficial as it means that you do not have to pay the VAT upfront and recover it later. Normal VAT rules continue to govern what can be reclaimed.

You can use postponed VAT accounting from 1 January 2021 if your business is registered for VAT in the UK and you import goods into Great Britain from anywhere outside the UK or into Northern Ireland from outside the UK and the EU.

There are no changes to the VAT treatment of goods moved between Northern Ireland and the EU, or in the way in which the VAT is accounted for.

Accounting for import VAT on your VAT return

You can account for import VAT on your VAT return if:

you import goods for use in your business;

you include your EORI number, which starts with ‘GB’ on your customs declaration; and

you include your VAT number on your customer’s custom declaration if required.

If you use customs special procedures, you can account for the import VAT on your VAT return when you submit the declaration to release those goods into free circulation.

Completing your VAT return

The introduction of postponed VAT accounting means that there are some changes to the way in which you will complete your VAT return from 1 January 2021.

You will need to download a monthly statement which shows the total import VAT postponed for the previous month which you will need to include on your VAT return. There are also changes to what you need to enter in Boxes 1, 4 and 7.

In Box 1, include the VAT due in the period on imports accounted for through postponed accounting.

In Box 4, include VAT reclaimed in this period on imports accounted for through postponed accounting.

In Box 7, include the total of all imports of goods shown on your online monthly statement, excluding any VAT.

Consignments not exceeding £135

Where the value of the consignment is less than £135, VAT will be collected at the point of sale rather than at the point of importation.

For More information on Postponed VAT accounting from 1 January 2021, Book a Free Consultation

Source:- https://makesworth.co.uk/postponed-vat-accounting-from-1-january-2021/

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Have you got your Economic Operators Registration and Identification number (EORI)?

From 1 January 2021, you will need an Economic Operators Registration and Identification (EORI) number to move goods between Great Britain and the EU. Prior to 1 January 2021, you only needed an Economic Operators Registration and Identification (EORI) number if you move goods between the UK and non-EU countries.

If you do not already have an Economic Operators Registration and Identification (EORI) number, you will need to obtain one in order to move goods between Great Britain and the EU. You may also need one you move goods between Northern Ireland and non-EU countries.

Applying for an EORI number

From 1 January 2021, you will need an Economic Operators Registration and Identification (EORI) number that starts with ‘GB’ to move goods between Great Britain and other countries.

If you do not already have an Economic Operators Registration and Identification (EORI) number that starts with ‘GB’ and you have yet to apply for one, this should be done as soon as possible.

Applications for an Economic Operators Registration and Identification (EORI) number can be made online.

To make an application, you will need:

your VAT number and the effective date of your registration (which can be found on your VAT registration certificate);

your National Insurance number (if you are applying as an individual);

your Unique Taxpayer Reference (UTR);

the date that your business started and its Standard Industrial Classification (SIC) code (which can be found on the Companies House register for a company); and

your Government Gateway User ID and password.

Making an application using the online service should only take 5—10 minutes. You will receive your Economic Operators Registration and Identification (EORI) number straight away unless HMRC needs to make further checks, in which case it will take up to five working days.

Once an application has been made, the status of that application can be checked online.

Moving goods between Great Britain and Northern Ireland

The Northern Ireland Protocol comes into effect on 1 January 2021. Special rules apply to the movement of goods between Great Britain and Northern Ireland. From that date, an Economic Operators Registration and Identification (EORI) number that starts with ‘XI’ will be needed to:

move goods between Northern Ireland and other countries;

make a declaration in Northern Ireland; or

get a customs decision in Northern Ireland.

To obtain a EORI number that starts with ‘XI’ you will need to have one that starts with ‘GB’ – if you don’t, you will need to apply for one first. If you already have an EORI number that starts with ‘GB’ and HMRC have identified that you are likely to need one that starts with ‘XI’, then they should send you one automatically, Expect to receive this from mid-December 2020.

Trader Support Service

If you move goods between Great Britain and Northern Ireland, sign up to the Trader Support Service (see www.gov.uk/guidance/trader-support-service) for help and support on moving goods between Great Britain and Northern Ireland.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/have-you-got-your-economic-operators-registration-and-identification-number-eori/

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Tax efficient remuneration using pension contributions

Despite on-going speculation that the government will intervene at some point, for now, making contributions into a pension scheme continues to be a particularly tax-efficient form of savings.

Nearly everyone is entitled to receive tax relief on pension contributions up to an annual maximum – regardless of whether they pay tax or not. The maximum amount on which a non-taxpayer can currently receive basic rate tax relief is £3,600. So an individual can pay in £2,880 a year, but £3,600 will be the amount actually invested by the pension provider.

Moreover, subject to certain conditions, tax relief is still currently available on pension contributions at the highest rate of income tax paid, meaning that basic rate taxpayers get relief on contributions at 20%, higher rate taxpayers at 40%, and additional rate taxpayers at 45%. In Scotland, income tax is banded differently, and pension tax relief is applied in a slightly different way.

The total amount of tax relief available on pension contributions is calculated with reference to ‘relevant UK earnings’. If you own a limited company and you take both salary and dividends, the dividends do not count as ‘relevant UK earnings’. This means that if you take a small salary and a large dividend from your company, your pension tax relief limit will be low – tax charges will apply if the limit is exceeded.

If you want to increase your tax-free contributions limit, you could consider either increasing the amount of salary you take from the company (to increase your ‘relevant UK earnings’), or making the pension contribution directly from your company as an employer contribution. Making an employer contribution has additional advantages.

Employer contributions

Qualifying employer tax-efficient contributions count as allowable business expenses, so the company could currently save up to 19% in corporation tax. In order to qualify for a deduction, the pension contributions must be ‘wholly and exclusively’ for the purposes of business. HMRC will check for evidence that this is the case, for example whether other employees are receiving comparable remuneration packages.

Another advantage of making a company contribution is that employer National Insurance Contributions will not be payable on the contributions made, saving the company up to 13.8% on the contribution amount.

This means that the company can potentially save up to 32.8% by paying money directly into your pension rather than paying money in the form of a salary. Depending on your circumstances, this may or may not be more beneficial to you rather than paying personal pension contributions.

Employee benefits

An employer-provided pension can be a significant benefit. Employers can make contributions to occupational or personal pension plans without triggering a tax charge. This can significantly enhance an employee’s remuneration package and is a tax-efficient way of rewarding employees. It is also worth noting that, subject to a couple of conditions, there is a tax exemption covering the first £500 worth of pension advice paid for by an employer. The exemption covers advice not only for pension but also on the general financial and tax issues relating to pensions.

Pension inequality

The government is currently reviewing feedback from a consultation on pensions tax relief administration, particularly in relation to an anomaly in the tax rules whereby people on low incomes may pay 25% more for their pension contributions due to the way their employers’ pension scheme operates. It is likely that there will be some modification to the rules to iron out this issue. Whether there will be wider-ranging changes or restrictions on pensions tax relief remains to be seen, but it is recommended that anyone considering topping up their pension pot should think about doing it sooner rather than later.

For more information on tax-efficient remuneration using pension contributions Book aFree Consultation

Source:- https://makesworth.co.uk/tax-efficient-remuneration-using-pension-contributions/

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Tax Relief on Business Loans

Interest paid on loans used for qualifying businesses purposes should be eligible tax relief and can save up to 45% of the cost of the interest.

The repayment of the capital element of a loan is never deductible for income tax relief purposes. However, interest paid on loans to a business will be a deductible revenue expense, provided that the loan was made ‘wholly and exclusively’ for business purposes. For example, interest paid on a loan taken out to acquire plant and machinery (a capital asset) is a revenue expense and will therefore be allowable for income tax and corporation tax.

The incidental costs of obtaining loan finance are deductible. Given that business owners often borrow funds personally, and then introduce the capital to the business by way of a loan, it is essential that tax relief is not only secured at the outset of the loan but also maintained throughout the borrowing period. It is often the case that qualifying loans become non-qualifying loans so care is needed.

Broadly, the loan will become non-qualifying if either the capital ceases to be used for a qualifying purpose or is deemed to be repaid.

For example, Bob borrows £100,000, secured on his house, and lends this to his business. The loan is a qualifying loan, so he can initially claim tax relief on the interest payments. Unfortunately, the rules relating to the repayment of qualifying capital mean that each time a capital credit is made to the account it is deemed to be the repayment of qualifying loan. Since the capital value of the loan is reduced every time a payment is made, credits totalling £50,000 per year will mean that all tax relief is lost within just two years. Re-borrowing shortly after making repayment is not a qualifying purpose so future relief is also lost.

It is also worth noting that a business cannot claim a deduction for notional interest that might have been obtained if money had been invested rather than spent on (for example) repairs.

Double counting is not permitted, so if interest receives relief under the qualifying loan rules, it cannot also be deducted against profits so as to give double tax relief.

Restrictions under the cash basis

Tax relief on loan interest is restricted where the ‘cash basis’ is used by a business to calculate taxable profits. Broadly, businesses using the cash basis are taxed on the basis of the cash that passes through their books, rather than being asked to undertake complex and time-consuming accruals calculations.

Under the cash basis, bank and loan interest costs and financing costs, which include bank loan arrangement fees, are allowed up to an annual amount of £500. If a business has interest and finance costs of less than £500 then the split between business costs and any personal interest charges does not have to be calculated. Businesses should review annual business interest costs – if it is anticipated that these costs will be more than £500, it may be more appropriate for the business to opt out of the cash basis and obtain tax relief for all the business-related financing costs.

Private use of assets

Where a loan is used to buy an asset that is partly used for business and partly for private purposes, only the business proportion of the interest is generally tax-deductible. Commonly cars and other vehicles used in a business fall into this category. Note however, that a deduction for finance costs is not allowable where a fixed rate mileage deduction is claimed.

Example

Bob takes out a loan to buy a car and calculates that he uses it in the business for 40% of the time. The interest on the loan he took out to buy the car is £500 during 2020/21. He can therefore deduct £200 (£500 x 40%) for loan interest in calculating his trading profits.

Finally, interest paid on loans used to fund the business owner’s overdrawn current or capital account is generally not deductible for tax purposes.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/tax-relief-on-business-loans/

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The Off-Grid Day

Blocking out a whole day once a month can work wonders for your productivity.

Time management courses, books and best practice all suggest carving out some time each day to focus on being productive and working towards your goals and personal business objectives.

However, this often conflicts with the emails, notifications, calls and reminders that we are all bombarded with on a daily basis.

The traditional approach to time blocking simply doesn’t go far enough. Blocking out an hour each day might give you time to focus on progressing a particular project, but just as you start to get into your groove, your hour will be up and you’ll have to move on to the next thing on your agenda.

Calculating the return on investment on time blocking is pretty straightforward. If you are focused on what you want to achieve, then the more time you block out, the greater the return you will experience in terms of productivity. So how about blocking out an entire day, once a month?

To make this work, focus on your key business objectives. Perhaps you are working on a particular project such as entering a new market or launching a new product. Try blocking out one day per month to progress those key objectives. Aim to start early, say 7 am and finish late. Log out of your email and block out the time in your calendar. Make sure that your colleagues know that you are uncontactable for the day and ensure that there is another senior person available to handle any queries that come up during the day.

Even short interruptions can interrupt the continuous flow of your off-grid day so make a deal with yourself – no calls, no email and no distractions. In order to make these key days work, populate your off-grid days in your calendar for the next 12 months and defend those days – don’t give them up for anything.

Finally, in order to maximise your off-grid day, you may need to enlist the support of your family to take care of the day to day logistics of family life. The key thing is to remember to say thanks and to pick up your share on other days. Like everything in life, it’s all about balance.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/the-off-grid-day/

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Rent Covered By Rent A Room Relief

For many property owners, the rental income will be tax-free if it is within the £7,500 rent a room relief and will not even need to be reported. This applies where room(s) in the taxpayer’s main residence is rented out, typically to lodgers. Where the house is owned jointly, they would qualify for £3,750 each tax-free.

This £7,500 exemption would also apply where the property owners are temporarily absent and rent out their property, for example, a house in SW19 during the Wimbledon fortnight.

A few years ago it was proposed that such lettings would not qualify but the legislation was dropped and the CGT lettings relief restriction was introduced in the latest Finance Act instead.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/rent-covered-by-rent-a-room-relief/

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Diversity in Leadership

The business case for diversity is clear – diverse teams produce better solutions to complex problems.

Diversity in Leadership can boost innovation and employee engagement. Businesses with greater gender and racial diversity tend to be more successful and perform very well financially.

However, progress within the business community has been slow and there is still a lack of women and minority ethnic groups in leadership positions. In order to create truly inclusive and diverse firms, businesses need to start by creating more diverse teams, from the top down.

Making Diversity and Inclusion part of your culture puts your business ahead of the curve and focusing specifically on your leadership team can help facilitate a top-down approach so that it trickles through your entire firm. However, adding diversity to your board is not a simple task, and there are numerous ways to implement a D&I initiative at the leadership level. The way in which you decide how diverse your board should be and which individuals are right for the role will vary from one business to the next.

Many businesses are now adopting an approach where existing senior leaders sponsor the next generation of managers and directors. Pairing sponsors and proteges in a way that aligns with the goals of the businesses can help to bring the next generation of successful senior people through.

While sponsors don’t have to mirror all the qualities of their mentees, it is certainly easier for an individual to be led by someone who they can relate to. This is worth bearing in mind when you are selecting your sponsors from the current leadership team.

When looking at how to create a more diverse leadership team in your firm, it is important to think about your customers. Every business relies on creating a strong relationship with its customers.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/diversity-in-leadership/

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Managing a Hybrid Team

As businesses manage the gradual return to the office, some of your hybrid team will be able to come back while others may need to continue working remotely.

As firms begin to navigate the complexities of returning to the office, some employees will have to contend with challenges around childcare, health issues that prevent them from returning to work, anxiety and other factors. By contrast, other employees will be racing back to the office as they may have found working from home to be isolating or challenging in other ways. All of this creates a new challenge for managers – how to manage a hybrid team, where some people are in the office and others continue to work remotely.

Set expectations

Avoid creating an atmosphere of “them versus us”. Set expectations and make accountability clear to all staff so that both home and office-based employees can work together productively and know who is doing what.

As part of this, you might run daily or weekly meetings with your entire team to start each day or week on the right foot, then share progress regularly on key projects with the entire team to maintain momentum.

Define clear working hours

This will help you and your team know who is working when and where. Sharing your work calendars will help to further boost the visibility of this crucial information, enabling your team to know what each person is doing at any one time, including colleagues who they do not physically sit next to in the same space.

Communication is key

Remote workers can miss out on face-to-face interaction. This means you’ll need to think carefully about how you can make them feel equally included via virtual remote meetings, during which you as the leader might be sitting next to an office-based member of your team.

When communicating with remote team workers, choose voice or video over email or chat, depending on the task. Seeing and hearing you regularly will help your remote staff to feel included and part of the team. Encourage your remote workers to switch on their video when attending team meetings.

Bring everyone together

Once COVID-19 is over and government restrictions lift, it can help team unity, harmony and morale if you arrange occasional opportunities for your hybrid team members to meet and get to know each other face-to-face. In “normal times” maybe try to arrange an all-team social or dinner, every 6 months. The relationships that are built through these events will help your team to function better as a unit.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/managing-a-hybrid-team/

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Customer Onboarding

If your customers have a positive experience from the very beginning, they are going to stick with your product or service and continue to do business with you.

Customer onboarding is the nurturing process that gets new users and customers acquainted and comfortable with your product or service. A positive onboarding experience confirms to your customers that they made the right choice. It also, ultimately, helps you retain them.

Customer Onboarding Strategy

A good customer onboarding program can include step-by-step tutorials, guidance, support, and milestone celebrations when a customer achieves success through your product or service.

Creating a customer onboarding strategy is relatively easy. Start by creating a key objective such as “get your new customers to use your product or service more than once a week for the first 10 weeks”.

In order to onboard them effectively, you need to really know your new customers. Some of the information that you gather about your customers during the marketing and sales processes will carry over into the initial stages of onboarding. Try to understand the challenges and pain points that each new customer faces. You can then help them to create solutions to some of those challenges, through using your product or service.

Your sales process should set clear expectations so that customers are prepared to invest time in getting set up with your product or service.

A good onboarding process should reiterate the value that your product or service provides to customers. You could include a personalised kickoff call, specialised training, or documentation to help your new customers get everything set up in order to address some of the pain points or challenges that they face.

Regular communication is important during the customer onboarding phase of a business relationship. An initial welcome message is a good place to start. Following the welcome message, you should spend some time with your new customers in order to help them set goals and KPIs that are unique to their business. Allow them to define success and help them to create measurable milestones.

Once you have agreed to a set of goals you should continue to contact your new customers on a regular basis for the first couple of months in order to offer tutorials, guides and training, and to keep them on track with achieving their business objectives.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/customer-onboarding/

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Can You Claim Business Asset Disposal Relief on The Sale of The Holiday Let?

Furnished holiday lets benefit from a number of tax advantages which are not available to landlords of residential lets. One of the main advantages is the opportunity to benefit from Business Asset Disposal relief (BADR) on the sale of the property, paying capital gains tax at only 10% above the annual exempt amount rather than at 18% or 28% on the sale of the buy-to-let. Individuals can benefit from BADR on gains up to the lifetime limit of £1 million.

A let must meet certain conditions re availability and letting to qualify as a furnished holiday let for tax purposes.

Nature of the relief

Business Asset Disposal Relief was previously known as Entrepreneurs’ relief. It is available on the disposal of all or part of the business. The commercial letting of furnished holiday lettings, which for certain capital gains tax purposes, including BADR purposes, is treated as a trade, falls within the scope of the relief. Furnished holiday lets qualify for the relief if the let is in the UK or the EEA, but not elsewhere in the world.

Qualifying disposal

The relief is available for a disposal of the whole or part of the business, and for a disposal of the assets used for the purposes of a business that has now ceased. Where the business is operated as a company, relief is available for the disposal of the shares.

In the case where an individual has one property that is let as a holiday let and decides to stop letting and sell the property, relief will be available where:

the property was used as an FHL at the time that the FHL business ceased;

the business was owned by the individual making the disposal for a period of two years immediately prior to the cessation of the business; and

the disposal takes place within three years of the cessation.

The rules allow the landlord three years to sell the property once the FHL business ceases without losing the relief.

Example

Billy has a cottage in Suffolk that he lets as a holiday let. The let meets the conditions for a furnished holiday let. The cottage was purchased as a holiday let in 2010. Billy ceases letting it in May 2020, putting it up for sale. The property is sold in November 2020, realising a gain of £120,000.

The conditions for BADR are met. Assuming Billy has his annual exemption available and has not used up his lifetime allowance of £1 million, he will pay capital gains tax £10,770 on the chargeable gain of £107,700 ((£120,000 – £12,300) @ 10%).

If the property had been a residential let and assuming Billy is a higher rate taxpayer, the capital gains tax bill would have been £30,156 (£107,700 @ 28%).

Multiple properties

Problems may arise when the landlord has several properties in his or her furnished holiday letting business. The relief is only available for the sale of the whole or part of the business or assets used at cessation. Thus, where a landlord has multiple properties but sells one of them while continuing to run the FHL business, that sale may not qualify for BADR and the lower rate of capital gains tax,

In some cases, there may be a part disposal of the business. This may be the case where the landlord has properties in different locations and sells those in one location, but continues to run the FHL business in other locations. It will depend on the facts in each case.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/can-you-claim-business-asset-disposal-relief-on-the-sale-of-the-holiday-let/

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Doing Up Properties – Are You Trading?

There can be money to be made buying a property in a dilapidated state, renovating it, and selling it for a profit. However, when it comes to tax, it is important to know whether the ‘profit’ element is a capital gain or a trading profit. This will determine how it is taxed and at what rate.

Trading or investment

The tax consequences will depend on whether the property is an investment or whether there is a trade. The question is whether you are a property developer or an investor.

Much of it comes down to your intention when you bought the Properties. If the aim was to buy the property, do it up and then let it out, the property will count as an investment property. However, if the intention is to buy, renovate and sell at a profit, HMRC may regard you as trading. However, an intention to sell at a profit at some point in the future does not automatically mean you are trading. Also plans change, and a property purchased as a long-term investment might be sold after a relatively short period of time as a result of a change in personal circumstances.

Badges of trade

The concept of the ‘badges of trade’ has been developed from case law and provides something of a checklist which can be used to determine whether an activity is a trade or an investment. The six badges of trade are as follows:

The subject matter of the transaction.

The length of the period of ownership.

The frequency or number of similar transactions.

Reasons for the sale.

Motive when acquiring the asset.

Where there is a trade, the Properties will only be held for as long as it takes to do up and sell. A property developer is likely to develop more than one property, either simultaneously or in succession. Where there is a trade, the property will be sold to realise a profit; for an investment property, the sale may be triggered by other factors.

Case study 1

Paul inherits some money and invests in a property, which he plans to do up and rent out. He completes the renovations and rents the property for six years before selling it to enable him to buy a larger family home.

The property was purchased as an investment and would be regarded as an investment property. The gain on sale would be liable to capital gains tax.

Case study 2

Mark sees a run-down property on the market and spots the opportunity to make a profit. He buys the property, spends six months renovating it, selling once complete, making a profit of £40,000. He invests the proceeds in another property to renovate and sell.

Mark would be treated as trading. His aim is to sell the properties at a profit. Consequently, he would be liable to income tax rather than capital gains tax on the profit.

For more information, Book a Free Consultation

Source:- https://makesworth.co.uk/doing-up-properties-are-you-trading/

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