Category: Financial Freedom

What’s the most tax efficient way to pay myself through my limited company?

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???? The most tax-efficient way to withdraw money from your limited company in the UK will depend on your specific circumstances. However, here are some commonly used methods:

1️⃣ Salary (????): Paying yourself a salary from the company can be tax-efficient. You’ll need to register as an employee, set up a payroll system, and deduct income tax and National Insurance contributions (NICs). However, you’ll also benefit from personal income tax allowances.

2️⃣ Dividends (????): If your company has sufficient profits and you’re a shareholder, you can take dividends. Dividends are subject to different tax rates and thresholds, and you’ll have a tax-free dividend allowance. Remember to consider any tax implications, such as the dividend tax and potential higher tax rates for larger dividend amounts.

3️⃣ Pension contributions (????): Making pension contributions can be tax-efficient, as they can be deducted as a business expense, reducing your corporation tax liability. Personal contributions may also qualify for income tax relief.

4️⃣ Director’s loan (????): You can take money out as a director’s loan, but it should be repaid within a specific timeframe (usually nine months and one day from the end of the company’s accounting period). Failure to repay the loan can result in additional taxes.

5️⃣ Capital gains (????): If you sell or transfer assets owned by the company, such as property or investments, you may trigger capital gains tax. Proper planning and advice are crucial to ensure tax efficiency.

Get in touch with us today for personalised advice based on your specific circumstances and the latest tax regulations. ????????‍????

www.sunnysideaccountancy.co.uk/contact-us

How can small business owners work with their accountants to improve their profits?

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???? Small business owners! ???? Want to boost your ????profits? Look no further than your ????accountant! Here’s how to maximize the ????business potential with their help:

1️⃣ Lay the groundwork: Build a strong relationship with your accountant from the get-go. Share your business goals, challenges, and financial records. Communication is ????.

2️⃣ Track it all: Stay on top of your finances. ????Record and categorize income, expenses, and investments. Regularly update your accountant to ensure accurate and up-to-date financial statements.

3️⃣ Budget like a boss: Work with your accountant to create a realistic budget that aligns with your goals. ????They can provide insights on cost-saving strategies and identify areas where expenses can be reduced.

4️⃣ Analyze, analyze, analyze: Your accountant can be your ????️‍♂️detective in deciphering financial data. Together, analyze profit margins, sales trends, and costs. Identify areas where profit can be increased and inefficiencies eliminated.

5️⃣ Tax planning: Don’t let taxes drain your ????profits! Collaborate with your accountant to develop a tax strategy that optimizes deductions and minimizes liabilities. Stay updated on tax law changes to ensure compliance.

6️⃣ Cash flow management: Smooth cash flow is essential for business success. Your accountant can help you manage receivables, payables, and forecast future cash needs. ????Plan ahead to avoid liquidity crunches.

7️⃣ Financial forecasting: ????‍♂️Predict the future! Work with your accountant to create financial projections and scenarios. Anticipate market changes, plan for growth opportunities, and adjust strategies accordingly.

8️⃣ Review and adjust: Regularly meet with your accountant to review financial reports and discuss performance. ????Identify areas for improvement, tweak strategies, and adapt as needed to drive profit growth.

Remember, your accountant is your ????BFF (Best Financial Friend). They have the expertise to guide you on the path to profitability. Collaborate, communicate, and watch your small biz soar! ????????????

How to Scale Your Business – 4 Key Principles to Follow

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Are you looking to take your business to the next level? If so, you need to start thinking about scaling your operations. Scaling a business can be difficult, but if done correctly it can lead to tremendous growth. There are certain steps required when scaling, but it’s also important to have overarching principles to guide you on this journey to ensure that you stay on track for success.

#1 – Attitude and Values are Everything

When it comes to creating the right team to help you scale, it all starts with attitude and values. You need to be very clear about what your company stands for and what kind of people you want to work with. The right team will help support the culture you’re trying to create and maintain as you grow.

It’s important to define your company values in order to attract the right staff and contractors. If you want to create a customer-centric business, then your team should reflect that. 

If you’re looking to be the most innovative company in your industry, again, your team should be a reflection of that. Your values will help guide you in making the right hiring decisions as you look to expand your business.

Basically, it’s all about practicing what you preach.

#2 – Think Ahead

Scaling is about creating the business you want, not running the one you have. This means you need to think ahead to what the future looks like for your business. What are your long-term goals? What do you want to achieve?

This is where a lot of businesses make mistakes. They get caught up in the day-to-day and lose sight of the big picture. If you want to scale successfully, it’s important to have a clear vision for the future and make sure everyone on your team is aligned with that.

If you’re not ready for growth, then things will start to break down in your business as it expands. You need to ensure that your systems are able to cope with increased demand before it arrives. You need a team that is ready for challenges before they appear. 

In short, you need to be prepared for success before it happens.

#3 – Company Culture Matters

It’s not enough to just have a great product or service. You need to have the right team in place to support your growth. And that starts with a great company culture.

As your business grows, it’s important to maintain the culture you’ve worked so hard to create. And if you haven’t yet created a positive company culture, it’s time to change that.

Your team are at the centre of everything you do. The working environment you create affects spending, turnover, productivity and profitability, so it’s important to get it right.

A good company culture attracts the right people, reduces staff turnover and helps you scale successfully. It’s also something that should be constantly nurtured and developed as your business grows.

#4 – Be Flexible

Yes, you need to stay true to your core values, but as a business owner you also need to be open to change.

Flexibility is key when scaling. You need to be able to adapt to change quickly, without compromising your values.

Just because you’ve always done things a certain way doesn’t mean that’s the best way to do them. As your business grows, be open to new ideas and ways of doing things. You need to be willing to experiment and try new things, such as tweaking your processes or the way you structure your team.

The most successful businesses are those that are constantly evolving. They’re always looking for ways to improve and grow. The covid-19 pandemic in particular highlighted the importance of being able to pivot quickly and adapt to change.

So, don’t be afraid to mix things up a bit as you scale. It could be the key to your success.

Final Thoughts

Growing a business is never easy, but if you follow these four key principles, you’ll be on the right track. Having a clear vision for the future, maintaining your company culture, being prepared for success and being flexible are all essential ingredients for scaling your business. 

If you’re not ready to scale or don’t have a good team in place, then it’s time to reevaluate your priorities. Remember, scaling is about creating the business you want, not running the one you have.

Taking out cash for Directors vs Sole Traders

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Every business owner needs to take cash out of the business at some point. But if you’ve just moved from being a sole trader to a limited company, you may get caught out by the different rules around withdrawing cash from the company.

Why are the rules different for directors and sole traders?

When you’re a sole trader, you and your business are one and the same legal entity. So taking cash out is a simple procedure. But as the director and shareholder of a limited company, you and your business are two separate entities – and that means that money in the business is no longer your personal money. It’s money that belongs to the limited company.

Do I need to keep my personal and business money separate?

Regardless of which way you operate, you should always have separate business and personal bank accounts. The business account should be used to deposit all funds from sales and other business income, and to pay for purchases and other business running costs.

As a sole trader, there’s no legal difference between your personal and business funds. The main reason for a separate personal bank account is to keep your personal expenses separate from your business expenses. So, rather than mixing up things like mortgage or house rental payments, groceries and household bills with your business expenses, you have two distinct accounts – one personal, one business.

If you need money for personal expenses, you just transfer it from the business account to your personal account – it’s all yours to do what you want with. Obviously, you need to leave enough in the kitty to pay suppliers when their bills become due. But, as a sole trader, there’s nothing to stop you draining the business account completely, if you want to.

How do I draw money out as a limited company director?

For a limited company, it’s a legal requirement to have a separate business bank account. Even if you own the company 100%, the money in the company bank account belongs to the company, it does not belong to you.

So, how do you take out money to live on?

There are four ways of taking money out of the limited company, and in each case you should do it by transferring funds from the company account to your personal account. Preferably you should make these separate transfers, even if they happen on the same day.

  • Claiming back your expenses – any business expenses that you’ve paid personally can be reclaimed. Your expense claim should include receipts or other documentation, and a description of what they were for.
  • Being paid a salary – you can opt to be paid a salary for your role. This salary is processed through your payroll system, with any PAYE and NI deducted. The net pay due should be transferred to you on the normal company payday.
  • Withdrawing a dividend – where there are sufficient after-tax profits available in the company, you can withdraw dividends. Paying yourself and your fellow directors a dividend requires some formalities, including board minutes and dividend vouchers.
  • Directors’ loans and repayments – if you’ve previously loaned money to the company, the loan can be repaid to you. Where nothing is due, the company can lend you money but there may be interest charged (or a taxable benefit may arise if no interest is paid). The company may also be liable for a 33.75% temporary tax charge (section 455 charge) if the loan is not repaid by the end of your company’s financial year.

Talk to us about taking out cash as a director

Withdrawing funds from your company for personal use takes some serious thought and planning. If not, you may well end up with an unintended overdrawn director’s loan account.

It’s important to remember that the company’s funds are not yours in the same way that a sole trader owns the funds in their business account. Getting professional advice as a director is the best way to manage your cash withdrawals from the business.

We’ll work with you to:

  • Decide the best split between salaries and dividends
  • Help with any board minutes and other documentation
  • Help ensure that your company’s bookkeeping records accurately and timeously reflect the movement of funds between you and the company.

Get in touch to talk about your cash requirements.

6 Benefits to Help Retain Employees for Your Small Business

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The covid-19 pandemic sparked The Great Resignation, as many employees chose to resign from their jobs. As a consequence, small businesses are currently having a difficult time retaining employees. Since smaller companies typically cannot afford to offer the same benefits as larger enterprises, it’s essential for business owners to do what they can to keep their employees as satisfied as possible. Fortunately, there are several benefits that small businesses can offer to help keep their employees happy and make them feel appreciated.

#1 – Health & Wellness

One way to show your employees that you care about their well-being is to offer them health and wellness subscriptions. This could include access to online fitness classes or access to an app. Not only will this help your employees stay healthy, but it can also improve morale and encourage team camaraderie.

If your team works remotely, then even access to a mindfulness or meditation app can go a long way in terms of supporting their mental health and wellbeing. 

If this all sounds abit expensive, there are lots of free apps you could promote. You could also encourage a more active lunch break, this could be a walk, yoga or anything to raise the heart rate. Alternatively try swapping a tea break into a mini workout or desk break.

#2 – Remote Work Options

The pandemic has led to an increased demand for remote work options. Employees prefer the flexibility that comes with being able to work from home or elsewhere. Therefore, it is important for small businesses to make a firm commitment to offering flexible and remote working opportunities. This can include allowing employees to take their laptops home, allowing them to work from home a few days a week, or offering access to co-working spaces.

#3 – Flexible Hours

Many employees prefer working flexible hours. For example, they may want to work from home in the morning and then come into the office later in the day or vice versa. In general, people like having more control over their schedules instead of sitting at a desk for nine straight hours each day.

This is especially true for parents who need to take their kids to and from school or childcare. Offering flexible hours can help them better manage their work-life balance so they do not feel overwhelmed with having to juggle too many responsibilities at once.

In addition, flexible working hours will allow your employees the opportunity to have a life outside of work by allowing them time for personal projects, errands, and social engagements.

Offering flexibility also demonstrates to your employees that you trust them.  This could make them more likely to go the extra mile for you and your company.

However, it is important that employees who work flexible hours are still committed to finishing their projects on time so they do not fall behind or negatively affect other members of the team.

#4 – Personal Development

Continued Professional Development can boost staff morale and help employees feel like they are moving forward. Giving your team the opportunity to learn new skills or attend workshops or courses makes you team feel like you are really invested in them, their development, and a long career with your business.

You could organise group training, or simply provide information on opportunities that employees can take advantage of independently.

#5 – Partnership Discounts

If your small business has partnered with other local businesses, then consider offering your employees discounts at those establishments. This could include restaurants, bars, or even stores. Employees will love the opportunity to save money on their everyday expenses, and it can help to strengthen relationships between businesses in your community.

#6 – Employee Recognition

Recognising employee accomplishments is a great way to boost morale and make your employees feel valued. You could acknowledge individual achievements with an email or even announce them at the next staff meeting.

Rewarding employee achievements can encourage others to do their best, as well as maintaining high standards of performance throughout the company.

Final Thoughts

Small businesses often struggle with retaining employees. However, by implementing some of the strategies listed above, you can create a workplace that your employees will love and want to stick with for years to come.

Hiring your first employee – things worth knowing

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Hiring your first employee is a big step as a business owner. It’s great that you’re ready to grow your business and delegate some responsibility in order to narrow your focus, but it’s also natural to be nervous about the process. We’ve compiled a list of the most important things to bear in mind when hiring your first employee so that you can prepare and make the right decision for your business.

#1 – Payroll

When you hire an employee, you need to put a payroll system in place to make sure that employees get paid the right amount at the right time. Otherwise, your staff won’t be with you for very long.

You will need to submit National Insurance contributions and PAYE tax where applicable. And may also need to set up a Pension Scheme.

#2 – Contracts

It’s important to have a written contract in place with all employees. This document should outline the employee’s job duties, hours of work, pay rate, and benefits. It’s also a good idea to include an exit clause in case the relationship between employer and employee doesn’t work out.

#3 – A Code of Conduct

When you’re operating solo, you don’t really need a code of conduct – you know how to behave. However, when you have employees, it’s important to have a code of conduct in place that everyone is expected to follow. 

This document should outline the company’s expectations for employee behaviour, both on and off the job. It should also include disciplinary procedures for employees who violate the code of conduct.

#4 – Management Skills

If you’re not used to managing people, it’s important to learn the basics of good management before hiring your first employee. This includes setting expectations, providing feedback, and creating a positive work environment.

This is an important part of your growth as an entrepreneur. Learning great management skills as early on in your journey as possible will set you up for success.  Especially as your business grows and you add even more employees to your organisation.

#5 – Hire Based on Attitude

You can teach new skills and provide experience, but you can’t change a bad attitude.

That’s why it’s important to take attitude into account when hiring your first employee. 

Look for someone who is positive and enthusiastic about their work, even if they don’t have a lot of experience. Employees who are keen to grow and develop their skills will prove immensely valuable to you and your company.

Of course, you may well be keen to hire an experienced employee, but still be sure to screen candidates carefully and pay close attention to their attitude.

#6 – Ensure That You’re Financially Ready

Hiring employees is a great way to grow your business, but you need to make sure that the timing is right.

In other words, make sure that you’ve got enough money in the bank before making this big decision. Once you have an employee on board, it’s important not to let them down by being unable to pay their wages on time.

If you’re not sure whether your business is ready for its first employee, consult with your accountant or financial advisor to get their opinion.

Final Thoughts

When it comes to hiring your first employee, there are a few things you need to keep in mind. The most important of these is getting everything set up so that they get paid correctly and on time. You’ll also need contracts for both the employer and the employee, as well as a code of conduct for all staff members who work with you.

If you’re not sure whether or not your company is ready for its first employee, consult with an accountant or financial advisor who can help guide you through the process of hiring employees, managing all their associated responsibilities and ensuring that your operations remain cost-effective.

How to Use Profitability Ratios to Grow Your Small Business

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If you’re looking to grow your small business, you need to understand profitability ratios. These ratios help you measure how efficiently your business is using its assets and generating revenue. There are three main types of profitability ratios: operating, asset use, and contribution. In this blog post, we’ll discuss what each one is and how to use them to make smart decisions for your business.

What is a Profitability Ratio?

A profitability ratio measures how efficiently your business is using its assets and generating revenue. Profitability ratios are used by lenders, investors, and profit-seeking businesses to evaluate a company’s ability to generate profit relative to sales, assets, or equity.

Profitability ratios can be calculated on an annual basis or over any period you choose. For example, if you’re evaluating your company’s profitability ratio based on the sales of widgets in a specific month, you could calculate each ratio using that period.

Operating Profitability Ratio

The operating profitability ratio measures how much profit your business generates from its operations compared to the revenue it earns. To understand this better, let’s look at an example.

Let’s say you own a company called Widget Co., which manufactures widgets and sells them to retailers for $100 each. In one month, your business produced 100,000 widgets and sold 70,000 of them at $100 each. The operating profitability ratio would be calculated as follows:

First, we calculate the gross profit by subtracting the cost of goods sold from the revenue. This gives us $700,000 (70,000 x $100 – 100,000 x $60).

Next, we divide the gross profit by the revenue to get the operating profitability ratio. This gives us 0.70 (700,000 / 1000000).

This tells us that for every dollar in revenue Widget Co. generates, it earns 70 cents in gross profit.

Asset Use Profitability Ratio

The asset use profitability ratio measures how much profit your business makes from the use of its assets, minus the cost of those assets. This ratio is helpful for businesses that have a lot of fixed assets, such as property and equipment.

Let’s use the same example as above to calculate asset use profitability ratio. In this scenario, Widget Co.’s fixed assets are worth $200,000 and its total revenue is $100,000 (70,000 units sold at $100 each). We’ll also assume that the company has no debt or other liabilities.

First, we calculate the net profit by subtracting all expenses from revenue. This gives us $300,000 (100,000 x 100 – 70,000 x 60).

Next, we divide the net profit by fixed assets to get the asset use profitability ratio. This gives us 0.15 ($300,000 / 2000000).

This tells us that for every dollar in fixed assets Widget Co. owns, it earns 15 cents in net profit.

Contribution Profitability Ratio

The contribution profitability ratio measures how much money your business makes from each sale after deducting variable expenses such as material costs and labour. It’s also known as the gross margin percentage because it is calculated by dividing the gross margin by sales.

Let’s use the same example as above, but this time we’ll assume that Widget Co. has a contribution margin of $40 per widget (meaning it costs the company $60 to produce each widget, but it sells them for $100).

First, we calculate the gross margin by subtracting the cost of goods sold from the revenue. This gives us $600,000 (100,000 x $100 – 100,000 x $60).

Next, we divide the gross margin by sales to get the contribution profitability ratio. This gives us 0.60 (600,000 / 1000000).

This tells us that for every dollar in sales Widget Co. generates, it earns 60 cents in gross profit.

This figure can help you to understand how effective your marketing efforts are and whether you’re pricing your products correctly.

How to Use Profitability Ratios

Profitability ratios are helpful when used alongside other financial metrics because they can help you make sense of your business’s overall profitability and identify areas where you can improve performance. For example, if your company’s asset use profitability ratio is low, you might consider investing in more fixed assets to increase profits.

Likewise, if your contribution profitability ratio is high, you might be able to reduce the cost of goods sold by finding a cheaper supplier or streamlining production.

Final Thoughts

Keeping track of your company’s profitability ratios can help you make informed decisions about how to improve profitability, reduce expenses and grow your business. A more profitable company is better positioned to earn more revenue, hire new employees, and reinvest.

A Guide to Writing a Business Growth Plan

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Successful business growth requires a solid plan. In fact, rapid and uncontrollable growth can actually do more harm than good in the long run, which is why it’s vital to have a growth plan in place.

But how do you go about mapping out a growth strategy? And, since no-one can predict the future with 100% accuracy, what do you do when things inevitably veer slightly off-course?

This guide will discuss the components of a successful growth plan and provide tips for creating one that works for your business. Let’s get started.

What is a Business Growth Plan?

A business growth plan is a roadmap for increasing revenue and expanding operations. It outlines your company’s goals, strategies, and tactics for achieving growth in both the short- and long-term.

Why Do You Need One?

Businesses of all sizes can benefit from having a growth plan, for multiple reasons.

Market Share

If you’re not growing, your competition is. And if they’re taking market share from you, it’s only a matter of time before they start eating into your profits. A growth plan can help you take back control and regain any lost market share.

Minimise Risks

As your business grows, things will inevitably become more complex. This can lead to a number of risks, such as cash flow problems, operational inefficiencies, and customer service issues. A growth plan will help you identify and mitigate these risks before they start to pose a real problem.

Cash Flow and Revenue

Your business needs money to survive.  A growth plan will ensure that you have the necessary cash flow to sustain operations and fund expansion. It will also help you to increase revenue and profits, which can provide a cushion in tough times.

How to Write a Business Growth Plan

Now that we’ve discussed the importance of having a business growth plan, let’s take a look at how to write one.

There are four key components to any successful growth plan:

  • Market analysis
  • The right target market
  • Product/service offering
  • Sales and marketing strategy

We’ll discuss each of these in more detail below.

Market Analysis

The first step in writing a business  growth plan is to do a market analysis. This involves studying your industry and competitors, identifying trends, and assessing the potential for growth.

To conduct a market analysis, you’ll need to gather data on:

  • Industry size and growth
  • Market share by segment
  • Trends in technology, demographics, and consumer behaviour
  • The competitive landscape
  • Opportunities and threats in the market

Target Market

Once you’ve completed your market analysis, it’s time to identify your target market. This is the group of customers that you want to do business with and who are most likely to buy from you.

Your target market should be based on:

  • Your company’s strengths and capabilities
  • The needs of your target customers
  • The size of the market
  • The potential for growth in the market

Product/Service Offering

Once you’ve identified your target market, it’s time to develop a product or service offering that meets their needs, or adjust your current offering to capitalise on new opportunities for growth. This will involve creating  a unique value proposition and determining what makes your product or service different from the competition.

Evaluate Your Team

No matter how great your product or service is, you won’t be able to sell it if you don’t have a team of talented salespeople. Before you write your growth plan, take some time to evaluate your current sales and marketing teams. Do they have the skills and experience necessary to reach your target market? If not, you’ll need to make some changes.

Sales and Marketing Strategy

Once you’ve developed your product or service offering, it’s time to create a sales and marketing strategy that will help you reach your target market. This should include:

  • A plan for increasing market share
  • A budget and timeline
  • Strategies for generating leads 
  • Tactics for converting leads into customers
  • A communications plan
  • A way to track results

Finding Capital to Fund Growth

The final step in writing your business growth plan is to identify the capital you’ll need to fund expansion. This may involve taking out loans, seeking investment, or using your own cash reserves. Whatever route you choose, be sure to include a detailed plan for how the money will be used and when you expect to see a return on investment.

Putting It All Together

Now that you know what goes into a business growth plan, it’s time to put all the pieces together. Start by creating a rough outline of the plan, then fill in the details as you go. This will help you stay on track and ensure that your growth plan is comprehensive and achievable. Bear in mind that your growth plan can be adjusted as you go along, so check back in regularly to ensure that the document stays up-to-date.

5 Myths About Making Tax Digital Busted

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The UK government’s plans to make tax digital have been shrouded in controversy since they were first announced. There has been a lot of misinformation floating around, and many people are unsure about what the changes will mean for them. In this blog post, we will dispel some of the myths about making tax digital and give you the facts.

What’s Happening?

The Making Tax Digital (MTD) scheme rolled out in 2019 for VAT-registered businesses with over £85,000 in taxable income. In April 2024, this threshold will be reduced to £10,000.

There are many benefits to MTD, but many business owners are apprehensive about the change, fearing it will mean more stress, fear and penalties. Let’s take a look at some of the incorrect assumptions about MTD and talk about what the truth is instead…

#1 – HMRC Will See All of Your Data

This is a common misconception about MTD. The scheme does require quarterly updates but the amount of data you reveal to HMRC remains the same. With your VAT return, for example, you will still fill in the same nine fields of information but you will simply do it digitally.

Quarterly updates will actually encourage business owners to stay on top of their finances and give them a better insight into their cash flow.

#2 – You Will Pay More Tax

MTD is not about creating a heftier tax bill; it’s about reducing errors and fraud.  When businesses are able to submit accurate tax returns more quickly and easily, it minimises the chances of mistakes being made. This means that you are likely to pay the right amount of tax – no more, no less.

In addition, MTD will help to reduce the administrative burden on business owners, so everyone can focus on more important things.

#3 – Tax Returns Will Take Forever to Complete

This is another common misconception about MTD. The reality is that tax returns will take the same amount of time to complete – or quite possibly less. The main difference is that you will be doing them digitally instead of on paper. You won’t have to spend hours poring over your accounts – the software does all of the hard work for you.

This also means that there is less opportunity for human error, meaning your tax return will be more accurate.

#4 – MTD Means No More Tax Returns

MTD involves quarterly updates but this doesn’t mean that you won’t have to complete tax returns anymore.

The quarterly updates are in addition to your annual tax return – they are not a replacement for it. The SA100 form will be replaced with a final declaration, which HMRC will then review.

#5 – Small Businesses Don’t Need to Worry About MTD

Currently, businesses with a taxable income of under £85,000 per year are not required to participate in MTD, but this will change as the 2024-2025 tax year commences. This may seem far off now, but it’s best to take steps to prepare for the change now.

The truth is that all businesses need to be prepared for MTD, even if they don’t have to start complying with it until later on.

The sooner you start getting ready, the smoother the transition will be. This means it’s a good idea to begin digitising your accounting process and using MTD-compliant software so that you’re ahead of the game when 2024 rolls around.

Summary

There are a lot of misconceptions about Making Tax Digital, but the truth is that the scheme has many benefits. It reduces the chances of mistakes and fraud, and it makes tax returns easier to complete.

All businesses need to be prepared for MTD, even if they don’t have to start complying for another few years. The sooner you start getting ready, the smoother the transition will be.

How to Set Business Goals For 2022 (And Beyond!)

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Setting goals for your business is an important step in making sure it thrives. While some people might think this is a simple task, it can be more complicated than you may think. This guide will walk you through the process of setting goals and provide tips on how to make them actionable, achievable and measurable.

Why Are Business Goals So Important?

Business goals and objectives are important and should be established for a number of reasons.

If you don’t define what success looks like, the chances are that your business will never achieve it.

You need goals to measure growth by comparing them from year to year or month to month. If you’re not seeing the results that coincide with your expectations, then it’s either time to adjust your goals or get to the bottom of why you cannot meet them.

Goals are also important because it shows that you’re organized and have a plan in place, which is especially helpful when raising capital for growth. It lets potential investors know what milestones to expect throughout the process of investing into your business.

Goals keep you and your team focused, and provide a clear benchmark against which to measure your success. Clear goals enable you to prioritise the most important tasks and focus on the things that matter most.

Step 1: Identify Key Areas Of Focus

First things first. What are the top areas you want to focus on in your business? Of course, this depends on your unique business and industry, but some examples to consider include:

  • Improve customer service
  • Reduce costs by 10%
  • Grow sales volume by 20%
  • Be the first mover in your industry with a new product or service offering
  • Increase employee satisfaction to 75%
  • Improve customer retention rate by 5%
  • Reduce company debt and interest expense below a certain threshold, e.g. $40,000
  • Increase profit margin by 10%
  • Reduce time required for product or service production by 12%

Step 2: Set SMART Goals

In order for your goals to be effective, you need them to meet a specific criteria. They must be SMART. This means:

  • Specific  – very clear and easy-to-understand.
  • Measurable  – determined by the numbers or data.
  • Achievable – your goals must be realistic, or else you are simply setting yourself up for failure.
  • Relevant –  each goal should be pertinent and directly beneficial to your business.
  • Time-bound – the deadlines must be clear and reasonable.

“Increasing profit margins” is not a good goal because it’s far too vague. However, “increasing our profits by 10% in the next 12 months by reducing costs and increasing efficiency”  is an example of a SMART goal.

Step 3: Set a Timeline

Your goals need to have a timeframe. This is important because it helps you think about which resources are required, how much time your goals will take and what milestones must be reached along the way. For example, you won’t increase your profits by 10% overnight – it will happen in much smaller increments. Therefore, you should set milestones that will be reached along the way. For example, you might aim to increase profits by 4% by the end of Q1. Then, you can adjust your goals against real-time progress.

Step 4: Review Your Goals Regularly

It is crucial that you regularly review your goals to ensure they are still relevant and helpful. You may find that the market has changed, or that new opportunities have emerged based on customer feedback which would alter some of your original plans – this means it’s time for an update. Maintaining four or five year goals is a good idea, but you should also create one-year and quarterly plans to ensure your business stays on track.

Step 5: Accurately Track Your Goals

You cannot measure progress unless you are measuring against something specific – that’s where SMART goals come in. You need to establish metrics and benchmarks against which you can measure your progress. This way, it’s easier for everyone to see whether they’re on track towards achieving the goal and when adjustments need to be made.

Final Thoughts

Clear goals provide a clear direction for your business and keep everyone on the same page, working towards achieving something that is meaningful and beneficial to all. They can be used as an effective tool when pitching to investors or potential partners to give an idea of how the business will progress over time.

No matter how well your business is doing, there are always areas for improvement and new heights to reach. Setting goals is the first step on the journey to success..