As 2015 comes to a close your thoughts, as a business owner, you will probably already be looking forward to 2016. When planning your business strategy for next year have you taken into consideration the changes to your businesses finances, following the Summer Budget announcement in July 2015? From changes in wage legislation to switching to online accounting – we have put together seven things you need to consider for your business in 2016.
- 1 Take advantage of tax changes
- 2 How employment changes could affect your business
- 3 Running your business
Take advantage of tax changes
Dividend tax changes
April 2016 will see an overhaul of the current dividend tax regime, which the Government has described as arcane and complex. The current system will be replaced by something much simpler, which could result in significant tax hikes for most limited company owners. Under the new regime you’ll be entitled to receive £5,000 of dividend income with no tax liability, but anything above that will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.
Whilst a lot of taxpayers will end up paying more, others will find themselves better off under this new regime. It may make sense for some people to take extra dividends before the rules change, but not everyone. Talking to your accountant about the changes and what you should do will ensure you are prepared when they take place.
Take advantage of the Annual Investment Allowance
After a temporary increase in 2014, the Annual Investment Allowance (AIA) will be permanently set at £100,000 from January 2016. The AIA is an allowance for businesses to invest in tools, plant and equipment, including developing new software, systems or products, with 100% tax relief on qualifying items in the year of purchase – making 2016 the perfect time to focus on upgrading your systems. In some cases there may be Research and Development (R&D) tax credits available, which is an excellent incentive for businesses to invest in new systems and develop new products.
How employment changes could affect your business
Auto-enrolment – again
We’ve previously discussed the changes in workplace pensions and auto-enrolment, but in case you missed it here’s the overview. Auto-enrolment is part of the Workplace Pension Reform, which means every business in the UK must enrol their workers into a Workplace Pension Scheme by 2018. Auto-enrolment applies to all full and part-time employees who are earning over £10,000 per year on your payroll, and it’s a process most small businesses have started focusing on – if you’ve not started thinking about auto-enrolment in your business then speak to your accountant at the earliest opportunity in 2016.
New living wage
Along with changes to dividend tax, businesses will also be effected by the changes to the Minimum Wage. From April 2016 the Minimum Wage will increase by 10%, from £6.50 per hour to £7.20 per hour – which will see six million people get a pay rise, according to the Chancellor, George Osborne. There are fears that this could cause a knock-on effect for businesses, whereby employees not affected by the new living wage will expect a pay rise to match their colleagues. Additionally the cost of workplace pensions will increase with the increase in wages, which could result in more of your staff being entitled to a workplace pension scheme. If your staff are likely to be affected you will need to review your overall employee costs, which includes the new workplace pensions, and, as a result of these changes, you may find you need to increase prices to your customers in order to cover your costs.
Rise in employment allowance
At the same time as announcing the above, the Chancellor also announced changes to the Employment Allowance (EA), which allows businesses and charities to claim money back on their Class 1 National Insurance (NI). From April 2016 the EA will rise to £3,000, a 50% increase, to counteract the additional costs small businesses will face from the changes to the national living wage. This change is designed to support small businesses and charities, encouraging them to employ people.
Running your business
Technology and online accounting
Online accounting platforms, such as Xero and FreeAgent, are not something which should be new for 2016. Yet thousands of small business across the UK are still struggling with outdated systems and spreadsheets in the battle to keep their books in order. It doesn’t have to be this way – platforms such as Xero are designed to help small businesses simplify their accounting and bookkeeping, from seeing your cashflow in real-time to fuss-free expense claims. We have helped revolutionise our clients’ business finances through moving them to simpler online accounting systems.
Technology continues to advance at an astonishing rate, and businesses of all sizes will always benefit from keeping up with the latest ways to improve and streamline what they do. Not investing sufficiently risks handing a competitive advantage to someone else. We have a lot of experience in this area, in terms of what we do to stay ahead of the game, what we see our clients doing and what we help them do. So talk to us today if you know that you need to improve your systems, but don’t know where to start.
And most importantly…you must have a strategy
Every business needs an effective leader, who has a clear idea of the journey ahead. You need to know the destination you’re aiming to arrive at in order to plot the right course today, tomorrow, next week and so on. The most successful business leaders we see avoid getting bogged down in day-to-day details and ensure they have a plan.
When we begin working with a client we want to know your business inside out, some of the questions we ask ourselves and our clients are:
- What are your margins? Can it be better?
- Is your cash flow healthy?
- What do you need monthly sales, costs, cash flow and stock levels to be in order to make the profit you want?
- How are you going to achieve the growth you want?
- Do you have a marketing plan?
- What are your competitors doing? Can you learn from them or differentiate yourself?
- Are you delivering what your customers want? Will that change in the future?
- Are your staff motivated and working efficiently?
- Do you have a particular problem area in the business? If so, what are you doing to overcome it?
Are you getting the right advice and support in dealing with these challenges? Get in touch with the experts at Approved Accounting now. Call us on 01730 823 000 or Email Jon.