Category: General

Staying on top of your tax is not the reason you got into business. We get it, it’s not fun. But unfortunately, it is a vital aspect of running and ensuring you’re on the right side of the law.

Whilst getting to grip with business tax won’t bring you immediate joy – it may leave you laughing. By following our handy tips, you can make sure you’re making the most out of your time and correctly managing tax.

Get your calendar in order

When it comes to tax, time really is of the essence. There are deadlines for payments, submissions and information updates, all of which if missed can have an impact on your business.

Keeping a calendar with all of your dates for payment (tax-related or not), ensures you won’t fall behind. Whilst you may have an accountant who takes care of your payments – you should still be aware of deadlines, as it is you as the business owner who will receive the late penalty charges.

Save time with the cloud

Cloud accounting is becoming common practice in today’s business world. Adopting online platforms within your business will save hours of time for both you and your accountant.

The beauty is, most cloud accounting software allows you to enter key dates, set reminders, and even estimate the amount of tax you’ll need to pay and when.

Take it from us, it’s a worth investment.

Keep records – and keep them accurately!

Many have been there; a lost receipt, a misplaced invoice – it all happens too easily. Stay on top of your records, keep them in a safe file and get into the habit of storing them straight away.

Even if you use online accounting, everything can still be safely stored online and in a categorised way. NB: HMRC recommends you keep all business records for six years.

Know what to claim for

Remember that expenses incurred in business can often be tax-deductible. From office stationery and equipment to travel expenses, many can be claimed. Make sure you keep your receipts as your accountant will likely want to check.

Most expenses incurred in business are ‘allowable’, but make sure you can clearly state how they are a business expense and not used for personal reasons. Also, remember you can still claim on work from home expenses. Your entitlement is a flat rate of £6 per week – without providing any evidence of your costs. Or you can claim tax relief on the exact amount of extra costs you have incurred if it is above the £6 weekly amount – but evidence must support this claim, for example, receipts or utility bills.

Check whether your business structure is working for you

There are several different business structures, and all have different tax implications. Unfortunately, there is no one size fits all approach, and deciding upon a structure is a decision personal to you and your business.

Many businesses begin as sole traders or partnerships as they require less compliance than limited companies, for example.

However, once your business is earning a certain amount, it may be time to consider changing to a limited company. This means your business is a separate entity to you personally, so rather than paying income tax on all of your earnings as a sole trader, you pay corporation tax. This is, generally speaking, more tax-efficient – providing your business is earning over a certain threshold of roughly about £30,000.

Decide on the most efficient way to pay yourself

As a business owner, there are many different ways you can pay yourself. It all depends on your business structure and is a decision that is different for each individual.

A common way for business owners of a limited company to pay themselves is via both a salary and dividends. Usually, that salary does not exceed the Personal Allowance threshold and as such is not subject to income tax. NB: In the 2021/22 tax year, the threshold is up to £12,570.

Don’t be confused by VAT

When your business is turning over more than £85,000 you must become VAT registered. Despite being known as the ‘simple tax’, it can actually cause a lot of confusion. It is worth discussing VAT with an accountant or financial advisor to determine whether your business would benefit from the VAT Flat Rate Scheme or cash accounting, and to understand how VAT generally impacts your business costs and transactions.

Remember… We’re here to help

Running a business requires a lot of planning and strategy. We understand that it can be overwhelming to remember all the considerations needed to run at an optimum level. As always, we are here at Shenward to offer you unrivalled support and advice about any of your business concerns. Contact us at hello@shenward.com

When the word tax is mentioned, everyone who’s not an accountant cringes a little inside, but the matter of fact is, your tax liability is something you can’t escape from and sooner or later, you need to face it head on and figure our a way to manage it.

Yes, tax liability can be difficult to wrap one’s head around, especially when trying to determine the legalties but there are steps you can take to correctly manage the amount of tax you pay whilst also remaining compliant.

Here we offer seven tips to help you manage your tax liability, focussing particularly on corporate tax liability, with some reference to self-employment where necessary.

1 – Correctly Account for All Business Expenses

We all know running a business costs money, but it’s not just the business side of things that incurs costs. Simple things such as travelling to meetings, providing lunch for the team and investing in new stationery or equipment are all overheads which build up on a monthly basis but can slip through the net on your personal statement if you use your own card whilst out and about.

All of these business expenses can be tax-deductible – providing they are used solely for business use and the correct records are kept to claim on them – so make sure you correctly account for them.

2 – Optimise Your Salary Structure

For business owners, the key to saving on tax is paying yourself a salary in two parts. Part of your salary should be paid through PAYE with tax being paid only when you break the threshold of £12,570, and the rest should be paid as dividends.

The reason this is effective in reducing your tax liability is that dividends are only taxed at 19%, where as income tax increases the larger your salary is.

3 – Giving is Receiving (i.e. Charitable donations)

Companies are eligible for tax relief for qualifying donations made to charities. The donations are deductible from the company’s profits in the same tax year as the donation was made. This offsets the amount a company pays through Corporation Tax.

There’s a huge focus on businesses giving back, so making the decision to donate to charity is recommended regardless of the implication it has on your tax liability.

4 – Pension Contributions

An employer can give decide on the size of the contribution they make to their registered pension scheme, regardless of the related salary. For tax relief to be granted on an employer’s contribution, it must be deducted as an expense when calculating the profits, which will therefore result in the company’s profit being reduced, as such lessening the corporation tax.

NB: An employer pension contribution will not be tax deductible if the contributions were made for non-business purposes.

5 – Review your VAT payments

Providing your company turnover does not exceed £150,000 per year, and you work for clients who are also VAT registered, applying for the VAT flat rate scheme could be beneficial for cutting costs.

Using the Flat Rate Scheme for VAT means you add up all of your sales, including any VAT you’ve charged to your customers, applying a fixed percentage to those sales. The flat rate can be between 6.5% and 14.5% depending on your business and industry. For the first year on the scheme, you also receive a 1% discount on your rates.

However, you cannot claim back the majority of the VAT on purchased goods and expenses for your business. This is except for capital asset purchases which are over £2,000 including VAT.

6 – Make Use of the Annual Investment Allowance

The Annual Investment Allowance (AIA) allows you to claim 100% tax relief for capital expenditure on plant and machinery. Qualifying expenditure applies from £200,000 to £1,000,000.

Assets that qualify for AIA fall into the categories as listed:

• Office equipment, including PC hardware, software and furniture
• Integral features of buildings (e.g. lifts and escalators)
• Fixtures including air conditioning or fitted kitchens and bathrooms
• Agricultural machinery
• Machines for business purposes
• Lorries or Vans for distinct business and moving purposes.

The AIA spending limit was temporarily increased to £1,00,000 between 1^st January 2019 and 31^st December 2021, it is assumed that it will go back to £200,000 after this period. Businesses therefore have just under a month to use the AIA scheme to maximum capacity before the temporary limit ends.

7 – Use Your Accountant Wisely

Making the most out of your accountant is key – especially when it comes to tax liability. Not only do you want to ensure you are reducing your costs, but you need to make sure you’re doing it compliantly.

The difficulty with looking at tax liability is there are a lot of tips, tricks and schemes to help you save on tax but questions and queries around eligibility make it hard to know if you can take advantage of the suggestions.

Always take your accountants advice. It’s not a matter of just saving the most – but a matter of being on the right side of the law. Your accountant is well prepared to make sure you’re running your business cost-efficiently and luckily for you, they are experts at ensuring you remain compliant.

We’re not limited to 7…

These are just seven of the ways to help manage your tax liability, but you are not limited to only these seven tips. There are always new schemes that you and your business can take advantage of, that is why it’s important to stay up to date with all the changes.

Whether it’s signing up to our monthly newsletter, or following us on social media – we are always sharing insights and the latest news and advice to help you along the way.

Shenward’s experts tuned in to listen to the budget announcement on October 27^th – though a lot of what was announced had previously been shared with the media ahead of the Chancellor’s budget.

Thing is, with so much information offloaded via various channels, it’s easy to get caught up in a slurry of information overload. Between the different news outlets and channels, the actual information you’re looking for can become difficult to find.

In true Shenward style, our team has developed a round-up of the budget announcement, giving you insight into what changes have been made and what we can expect going forward.

Income Tax

Though the income tax rates have been announced to be unchanged, there are still some changes that will take place that are worth noting. Some of these were announced before the Budget, but in the interest of context and a full picture, we feel it’s best to inform you of all upcoming changes.

• The personal allowance is set to increase to £12,570 in April 2022, alongside the basic rate threshold which will increase to £50,270. After which, both will be frozen to 2026.
• The dividend allowance remains unchanged, however, it’s worth reminding that the dividend rates are set to increase by 1.25% from April 2022 – this is in line with the announcement of the Health and Social Care Levy previously announced.

A significant change announced in the Budget is the basis period reform, which changes the way trading income is allocated to the tax year.

Generally, businesses draw up annual accounts to the same date each year, which is known as their ‘accounting date’. Currently, a business’s profit or loss for a tax year is usually the same for the year up to the accounting date in the tax year, known as the basis period.

The current rule creates overlapping basis periods, which charges tax on profits twice, generating a corresponding ‘overlap relief’ which is usually given on cessation of the business.

The reform will change this to a ‘tax year basis’ from the tax year 2024 to 2025. This means that a business’s profit or loss for a tax year is the profit or loss arising in the tax year itself – regardless of the accounting date. This removes the basis period rules, preventing the creation of further overlap relief.

So, what will the transition involve?

On transition to the tax year basis in the tax year 2023 to 24, all businesses basis periods will be aligned to the tax year, with outstanding overlap relief given. Businesses with an accounting date other than the end of the tax year would need to apportion profits or losses from different accounting periods to fit in with the tax year.

This sounds complicated but may mean using provisional figures in tax returns if the accounts and tax computations for the later accounting period are not prepared before the 31^{st of} January filing deadline. If this is the case, amendments will be required to tax returns once final figures are available.

Don’t let this information overwhelm you. At Shenward, we are on hand to ensure the new requirements are adopted seamlessly. The basis of this reform is to help simplify Make Tax Digital for Income tax, which will occur from 2024.

National Insurance

No changes were announced in the budget for National Insurance, but this is a good time to remind you that National Insurance rates are increasing by 1.25% for Class 1 Primary and Secondary as well as Class 4 from April 2022.

National Minimum Wage

The National Minimum is set to increase as of April 2022. See the table below for the current and new rates of pay determined by age group.

Age	Current	April 2022
23 +	£8.91	£9.50
21 – 22	£8.36	£9.18
18 – 20	£6.56	£6.83
Under 18	£4.62	£4.81
Apprentice Rate	£4.30	£4.81

Capital Gains

Whilst there was no change to the Capital Gains annual exemption, a few other changes were announced.

The chancellor announced the extension to the Capital Gains Tax returns and payment on property disposal deadline from 30 days after completion up to 60 days.

Furthermore, there was clarification on mixed-use properties. The 60-day deadline for mixed-use properties applies, apportioned to residential proportion only.  

Capital Allowances

A super-deduction has already been announced, allowing companies investing in new plant and machinery assets to claim a 130% super-deduction capital allowance on plant and machinery investments. Furthermore, the super-deduction will allow companies to cut their tax bill by 25p for every £1 they invest.

The Annual Investment Allowance (AIA) increase to £1 million was due to end on the 31^{st of} December 2021, has been extended to the 31^st March 2023.

Corporation Tax

In terms of corporation tax, we have already seen some recent announcements ahead of the Budget. There has been an increase in corporation tax to 25% from 19% for non-ring-fenced profits over £250,000.

In the budget announcement, a 4% levy for property developers with profits over £25 million was announced. This is to help establish a fund to finance establishments with unsafe cladding.

In addition to this, as a result of Brexit, the group relief has been abolished for UK companies claiming losses from European Economic Areas (EEA) Resident subsidiaries.

Businesses

For businesses in the retail, leisure and hospitality sectors, the budget announced a 50% business rates discount from 2022 to 2023 for up to a maximum of £110,000.

For online businesses, there has been consultation on an online sales tax, amid the soaring rates of online sales consumption following the COVID-19 pandemic.

Welfare State

The Chancellor slightly reversed the taper of Universal Credit, reducing the 63% taper rate of £1 earned over the work allowance will now be 55%. This means for every £1 earned over the work allowance, the amount of Universal Credit will be reduced by 55p rather than 63p.

On the horizon, we have increased taxes looming with the increase in NI and dividends. Frozen personal allowances and thresholds will cause fiscal drag.

Our Advice…

We are aware this is a lot of information to take in. There’s no need to feel overwhelmed as it is more than likely only a few points above will affect you, but it’s best to include all information so everyone is informed of changes that may affect them.

Our advice to you is to liaise with your accountant so you can get on top of these changes as soon as possible. As always, if you need further guidance, do not hesitate to contact us at hello@shenward.com.

Your accountant is one of the most important people within your business. That’s why it’s important to determine not only what you expect from your accountant prior to appointing them, but also know how you can get the most out of them once they’re part of your team.

But how exactly can you do this?

How can you get the most out of your accountant? 

Let’s explore.

Hire the right fit for you and your business.

Getting the most from your accountant relies on one thing – them having an understanding of your business and its specific needs. If an accountant doesn’t, it makes it difficult for you to work together as there will be a gap in knowledge of what you really need. 

Many accountants specialise in specific industries, but others are experts in certain sized businesses such as start-ups or larger corporations, so always ensure your appointed accountant is matched to the size of your business.

As you can understand, similar businesses are likely to face similar issues, which is why getting an accountant who understands your business is beneficial. Not only will they will be experienced in identifying and mitigating risks but they’ll also have a wealth of knowledge about the challenges you face.

Communication is Key

Ultimately without communication, your accountant cannot perform at their best. 

This works both ways. You need to have a clear channel of communication from day one to allow you to discuss what it is you are in need of and what you expect from each other. 

Obviously as your business grows your needs will change too but setting out a framework of expectations at the beginning of your relationship means no wires will be crossed, and expectations will only be met and hopefully exceeded.

Stay up to date with deadlines

Accountants make it their mission to ensure you meet deadlines and remain compliant, but even when the leg work is done for you, you’ll need to keep in mind deadlines that require your input.

Whilst it is your accountant’s responsibility to ensure you meet these deadlines, they need things from you in order to meet those deadlines for your business. 

To ensure your business remains compliant, you have to support your accountant yourself, for example by getting all paper they may need across to them well before the deadline. This way, they’ll have sufficient time to meet the deadlines for you.

Create your business plan together

This brings all of the previous points together. Your business plan is something that you should be returning to on a semi-regular basis, to touch base and look at further projections and goals. Having your accountant on board for this can be extremely beneficial for your business. It helps you get the most from your accountant because it gives them a valuable insight into your business and where it is set to go. 

Having your accountant on hand when doing your business plan is greatly beneficial to you as they’ll likely have experience with other businesses at the same life stage as you. This means they will have invaluable insight into the potential hurdles your business may face.

Multi-access cloud software

Cloud accounting software has become the norm now due to streamlined processes and the benefit of convenience. 

Allowing your accountant access to your cloud software services means they can have real-time access to your documents and paperwork, thus increasing efficiency. The greater insight they have into the financial state of the business, the better.

Make use of their network

An accountants’ network is often widely cast. From working in many industries and alongside other sectors such as lawyers and bankers, their network could be invaluable to you and your business. 

There’s no need to be coy when it comes to asking your accountant to help with connections. They are likely to have had many introductions with people across multiple industries, meaning they are able to give reliable recommendations on who may fit your needs. 

Even when it comes to general industry connections, your accountant may be able to make introductions to fellow business owners who may prove themselves to be vital connections of your own in time.

Final thoughts…

These are just a few ways in which you can ensure you are getting the most out of your accountant. 

Accountants are highly professional people and ultimately want the best for you and your business, but in order for them to deliver second to none services, they need some assistance from you to be made fully aware of your business needs.

Want to work in partnership with one of our experienced accountants? Get in touch.

By Talha Aslam, Payroll Manager at Shenward.

In a recent parliament meeting, it was announced that there will be changes to national insurance in the UK – more specifically, it is set to increase.

Being the biggest story of the week, the announcement is everywhere – but with so much information circulating, how can you be sure what the national insurance increase in the UK will mean for you?

Below, we’ll answer your questions providing you with easily digestible information relating to the national insurance increase taking a further look into what it all really means and how it will affect you.

Changes to National Insurance – where, why and when?

On the 7^th of September, Boris Johnson announced to parliament that National Insurance is going to be raised by 1.25% from April 2022 in the UK.

From 2023, the increase in payment will be separated and become known as the health and social care levy, which will be paid by all adults including those working who are above the state pension age, unlike other National Insurance Contributions (NICs).

It is said that the payment will still be taken the same as National Insurance, but will be reflected separately on your payslip.

Self-employed National Insurance and Dividend taxes will also increase from April 2022 at the same rate.

 

What is National Insurance?

Class 1 National insurance is a tax paid by both employees and employers. It is automatically taken from an employee’s wage – the amount paid can be found monthly on your payslip.

Class 4 National Insurance is paid by self-employed workers. 

Both classes will be subject to the 1.25% increase, but classes 2 and 3 will not be impacted.

National insurance contributions are paid into a fund that helps to fund the NHS, state pensions, maternity leave and other state benefits.

Why is National Insurance being increased?

The increase is said to be implemented to help the funding crisis within social care and the NHS.

The Government has said that the rise in National Insurance Contributions (NICs) and the health care levy will help the NHS clear their backlogs, as well as resolve the long-standing issue surrounding social care.

In terms of numbers, the Government explained that the increase will raise £12 billion a year, which will initially go towards easing NHS pressures, but over the next three years, some of the money will be moved to help the social care system.

This will predominantly help older people and people with high care needs who are unable to do basic tasks on their own such as washing and dressing. Though the increase has been announced, it hasn’t come without criticism.

How will it affect me?

Just like National Insurance and Income Tax now, it will affect you differently depending on how much you earn.

For a standard basic rate tax player earning £24,100, their national insurance contribution will increase by around £180 per year. A higher rate tax paying who earns £67,100 will contribute an additional £715 to what they currently pay.

National Insurance will increase per the table below:

	Employee Class 1 NICs	Employer Class 1 NICs	Self-employed Class 4 NICs
NICs rates for 2021/22	12% / 2%	13.8%	9% / 2%
NICs rates for 2022/23	13.25% / 3.25%	15.05%	10.24% / 3.25%
NICs rates from 2023/24	12% / 2%	13.8%	9% / 2%
Health and social care levy from 2023/24	1.25%	1.25%	1.25%

Dividend tax on dividends earned above £2,000 will increase per the table below:

	Basic rate taxpayers	Higher rate taxpayers	Additional rate taxpayers
Dividend tax rates for 2021/22	7.5%	32.5%	38.1%
Dividend tax rates from 2022/23	8.75%	33.75%	39.35%

Why is this a controversial increase?

The raising of taxes is no new occurrence in the UK.

With this particular decision to increase the National Insurance, the main controversy is around the Tory Manifesto and their promises not to raise any taxes while in power. Going against a manifesto promise instils the idea that they are betraying the terms on which they were voted in.

Boris Johnson defended his decision by arguing that the pandemic was an unforeseen issue so renders any promises in a manifesto too difficult to uphold. But many believe that the timing of this increase is poorly decided upon, with many people and businesses facing financial issues – paying extra contributions could be debilitating to people’s financial standing.

Furthermore, the increase is being branded a ‘tax on jobs’. This means that the tax is affecting those in work and their activity – rather than profit, resulting in lower earners being disproportionately affected by the increase. Also, the increase in dividend tax payment will impact small business directors who received no support from the government throughout the pandemic – making it a bitter pill to swallow for those who have to now help in repaying the costs. Employment specialists have warned that the raises in these taxes may discourage businesses from creating more job opportunities, at a time where the UK is facing a large crisis in recruitment. The argument stands that business owners should have been allowed longer to recover from the pandemic before being faced with additional concerns through raises in tax and National Insurance.

Why National Insurance and not a different tax?

The argument supporting the increase in National Insurance is that both employers and businesses contribute to national insurance, which spreads the payment, as Boris Johnson said the if they used an alternative method where only employees contributed, they could have been faced with double the increase.

Critics, however, argue that this is a tactic by the Government as people are less familiar with National Insurance. If they were to raise income tax, for example, people are more knowledgeable around the tax and as such more informed about what they are paying – and willing to pay.

Furthermore, choosing to use National Insurance as opposed to Income Tax disproportionately affects lower-paid earners. This is because as your income exceeds £50,000 National Insurance is a smaller proportion of your wage – unlike income tax.

Other alternatives to raising National Insurance Contributions are instead raising Capital Gains Tax (CGT).

The CGT is a tax on the profit of an item sold that has increased value – so you are taxed on the gain and not the amount of money you receive. Capital Gains are taxed at lower levels than income because people are seen to be making an investment or entrepreneurial risk. The tax is almost exclusively paid by wealthy older households with great assets and property portfolios. The argument is that raising this tax to a similar level to income tax could create around £17 billion in funding – and would save low earners from being disproportionately affected.

Finishing thoughts

As you have read, there is a lot of controversy around the latest announcement to increase National Insurance Contributions and Dividend tax.

Looking forward with the increase in mind, questions are raised as to whether the increase can be considered a ‘tax on jobs’, and could it stifle employment and the creation of jobs – with businesses not being financially stable enough to be able to support the additional payments.

Furthermore, would an alternative to raising National Insurance have been more appropriate? As opposed to threatening an already weak job market, would a fairer way to secure the levy be profits based, like the self-employed, as opposed to being based on jobs? Whether the decision is right or wrong, as it stands Class 1, and 4 National Insurance Contributions and Dividends will raise by 1.25% from April 2022 and will become a separate health and social care levy from 2023.

With the lifting of legal restrictions in the UK, it’s great to see businesses being able to reopen their doors after a difficult 18 months of closures.

Whilst it’s brilliant to see businesses with their open signs hanging, this doesn’t mean that the difficulties of the pandemic are over, and many businesses are still struggling to stay afloat.

There has been differing financial support throughout the pandemic and with businesses back in operation these lifelines are now beginning to dwindle and people are unsure as to where they can secure support for their business.

If you’re looking for financial support for your business but unsure where to turn, look no further. Below are some options that could work for your business – from national to regional funding options, we’ve got you covered.

Funding and finance support – where to find it.

The Recovery Loan Scheme (RLS)

This scheme aims to help businesses that are facing struggles due to the COVID-19 pandemic. The scheme is for business purposes and can be used to help with cash flow management, investment, and growth.

Through the Recovery Loan Scheme, you could receive:

• Term loans of between £25,001 and £10m per business
• Invoice or asset finance of between £1000 and £10m

To be eligible for the RLS you must:

• Have a business impacted by COVID-19
• Have a minimum of 2 years of trading history
• Be a limited company or limited liability partnership
• Be trading in the UK

This scheme is available until 31^st December 2021, subject to review.

For more information, visit https://www.gov.uk/guidance/recovery-loan-scheme

 

Seed Enterprise Investment Scheme

This government-backed scheme offers grants to start-up businesses for up to £150,00. To be eligible for this scheme, you must have:

• Less than 25 employees,
• Have been trading for less than two years
• Have a fixed place of business within the UK

This scheme is offered throughout the UK.

Northern Powerhouse Investment Fund

The Northern Powerhouse Investment Fund is supported by the European Regional Development Fund and is an initiative launched by the government-owned British Business Bank.

The investment fund aims to nurture regional entrepreneurship by providing investment and support for small and medium-sized businesses. It does this through three finance options:

• Microfinance:
  • Offers small business loans from £25,000 to £100,000
  • Can be used for smaller businesses looking to fill the funding gap needed for growth

• Debt Finance:
  • Offers business loans from £100,000 to £750,000
  • This option can be used to help businesses ‘level up’, helping with funding for hiring staff, purchasing equipment, or moving premises
  • Research shows that finance can be difficult for businesses in the North of England despite a huge demand – the NPIF is here to help with that

• Equity Finance:
  • This option offers early or late-stage equity funding from £50,000 to £2,000,000
  • Equity finance can be vital for past paced growth at all stages of a business

This is a Northern Powerhouse fund, meaning it is only available to businesses based in the north of England.

To find out more about the NPIF visit, https://www.npif.co.uk/

VAT Reduction for hospitality, accommodation, and attractions

Though not a fund or loan as such, the government announced that it would apply a temporary 5% reduced rate of VAT to supplies relating to hospitality, accommodation, and attractions.

These will remain temporarily reduced until 30th September 2021.

To find out more, visit https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions

Start-Up Loan

The government-backed Start Up Loan is an unsecured personal loan, rather than a business loan – which offers between £500 and £25,000 to grow your business.

To be eligible for this loan, you must:

• Live in the UK
• Be aged 18, or over
• Have (or plan to start) a UK business that’s been fully trading for less than 24 months.

Start-Up Loans charge a fixed 6% interest rate per year. Repayment can be done between one to two years, with no fees for early repayment.

Export Working Capital Scheme

This scheme helps UK exporters access capital finance for export-related contracts.

It is most useful for exporters who have won a contract that is higher in value than they can typically fulfill and may need support.

There is no minimum or maximum value for the capital amount.

To be eligible for this scheme, the exporter must be carrying on business in the UK and must have entered or be intending to enter, a contract for the supply of goods/services with a company that carries on with business outside of the UK.

For more information visit https://www.gov.uk/guidance/export-working-capital-scheme-overview-and-how-to-apply

Bank Referral Scheme

The bank referral scheme was established to help businesses who have been unsuccessful with mainstream banks find alternative finance elsewhere.

With an unsuccessful finance application, the bank in question will refer the applicants to designated finance platforms – which will then help the business find another source of finance.

Eligible businesses are those:

• With a turnover of up to £25m
• Who are UK based
• The principal activity is commercial

For more information, visit https://www.british-business-bank.co.uk/bank-referrals/

AD:VENTURE Grants

This grant offers tailored support of both finance and coaching to ensure you get the best out of your business.

The AD:VENTURE Growth Grant is offered to businesses under 36 months or in their pre-trading phases. Grants are available between the value of £1000 and £25,000 given to support capital growth.

Businesses must be able to contribute a minimum of 50% of the eligible costs.

This grant is offered to businesses that are based in the Leeds City Region.

For more information, visit https://ad-venture.org.uk/finance-funding/

Listen, we know everyone makes mistakes. We’re only human.

Starting a business in itself is all about trial and error; finding out what works for you and your business and what doesn’t.

But, when it comes to your finances, unfortunately, there is less margin for error. You don’t need us to tell you that your business needs funding to survive. And, whilst every business is different, everyone tends to make similar mistakes the first time around. 

So, here’s where you can come out on top – learn from other businesses ‘ mistakes so you don’t do them yourself. Below are the 5 most common mistakes people make when starting a new business.

Mixing business and personal.

When starting a business, setting up a business account should be one of your priorities. In the beginning, it may seem like more hassle than it’s worth but trust us – it will save you in the future.

It’s too easy to use your personal banking account when purchasing business-related things and mistakenly using your business card for personal spending. Whilst it may appear convenient at the point of purchase, every penny you spend on the wrong account is going to cost you time and confusion when you’re working out your expenses for tax purposes.

Keep everything separate. Having a separate business account means you can keep track of all your expenses, and don’t have to spend time mulling over what train ticket was for a meeting, and what was the family trip away.

Also, another way not to mix business and personal is to not use your personal funds or savings for business where possible. We understand that when starting a new business, some of your own money will be used to get the business off the ground, but further down the line, if you were to experience financial difficulty in your business and you invested all of your personal savings, it has the potential to be detrimental to your financial standing on a personal level outside of your business. This isn’t worth the risk.

Going too big, too soon.

Business owners want the very best for their businesses. That’s a given. Every business wants the state-of-the-art computers, large modern offices and, cutting-edge technology – but spending beyond your means is a sure-fire way to burn through your money dangerously.

This doesn’t mean it isn’t always wise to invest in things that will keep your business ahead of the competition, but every purchase should be a properly thought-out decision with cost vs benefit analysis.

Another mistake to avoid here is to avoid using your financial backing and outside investment for unnecessary purchases. This money should be used to elevate your business and keep it afloat, purchases that are not essential should not be considered until your business is at a stage of financial freedom and you have the luxury to spend more freely. Whilst investing in software that will make your jobs easier may be a smart decision, spending big on frivolous office furniture just because it looks nice is not so wise. Do you see our point?

Where’s the Budget, Budget, Budget?!

“Fail to prepare, prepare to fail.”

This may seem like an obvious suggestion. But research shows that 61% of businesses do not have a set budget.

As a business owner, one of your main goals is profitability. To achieve this, you need to stay on top of what is coming in and out of your business. If you don’t keep track, it’s easy to lose sight of spending and find yourself spending more than you’re bringing in.

Having a budget set in stone means you know what spending is occurring that month, and as such is likely to deter you from unnecessary purchases. If you haven’t planned for it in the budget, it’s probably an impulse buy – if not, put it in next month’s budget.

No emergency funds

Nobody wants to see their business struggle, but unfortunately, roadblocks occur – often ones we could never have planned for. This is why it’s necessary to have an emergency fund, you never know what could go wrong.

Just look at the past year as an example. COVID has taught us that financial planning is desperately needed to withstand external shocks to the business, both from a cashflow and emergency fund perspective.

Experienced entrepreneurs and financial advisors recommend that between 3 to 6 months of your operating expenses is a sensible figure to have saved away for a rainy day, but that’s not always achievable. What you can do is plan by investing in covering yourself ahead of a catastrophe.

Speak to us about how our key person cover, health insurance, and life insurance could be a solution.

Thinking you need to be a one-man-band.

While many businesses are sole traders or start as one person in their bedroom, this doesn’t mean that you have to do everything alone.

Running a business is incredibly difficult to get right and doing everything yourself – no matter how experienced you are- can lead to mistakes.

It’s always acceptable to ask for help. Running a business is hard. Staying on top of your finances, especially as a small business can be daunting. You don’t have to overwhelm yourself by doing it all yourself. There are a number of ways you can alleviate stress.

Help from peers can be great for new businesses who don’t have to finances to seek professional help but know people in business who can offer free advice. There is a multitude of apps and cloud accounting services that can help you stay on top of your accounts and bookkeeping.

Investing in professional help from an accountant early on can stop you from making mistakes that are completely avoidable early on. As well as this, they can take the load off your to-do list, making running a business that bit easier.

As always, at Shenward we are here if you have any further questions or would like to contact us to see how we can help you and your business https://shenward.com/contact-us/.

Starting a new business can leave your mind reeling – with a never-ending to-do list, it is no wonder 72% of small business owners feel overwhelmed with their responsibilities.

Whilst you may be excited to get your product or service out into the world, you must remember your business is more than what you’re selling, and there are a number of things you need to think about in order to help your business run smoothly in the long run.

One thing which should be at the top of your list as a new business owner is sorting out your finances, particularly getting your banking in order, so that you have tight control over where your money is coming from and going to.

Having an understanding of business banking is the foundation to good business ownership, and whilst it can feel overwhelming to get to grips with the basics, you shouldn’t worry. We’ve rounded up five things every small business owner needs to know about business banking.

1. Know your business

First things first, you’ll need to determine what kind of business you are as that impacts the type of account you’ll be required to have.

If you’ve set up as a limited company, your business is legally separate to you. This means that you must have a business account separate to your personal banking.

For other business types such as sole traders, it is not a legal requirement to have a business banking account, however it is definitely beneficial.

At the beginning of your business ventures, it can be easy to run expenses through your personal account. Having a separate account for business allows you to stay on top of your spending and is much easier to keep track of if it is all separate from the word go.

When approaching banks to open a new business account, you might be required to present your business plan, so it’s important to have one prepared. Whilst some banks and financial institutions won’t want to see your business plan, it’s still a good idea if you want to access funding later down the line. Then, they’ll need to understand aspects such as where you place yourself within a market, how you aim on reaching you goals, and any expected costs.

2. Understand what kind of bank will work best for you

Over the last 5 years, challenger banks have completely disrupted the banking market.

Challenger banks are banks which are app or online based – and do not having physical branches like the high street banks we are perhaps more familiar with.

Choosing which bank to open a business account with is completely personal to you and your business needs, but it pays to do your research and ask others – there is a general lack of trust for banks and deciding alone which works for you can be tasking.

While the traditional high street banks have the long-running expertise and benefit of simply being known making them advantageous, challenger banks have grown to be much more agile and work to meet customer demands in a much faster fashion than what one would be used to with the ‘brick and mortar’ banks.

For example, the vast use of technology amongst challenger banks means they are generally much quicker and user friendly than that of the high street banks. Furthermore, the security of challenger banks – though initially questioned- can be considered to be much higher, with the integration of facial recognition and fingerprints being deemed as much more secure than that of a traditional chip and pin etc.

Challenger banks have been known to push back on the subpar customer service that has been associated with the traditional banks. Focussing on instant response times and shorter processes for opening accounts, challenger bank’s ease of access and speed has made them very real contenders.

While these challenger banks have become known for their speed, ease and high standard customer service, the traditional high street banks still remain strong competitors. With power behind their name on a global standing, the trust in a physical bank can be hard to knock. Some people prefer going into a branch and seeing a face, the power of that can be hard to top.

So, how do you decide between them all?

Simply put you need to know your business requirements.

This may be swayed by the functions and tools offered in your account. For example, many challenger banks offer integration with other apps such as cloud accounting software. If you were looking to pay in money over the counter, high street banks may offer a better ease of access.

Not so tech-savvy? It may be wise to see which banks offer 24/7 business account support.

What’s in it for you? Remember to look at what extras the bank can offer beside from just your business account. While securing your money is priority number one – having added perks can be the edge which keeps you happy, after all despite this being business, remember it’s you that’s the customer! Knowing what aspects of banking are going to make your life easier is key when deciding upon the right bank for you.

3. Service fees and charges

As a business owner, we don’t need to tell you that nothing comes free.

Understanding which banks offer highest fees and charges for their services, and what you are or are not willing to pay will play a big part in your decision.

There are a number of fees that are common in business banking. From one off application fees, transaction fees, ATM withdrawal fees, to overdraft fees – knowing what your prospective bank may charge when applied against how you intend to use your account, can be a big factor in your decision.

4. Know when to jump ship

Whilst we’re here to discuss how to get to grips with business banking, knowing when it’s time to try elsewhere is something you can’t be afraid to do. Your business account has to suit your needs and knowing when it’s no longer serving its purpose is something you need to be aware of.

Granted, this is something to consider further down the line. Once you have set up your first business banking account, you’ll begin to understand which features work for you, and what could be missing from your account. It can be really helpful to stay up to date with what is happening in the banking world – what new features are being introduced and whether they could work for you. If your current bank cannot provide this for you then perhaps it’s time to look elsewhere.

5. Small business accounting beyond the bank account

There are a number of decisions to be made surrounding banking in the early stages of your business besides opening a business account. One of the most important is the software you’ll use to manage finances in house.

Cloud software is the most popular option, but again, you should choose which cloud software works for you.

It is almost unheard of now for a small business not to use cloud accounting software in some capacity.  While smaller businesses may choose to use these platforms in lieu of an accounting professional to save costs, growing businesses may use a mix of both in a way that is most suited to their business.

Popular cloud accounting platforms include QuickBooks, Xero and our very own Kashflow app. Knowing what you can keep on top of yourself with the help of mobile apps, and what you need to consult an accountant for is key in the smooth running of business. Don’t let things get on top of you.

Finishing thoughts… While it’s of no surprise that there is a lot to consider when opening your first business bank account, hopefully these five aspects of business banking can help to point you in the right direction.