Making the most of your savings – A guide on how to using your savings to improve your financial position.

August 5, 2015 Posted by Wellden User

People often have a slightly misjudged opinion of their savings as a sedentary block of assets that only creeps forward at a glacial pace due to the interest it generates.

The idea that an individual’s savings can be turned into a productive asset is one that is far removed from the image of throwing your money into a dark vault until you need to make a major purchase.

Figures from National Savings & Investments shows that the amount people are putting away reached its highest level in a decade in 2014. The average monthly saving last year was £113, but only 26% of those surveyed were saving with a specific purpose in mind.

Whether you are thinking about maximising the amount of resources you will have for retirement, or you simply want to start making your money work a little harder, there are a range of strategies for getting more out of your savings.

What do you want from your savings?

What you want to achieve is the foundation of your savings strategy.

For example, some options are better suited to those who simply want to increase the amount of money they have as quickly as possible to achieve short-term goals. Others might want to minimise the amount of tax they pay on the money they earn.

Some of the most common reasons people have for saving are:

having a ‘rainy-day fund’ in case you need to make essential household purchases or replacements
holidays and other fairly large and one-off purchases
financial protection
future spending on property, weddings and things of a similar nature
increasing retirement

While there are alternatives to saving to achieve some of these goals, such as insurance, loans or selling your possessions, building up a bank of savings is a less risky way to get to where you want to be.

Inflation and savings

Inflation is an important concept for anyone who is making plans based on their savings to understand. High inflation combined with low interest rates can create a situation where your hard-earned savings begin to lose value.

In order for your savings to be worth the same amount over time, it will need to grow (either through interest or be added to) by at least the rate of inflation.

The golden rule of savings is therefore:

after tax, your savings must earn interest that is higher than the rate of inlation in order for the value to grow.

Savings strategies

There are a large variety of strategies open to those who want to increase their savings, from finding a decent rate of interest to getting on the next plane to Las Vegas with a suitcase bulging with cash.

Here are some of the most popular options:

Tax on savings interest

You do not have to pay tax on savings interest for certain kinds of savings accounts and National Savings & Investment products. Most other savings accounts will incur income tax at 20%, which is automatically deducted from your account.

How much tax you have to pay also depends on your income. For those that earn less than £15,600 (with or without savings interest) a year, it is possible to get your savings interest tax-free. Basic rate taxpayers will have their tax automatically deducted by their bank or building society while higher and additional rate taxpayers will have to pay extra.

ISAs

You can currently save up to £15,240 tax-free into an individual ISA each tax year. The interest earned is treated differently across cash and stocks and shares ISA accounts, with the former being tax-free and the latter tax-efficient.

The 2 different types of ISA, cash and stock and shares, are slightly different, but an individual can choose to split their money between them if they wish.

While a stocks and shares ISA gives you a choice of how your money is invested, like all investments your total savings could fall.

A cash ISA does not give you a choice of how the money is used, it will keep growing with interest added every year or more frequently.

Cash ISAs can be a good option for those who are looking for a low risk way of growing their savings while usually maintaining easy access to your money. If you want the chance of a higher return, then a stocks and shares ISA might just be the ticket.

Fixed rate savings accounts

You can earn a higher rate of interest if you agree to lock up your money and not touch it for a set period of time. These fixed rate accounts are a good option if you have a portion of your savings that you are certain you will not need for a number of years.

However, as with any long-term fixed deal, once the ink is dry on the contract you are at the mercy of external market forces. If you agree not to touch your money for 3 years and over that time interest rates go down and inflation goes up, then your pot will not grow substantially.

Investing

Investing your savings is the riskiest option, but also the one that can bring a big return.

First, you need to decide what you are going to invest in, with stocks, shares, property and bonds being among your choices. Diversifying the range of ways you invest your money can be a good strategy for minimising risk.

Second, you need to decide whether you are going to invest all of your savings or apply a more drip-feed approach based on the results of your initial investment.

Keeping active

One of the most important things to consider for people who are trying to make the most of their savings is the idea of keeping active.

While picking a savings strategy and sticking with it can bring around the desired results, regularly re-evaluating that strategy can maximise these results further.

It is an interesting quirk of the market that providers often offer great deals for the first 12 months or so in the hope that savers will continue to store their assets there once the initial period is over. It may be advantageous to think about switching accounts once the starting offer runs out, but this far from an iron-clad rule.

Some banks and savings institutions also offer savers the chance to earn higher rates of interest if they can commit to make regular deposits into the account.

Good saving takes planning, discipline and knowledge of the wider market environment. We can give you the expertise you need to make the most out of your money.

We can help you with your savings strategy, contact us today

Accounting for change: audits and annual accounts

August 4, 2015 Posted by Wellden User

The threshold for compulsory filing of audited financial statements rose on 6 April 2015 to those businesses with a turnover of £10.2 million or more for periods commencing from 1 January 2016.

This is part of a new European Commission directive which allows member states to choose whether to significantly raise the existing threshold to reduce unnecessary and burdensome red tape. The UK chose to do so and the new threshold was written into the statute under the Companies, Partnership and Groups (Accounts and Reports) Regulations 2015.

This means that most small and medium-sized private limited companies are no longer required to have their accounts audited. There are exceptions, with the following limited companies still being required to carry out an audit even if they do not exceed the threshold:

a subsidiary company (unless it qualifies for an exception)
an authorised insurance company or company carrying out insurance market activity
a company involved in banking or issuing e-money
a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
a corporate body whose shares have been traded on a regulated market in a European state.

In addition, an accounts audit will be required if shareholders who own at least 10% of shares (by number or value) request it. This can be an individual shareholder or a group of shareholders.

Many companies, however, are continuing to be audited by choice. This is because it is an excellent way to determine exactly where you stand at the point of audit and what changes if any need to be made to keep you on the right track.

An audit also provides a lot of the information you need to comply with your annual reporting requirements.

Whether you are legally obliged to have an audit or not, annual reporting requirements are not optional. They are required by law and failure to submit them to the deadline can result in harsh penalties.

Size matters…

The amount of information you have to submit depends on the size of your business. There are effectively 4 classifications of size: large, medium, small and micro-entity. The classification is determined by various thresholds for annual turnover, the balance sheet and average number of employees. It also depends on which body you are submitting them to.

Whilst companies that qualify as micro-entities, small or medium-sized business can submit abbreviated accounts for Companies House, all sizes of business must submit full statutory accounts to HMRC with their company tax returns.

What are full statutory accounts?

HMRC requires the following:

balance sheet detailing the value of everything the company owns and is owed on the last day of the financial year and must be signed by a director
profit and loss account showing the company’s sales, running costs and the profit or loss it has made over the financial year
notes about the accounts
director’s report.

What are abbreviated accounts?

Companies House will accept the following as abbreviated accounts:

balance sheet from your company’s statutory accounts, signed by a director
notes about the accounts.

Please note you will still have to prepare full accounts for your shareholders.

Keeping records

There is a mismatch between what HMRC and Companies House require when it comes to how long an organisation must keep certain kinds of data.

Companies Act 2006 states that accounting records need to be kept for 3 years from the date they are made. HMRC however, requires that records used to complete company tax returns must be kept for 6 years from the end of the accounting period to which the records relate.

To keep on the safe side and not risk prosecution for failing to keep adequate and accurate records, you should keep the following for at least 6 years:

record of goods and services bought and sold
record of income and expenditure
sales books
petty cash books
invoices and receipts
orders and delivery notes
contracts
till rolls
business bank account statements
VAT records
PAYE records for employees
record of assets and liabilities
statement of stock at the end of each financial year
record of dividend payments, if applicable.

Your records can be kept in digital format, paper based or a mix of both. What’s important is that they are organised in a way that means information is easy to find.

Penalties and deadlines

The one area where there is no confusion is when it comes to penalties. After the end of your financial year, you must prepare full statutory annual accounts, pay corporation tax and file a company tax return within the appropriate deadlines.

Action	Deadline
File annual accounts with Companies House	9 months after your company’s financial year ends
Pay corporation tax	9 months and 1 day after your company’s financial year ends
File a company tax return	12 months after your company’s financial year ends

If your accounting period is different to your financial year, your corporation tax and company tax return deadlines may be different.

To make matters more complicated, you don’t get a bill for corporation tax. It’s up to you to work out how much your company owes.

Missed the deadline for filing accounts at Companies House?

The penalty charges are as follows:

Time after the deadline	Penalty (for private limited companies)
Up to 1 month	£150
1 to 3 months	£375
3 to 6 months	£750
More than 6 months	£1,500

The penalty is doubled if your accounts are late 2 years in a row.

Missed the deadline for your company tax return?

Time after the deadline	Penalty
1 day late	£100
3 months late	Another £100
6 months late	HMRC will estimate your company’s tax bill and add a penalty of 10% the unpaid tax
12 months late	Another 10% of any unpaid tax

If your returns are late 3 times in a row, the £100 penalties are increased to £500 each.

If your return is more than 6 months late HMRC will do a ‘tax determination’ to tell you how much corporation tax they think you must pay. What’s more, you can’t appeal against it.

No hiding place

Now that anyone with internet access can immediately view your company data, your age, address and a veritable mine of other information, compliance and transparency is more important than ever.

Potential clients can see at a glance whether you consistently file late returns or whether any directors have been struck off to name just a fraction of data that is freely available. Any blips could be seen in a negative light. Could your business withstand the scrutiny?

An audit, particularly one carried out by an external, impartial professional can not only ensure you don’t miss deadlines but can also provide that extra level of reassurance for investors, lenders and new clients alike.

Contact us today to discuss how we can assist you with your audits.

New tax evasion plans revealed

July 21, 2015 Posted by Wellden User

HMRC has released further details about how it plans to crackdown on offshore tax evasion.

Treasury officials announced plans to create a new strict liability offence for offshore tax evasion following Budget 2015 in March. Strict liability refers to a criminal offence where proof of intent is not required to convict the suspected individual.

Under current laws, taxpayers can only be found guilty of tax evasion if HMRC is able to prove that the failure to pay was deliberate. Under the new rules, failure to declare income and gains will alone be sufficient to convict taxpayers.

Under the draft legislation:

the offence will only apply to income and capital gains tax
it will apply to all offshore income and gains
it will only be used if the amount of undeclared tax exceeds £5,000
the threshold will not roll over into multiple tax years
convicted people will face a maximum 6 month prison sentence.

HMRC is currently consulting stakeholders about the viability of the draft legislation.

The Chartered Institute of Taxation (CIOT) has warned that the use of strict liability will result in criminal convictions of people who did not intend to evade tax and merely made mistakes on their tax returns.

Patrick Stevens, tax policy at the CIOT, said:

“It is easy to see why this is attractive to the tax authorities. But UK and international taxation is a minefield of complexity and, while some taxpayers do actively seek to hide their income by intentionally failing to declare it, there are others who simply make mistakes in their financial affairs without intending to act wrongly.

“It is not reasonable for someone to be convicted, let alone imprisoned, for offshore tax evasion without an intention to evade tax being proved beyond reasonable doubt.”

We can file your personal tax return for you. Contact us for more information.

Reporting standards for small firms simplified

July 21, 2015 Posted by Wellden User

The Financial Reporting Council (FRC) has introduced new accounting standards designed to simplify reporting for small and micro businesses.

Micro businesses will now have to report to a different standard than small businesses under the new FRS 105, while small businesses will also have to adjust to a new set of standards.

The FRC’s changes are largely a response to the EU Accounting Directive which significantly increased the size thresholds for small companies.

Small and micro companies will have to report in line with the new standards for accounting periods on or after 1 January 2016.

FRS 105

Micro firms now have a separate reporting standard which allows them to submit accounts with reduced disclosure. Key changes include:

financial statements will be presumed true if they are prepared according to legislation
simplified balance sheets and profit and loss accounts
deferred tax does not need to be accounted for.

FRS 102

The standard previously used by small businesses (Financial Reporting Standard for Smaller Entities) has been withdrawn and a new section aimed at small businesses has been added to the FRS 102 standard. Reporting under FRS 102 is more comprehensive than FRS 105 but still contains reduced disclosures for small businesses.

Mandatory reporting under FRS 102 has already been introduced for medium and large companies with accounting periods on or after 1 January 2015.

Melanie McLaren, executive director of codes and standards at the FRC, said:

“These new accounting standards support the implementation of the micro-entities regime, further simplifying accounting requirements for up to 1.5 million of the UK’s smallest entities.

“They also respond to the new legal framework for disclosure in small company reporting, providing guidance for applying it and improving transparency relating to financial instruments, and they further improve the cost-effective reduced disclosure framework for listed groups by permitting IFRS-based presentation requirements in subsidiaries’ financial statements.”

We can manage your accounts for you. Contact us today for more information.

Government announces red tape reviews

July 17, 2015 Posted by Wellden User

The Department for Business, Innovation and Skills will launch reviews into cutting red tape in 5 key sectors, Business Secretary Sajid Javid has announced.

The reviews will be the first step in Conservative plans to reduce regulation by £10 billion over the next 5 years. The government is calling on businesses to voice their opinions about how deregulation could improve the productivity of British businesses and make the economy more efficient.

The 5 sectors identified by the government are:

Energy
A review will look at government Ofgem’s role in the sector. Energy companies will be asked to provide their views on regulations including licensing arrangements.
Agriculture
The government wants to reduce the amount of time it takes farmers to report on the health of their animals.

Care homes
Businesses working the care home sector can be subject to different inspection regimes, with small homes of 30 residents dealing with 7 different state agencies. A review will look into how the system can be more efficient.

Waste
A review will look into how regulations impact the sector. It will attempt to identify and remove obstacles to sector growth while maintaining human and environmental standards.

Mineral extraction
Sector businesses have complained that some of the strict planning and environmental regulations should be simplified and better-coordinated with regulators.

The results of these reviews will be used to build upon measures related to regulation included in May’s Enterprise Bill such as making the primary authority scheme simpler and making regulators contribute more.

Small businesses can submit their thoughts on the reviews by posting comments to the Cutting Red Tape website, using social media, email or via the postal address listed on the site.

Business Secretary Javid said:

“I am determined to take the brakes off British businesses and set them free from heavy-handed regulators. The government’s pledge to cut £10 billion in red tape over the course of this parliament will help create more jobs for working people, boost productivity and keep our economy growing.

“For the first time, these reviews will look not only at the rules themselves but the way they are enforced. We want firms to tell us where red tape is holding them back and help us make Britain the best place in Europe to start and grow a business.”

Contact us to discuss planning for the future of your business.

Brits unaware of overseas tax rebates

July 15, 2015 Posted by Wellden User

Failing to claim tax rebates on overseas purchases is costing British holidaymakers millions each year, according to research by Direct Line.

Of the 2,002 people surveyed, just 8% said they had reclaimed VAT on their purchases abroad in the past 2 years.

Tax-free shopping is widely available in some of Britain’s most popular holiday destinations such as EU member states, Thailand and Japan.

A lack of awareness was shown to be the biggest reason why the majority of British holidaymakers fail to claim rebates:

42% said they weren’t aware they could claim a VAT rebate
14% couldn’t receive a rebate because they hadn’t kept the receipts
12% thought the rebate wouldn’t be worthwhile
12% said it was inconvenient.

Tom Bishop, head of travel insurance at Direct Line, said:

“Getting some of the money you’ve spent back when returning from holiday should be an opportunity too good to miss, but millions of people aren’t taking advantage of it. We’re big spenders when it comes to shopping abroad, so the tax on these items really does add up and once you have arrived home it will be too late to claim.

“Check before you travel if your holiday destination offers a VAT or GST rebate, keep all your receipts and ensure you have sufficient time at the airport or port to make a claim before you leave.”

Going on holiday? Contact us to discuss the impact on your personal finances before you go.

Government outlines productivity plans

July 13, 2015 Posted by Wellden User

A comprehensive plan to improve the productivity of UK businesses has been published by the Treasury.

The policy document identifies 2 areas that the government regards as key to stimulating productivity in the UK: long term investment and a dynamic economy.

Long term investment

The government has the aim of cutting £10 billion of red tape by 2020. Long term investment will be generated through tax reform, innovation and upgrading infrastructure:

Business investment
Lower corporation tax rates, lower rates for personal tax planning and more generous capital allowances will support long term business investment.
Skills
Increasing emphasis on apprenticeships and building a globally-recognised university system will combat the skills shortage.
Infrastructure
Upgrading transportation, energy and digital infrastructure is essential to bringing the UK economy into the 21st century.
Innovation
The government will continue to invest in scientific and technological innovation.

A dynamic economy

Labour market reforms, increased support for exports and deregulation have been identified by the government as essential to promote a dynamic economy:

Market reform
Planning permission reforms, lower state welfare and more employee benefits such as free childcare have been outlined by the government.
Finance
A New Bank Unit within the Financial Conduct Authority and Prudential Regulation Authority will ensure finance is provided for productive investments.
Competition
The government has committed itself to cutting £10 billion of red tape and exporting £1 trillion worth of goods and services by 2020.

Business Secretary Sajid Javid said:

“This is a bold and ambitious plan, to achieve our vision of a more dynamic economy, with a business environment that fosters long-term investment, raising our living standards and become the best of all the major economies by 2030.”

Daniel Godfrey, chief executive of The Investment Association, said:

“It is crucial that Britain solves its productivity problem so that the economy can deliver rising standards of living and healthier public finances.”

Talk to us today about improving your business processes.

Dividend tax credits replaced by new allowance

July 10, 2015 Posted by Wellden User

Dividend tax credits will be replaced with a new £5,000 tax-free allowance from April 2016, the Chancellor George Osborne announced during his Summer Budget statement.

Under current rules dividend income is reduced with tax credits. Basic rate taxpayers currently pay no tax on dividend income while higher rate taxpayers are charged 25% and additional rate taxpayers 30.55%.

From April 2016, investors will pay no tax on dividend income below £5,000 but income exceeding the allowance will be taxed at the following rates:

Basic rate taxpayers: 7.5%
Higher rate taxpayers: 32.5%
Additional rate taxpayers: 38.1%.

The dividend allowance will be in addition to the £1,000 personal savings allowance for income such as bank interest.

Sean McCann, chartered financial planner at NFU Mutual, urged investors to review their stocks and shares portfolio:

“A new £5,000 tax-free allowance on dividends sounds great but there will be winners and losers. Basic rate taxpayers won’t be any better off. In fact, basic rate taxpayers with more than £5,000 in dividend payments will start paying tax on their dividend income.

“What is clear from today’s announcement is that anyone with stocks and shares should review their investments to make sure they aren’t paying any more tax than they have to.”

However, Anthony Thomas, chairman of the Chartered Institute of Taxation’s Low Incomes Tax Reform Group, welcomed the move:

“For some the new dividend allowance will offer a useful simplification, although it is possible that some people on modest incomes will now have to start paying tax on their dividend income and be brought into self-assessment in order to collect what is due from them.

“That apart, the dividend allowance together with the £1,000 personal savings allowance will encourage more individuals to save outside of the constraints of an ISA.”

Contact us to discuss what the Summer Budget 2015 means for you and your business’ finances.

Summer Budget Summary 2015

July 9, 2015 Posted by Wellden User

Free from the constraints of coalition government George Osborne has just delivered his second budget of the year, and the first Conservative budget in almost two decades.

In this Summer Budget, Mr. Osborne has set-out to implement some of the Tory party’s election pledges, whilst revealing the full scale of cuts ahead for both public services and welfare payments.

Recognising that not everything within this budget is necessarily of relevance or importance, Wellden Turnbull Director ‘Robin John’ took a moment to summarise what the measures could mean for you and your business, including the following:

Dividend Tax
Effective Tax Rate
Non-Domiciled Individuals
Foreign Owned Residential Property
Tax Depreciation for Goodwill
Buy-To-Let Landlords

Click on the video above to hear what Robin John has to say about the Summer Budget.

Summer Budget 2015: First Reactions

July 8, 2015 Posted by Wellden User

The Chancellor George Osborne has delivered the first all-Conservative Budget statement in almost 20 years. Here is a collection of snap reactions from the UK’s leading business groups:

Federation of Small Businesses

John Allan, national chairman of the FSB, said that the Chancellor has unveiled a “mixed bag of proposals”:

“There was further support to reduce corporation tax, fix the annual investment allowance and boost regional growth, where investment in roads will be particularly well received.

He agreed with the emphasis placed on boosting productivity but voiced concern about the introduction of a national living wage:

“However, even though offset by a welcome increase in the employment allowance, some will find the new national living wage challenging. Changes to the treatment of dividends will also affect many of our members.”

Confederation of British Industry

CBI director general John Cridland agreed that it was a “double-edged” Budget for businesses:

“Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.”

British Chambers of Commerce

John Longworth, director general of the BCC, was more positive about the Chancellor’s statement and praised his “genius balance of politics and economics”:

“The Chancellor has confirmed that Britain is open for business. Firms across the UK will cheer not just the new permanent Annual Investment Allowance, further Corporation Tax reductions, and lower National Insurance for small businesses, but also commitments to childcare and higher education that help them employ Britain’s best.”

He added that businesses will want assurance that the move to create a national living wage would follow an “evidence-based approach that will minimise the impact on small businesses for whom the adjustment will be harder.”

Institute of Directors

Simon Walker, director general of the IoD, said that the Chancellor’s announcement of a new living wage was “dramatic” but argued that businesses have been sufficiently compensated in other areas:

“In return [for a national living wage], companies have been provided with a cut to corporation tax and an increase in the employment allowance. We should not understate the boldness of this move, and many businesses will have been taken by surprise, but the IoD accepts that after several years of slow wage rises, now is the time for companies to increase pay.”

To read the announced changes in full, please click here to download a free copy of our Summer Budget Summary

Standard annuity rate hits 2015 high

July 2, 2015 Posted by Wellden User

The standard annuity rate has increased 5.6% since the 12 May 2015, research by My Pension Expert has found. This is the highest standard annuity rate in 2015 so far.

The research shows that a 64 year-old with a £100,000 pension would earn £303 a year more than they would have 7 weeks ago.

The best available income on 12 May was £5,370, compared to a possible £5,673 on 30 June. This adds up to an extra £6,060 over the course of the average 20-year retirement.

My Pension Expert attributes the rising rate to an increase in gilt yields. The yields on gilts, which are linked to annuities, rose in June after policymakers hinted at a future rise in interest rates.

The figures will come as good news for standard annuity holders which have seen rates plummet since the government’s pension reforms were announced. Rates fell 10% between August 2014 and January 2015 before hitting an all-time low in April 2015.

Scott Mullen, director at My Pension Expert, said:

“The 5.5% rise in the standard annuity rate is great news for those considering purchasing an annuity, as it could lead to a significant increase in their retirement income. It demonstrates just how volatile the market is and why it requires constant monitoring if you’re to make the most of your pension funds.”

Contact us to discuss your options in retirement.