Christmas has been and gone, and New Year’s resolutions have already been broken, but what does the coming year have in store for small businesses in the UK?
2016 promises to be a challenging year for small businesses, and here are the five things that we think ALL small business owners need to start thinking about….
1. Profit Extraction from Limited Companies
Over the past few years, owning a limited company has been straightforward for the shareholders. Pay a small salary and take the rest in dividends. If you can stay under roughly £40,000 then you won’t even have any personal tax liability. Nice and simple.
From April this year that will all change, as the new dividend tax rate of 7.5% kicks in. Quite simply, if you are paying yourself with dividends of more than £5,000 per annum you will be paying more tax.
In a future blog I will consider a few ways in which you can minimise this tax, but at the very least you should be putting a bit of money aside for a higher personal tax bill.
2. Auto enrolment
Not so long ago, the introduction of this seemed an age away, but with the majority of small businesses becoming liable in either 2016 or 2017, this will soon be a big issue to any small employer.
You need to check your staging date here and then the process starts a year in advance of this when you have to nominate contacts.
You’ll need a scheme in place and there will be roughly double the work to do from your current payroll – so now may be the time to consider outsourcing this function.
3. Improving your record keeping
Ok, so this one might not be an urgent thing for 2016, but things are going to change going forward…
The Government want to get rid of the annual tax return….and replace it with a quarterly one! (so much for cutting red tape and helping small business owners Mr Osborne!)
Although these proposals are still at the consultation phase, it is highly likely that by 2020 the new system will be in place.
For those of you that are disorganised and without time to do it yourself this could see a big increase in accountancy bills, as this will essentially need sorting out four times a year rather than one! It could also see a large increase in penalties as there will be more chances to be late!
The solution to both of these issues is to keep good records, kept in a timely manner using the best technology available to make it as quick and easy as possible.
This is where software like Xero can come in. Take a look at it here http://www.colmerwinchester.com/xero-accounting-software/
Please ask us for a free demo if you think it might help your business.
4. Rental Property Portfolio
The two budgets in 2015 seemed to take a fairly obvious pop at private landlords.
With a restriction on tax relief on interest payments, those that have borrowed heavily to buy properties will see their tax bills rise in the future.
If you have a rental portfolio then it may be worth making some big changes, again this will be the focus of a future blog, so keep your eyes open for this.
Alternatively, if you do have rental property and want to talk about your options, please do get in touch.
5. FRS 102
I have left this point until last, and will keep it quite brief as for most of you this will be far too technical and send you to sleep!
Essentially, the framework on which Limited Company accounts is changing for accounting periods starting after 1 January 2015. Now, for the majority of small companies this will just mean a few differences in the disclosures to the accounts and a change in terminology, but for some it could be a one off opportunity to strengthen the balance sheet by revaluing fixed assets for example.
Rest assured that we will ensure that every set of Limited Company accounts that we prepare will be prepared under the correct framework, and any opportunity to strengthen you Company Accounts will be suggested.
As I mentioned, I will be expanding on each of these subject areas over the coming weeks, as we try and make our blog a Friday afternoon fixture!