Spring Budget 2017

The Chancellor’s 2017 Budget contained some important announcements and confirmed a number of changes planned for the new tax year.

There was both good and bad news for sole traders and small businesses in today’s Budget. Following this, we have put together a review which contains the latest tax and financial information, which we trust you will find useful. Please click here to download.

For more information on how the changes in the Budget may affect you, please contact us

In Brief:

Class 4 NICs will increase from 9% to 10% in April 2018, and then to 11% in April 2019 for those earning more than £8,060. Employees currently pay 12%. Class 2 contributions – as previously announced – will be abolished from April 2018. This will affect you if you are self-employed.

In addition, Hammond announced that the tax-free dividend allowance – introduced last year – will be reduced from £5,000 to £2,000 from April 2018. This will affect you if you trade as a Limited Company.

As plans for Making Tax Digital (MTD), continue apace, Hammond also announced that for businesses with turnover below the VAT registration threshold this will be delayed by one year to April 2019 to allow more time to prepare for the changes.

Businesses that have an annual turnover below the VAT registration threshold will have an extra year before they are required to keep records digitally and send HMRC quarterly updates.

Those businesses trading above the VAT threshold will still be required to keep digital records and send HMRC quarterly updates from April 2018.

The exemption threshold for MTD remains at £10,000.

At Liric, we are working on ensuring all our clients have the systems they will need to ensure they comply and there will be much more about this in future newsletters.

 

Free Information from Companies House

I just thought i would let you know of something you can get for FREE…. You can now get free access to 170 million records at Companies House.

In line with the government’s commitment to free data, Companies House announced on 22nd June 2015 that all public digital data held on the UK register of companies is now accessible free of charge, on its new public beta search service.

This provides access to over 170 million digital records on companies and directors including financial accounts, company filings and details on directors and secretaries throughout the life of the company.

As a result, it will be easier for businesses and members of the public to research and scrutinise the activities and ownership of companies and connected individuals.

Standing back and looking at your business

The 80/20 Rule

The Pareto principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto who, while at the University of Lausanne in 1896, published his first paper “Cours d’économie politique.” Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population; Pareto developed the principle by observing that 20% of the peapods in his garden contained 80% of the peas.  In business, it is usually applied as follows: 80% of your company’s profits will come from 20% of your customers. In essence, 80% of whatever outcome you’re expecting will come from 20% of whatever you put into your project.

Why is it so important?

Using the 80/20 rule allows you to focus your business planning in a way that will allow you to maximise profit, production, or any other aspect of your business, with a minimum of effort.

80% of profit comes from 20% of customers

It would make sense to focus on making sure that 20% of your customer base is happy before expending resources on the rest. The same thing can be applied to any situation. While it doesn’t always come out to 80/20, the basic concept still applies: there is no 1 to 1 balance of input to output.

This same rule can be applied to marketing, profit predictions, and many other business aspects can also be applied to time management and other things that you use every single day, whether you realise it or not. 80% of your results should come from 20% of your effort.

It’s easy to be pulled into projects around your business that aren’t going to be terribly productive in the end. Sure, you may be able to fix the light bulb in the back office, but is it really worth spending that time fixing the light bulb when you could instead do a sales call? If it takes you 2 hours to fix a problem that would have taken a professional maintenance technician 20 minutes, then you’re losing out on that 2 hours. Instead of using 20% of your effort to obtain 80% of your results, you’ve managed to turn the rule on its head, spending 80% of your effort for only about 20% in terms of results.

One Final Note

The 80/20 rule is a great rule of thumb but it isn’t set in stone. It’s a very useful guideline, but it should only be used as such. Don’t try to lock everything you do into that 80/20 ratio or you’ll find yourself striving for something that is impossible to achieve. That said, take a look at the various aspects of your business, and see how you could benefit from the application of such a guideline. You’ll be surprised at the amount of extra time and productivity you can obtain with a little change of perspective.

Employment allowance continues

THE £2,000 EMPLOYMENT ALLOWANCE CONTINUES FOR 2015/16 The £2,000 “employment allowance” introduced in 2014/15 continues to be available for 2015/16. Note that this allowance provides relief from paying employers NIC on the first £2,000 of contributions. The £2,000 allowance is set against employers NIC on a cumulative basis during the tax year. The allowance is available to most employers, although those under common control are restricted to just the one £2,000 allowance. Husband and wife companies with no other employees charged to national insurance may find it tax efficient to change the mix of salaries and dividends to take advantage of the £2,000 allowance. From 6 April 2015 it may be advantageous to increase directors’ salaries to the new £10,600 personal allowance instead of the NIC threshold of £8,060 (£155 a week). The extra £2,540 will save £508 (20%) corporation tax (£1,016 for two directors) whereas the additional employees NIC would be just £305 each. Husband and wife company – from 2015/16: Salary £10,295 net = gross £10,600 Dividend up to BR band £28,606 net = gross £31,785 Top of BR band £42,385 Net cash extracted (each) £38,901 Total extracted £77,802 for couple There would however be 20% corporation tax payable. Profits before tax £71,515 @ 20% = £14,303 corporation tax, thus profits before salaries and tax would be £92,715. This results in an overall tax and NIC rate of just 16.1%. A salary in excess of £10,600 would attract income tax (at 20%) and employee’s NIC at 12%.

Implementing Your Business Plan

Many are familiar or have maybe even worked with teams who set strategic goals for the organisation, but fail to create an operational process to achieve them. A disproportionate amount of time is spent on the strategy compared to the detailed plan of implementing and executing that strategy. All too often, managers attempt to point their team towards the strategic end game, but provide little guidance on the step-by-step tactics to get there. Here are a few tips from LIRIC to help you to implement your business plan successfully:

SET OBJECTIVES

Strategic business plans should provide financial targets, initiatives to reach those targets and an overarching philosophy in which the company operates.  Writing the objectives is the easy part – it is the implementation of specific, measurable, achievable, realistic, timely (SMART) objectives that is key to the success of any business plan.

SUPPORT THE STRATEGY WITH TACTICS

A business plan that hits the mark not only identifies the strategic direction of the company, but also maps out the tactical elements that enable the company to execute the plan. This is where most companies fail to operate their strategic plan into tactical initiatives. Why are these strategies going to deliver the greatest return on investment and effort? How are they going to complete and deliver on their strategic plan? Who is responsible for all of the steps required to execute?

CASCADE THE OBJECTIVES

A strategic plan generally comes from the top.  It is up to each of the department heads to internalise the plan and cascade the various tasks throughout their teams.  Your companies managers should set the benchmark, help the team lay out the necessary tasks and then hold their time accountable to achieving those milestones.

MONITOR REGULARLY

Achieving strategic success is one part execution and one part inspiration. Hitting milestones on a regular basis provides the ongoing desire to see the plan through to its full fruition. Setting milestones and monitoring not only keeps the firm on plan, but also allows for management to communicate these successes to the wider team. Strategic targets can be daunting at the outset, but breaking them down into chunks makes achieving them more manageable.

Let us work with you on this – call LIRIC!

REASONS WHY PEOPLE START THEIR OWN BUSINESS…..

Here LIRIC reveal the most popular reasons, as detailed by a recent Barclays research, and their early experiences:-

  1. To work for myself….

It’s a cliché, but the research showed it still holds. 54 per cent of those canvassed said this was the reason they went out on their own, a claim most common in the North and Midlands. Paul Frost, of Paul Frost Associates in Teesside, left a career in broadcasting to launch a successful PR and media training business in 1994. “I wanted the flexibility of working for myself, and knew I had very useful and unique skills,” he said. “I’m ambitious and work better on my own, when I’m responsible for winning my own contracts. I’ve never looked back.”

  1. I was made redundant….

The payout that often comes with redundancy can make funding a new business much easier, which may explain why a fifth (20 per cent) of those asked said it was their catalyst.
Hannah MacDonald founded September Publishing a year ago after losing her job. “I’d never seen myself as an entrepreneur or business starter,” she says. “But when you’re made redundant, the change is made for you and you have to make the most of it. I didn’t want to give up on the industry and I need to work flexibly because I have kids, so starting my own business seemed better for my career.”

  1. Turning a hobby into a business…..

Most of us save hobbies for the weekend, but investing in that interest could be the key to a successful start-up. A significant 16 per cent of those asked had turned their hobby into a business.  Joan Mulvenna launched Garden Design Manchester after retiring as a teacher and realising her real passion was horticulture: “I’m really busy at the moment and I’m thinking about how to expand,” she says. “Right now it’s just me – I hire a part-time gardener to help out but I’d love to employ someone full time.”

     4. A childhood dream….

Those who had a childhood dream to own and run their own business make up 7 per cent of the research results. The motive was much more prevalent with women, with almost twice as many – 11 per cent – stating they grew up wanting to be a business owner, compared to 6 per cent of men. Kelly Alison launched KVA Digital a year ago. “From a very young age, I knew I wanted to run and grow a business,” she says. “It’s about more than making money – it was about achieving my dreams. Although it’s been one of the hardest years of my life, especially with a young child in tow, I absolutely love what I do and can’t imagine doing anything else.”

     5. NOT a TV programme….

One surprising result from the research is that TV shows about starting up a business are cited by just 1 per cent of respondents as a reason for starting up their company, while celebrity entrepreneurs also offer little inspiration – again just one per cent of men and no woman said they were a reason for going into business.

Why did you start your business? – let LIRIC know your story!

As 2015 approaches planning ahead is vital

Two-thirds of business leaders say they simply don’t have enough time to step back from day-to-day tasks to focus on a long-term strategy, according to a new report from GrowthAccelerator.  And yet those who have taken the time to plan say it has put them, on average, ten months ahead of where they would have otherwise been.  Other findings include:
  • The survey also finds that half of business leaders are unable to describe their business objectives for the next 12 months “off the top of their head”.
  • only 16% of business leaders spend the majority of their time planning for growth;
  • nearly half (47%) of business leaders are not working regularly, or at all, on their business strategy;
  • 36% only revisit their business plans occasionally;
  • 3% don’t even have a business plan.

Business owners are unsure how to grow their business according to the report, with 44% saying that a key challenge is knowing how to grow and with 30% saying that defining a clear strategy for growth is an obstacle.

The ‘Working On Not In’ report from GrowthAccelerator shows that this is made more difficult for the business leaders who do not have enough time to step back from the day-to-day to focus on a long-term strategy.

Simon Littlewood, director at GrowthAccelerator, said: “For business leaders, knowing the best way to achieve growth is a sizeable challenge and an added pressure in changeable economic times. This, combined with the time-consuming demands of ensuring a business is running smoothly on a day-to-day basis, means looking forward with longer term planning can slip down the to-do list, but it is essential for success.”

Meanwhile, new research by digital marketing agency, Engineered Marketing, finds that the majority (64%) of UK small businesses do not have a documented marketing plan. And women in business are more likely to ‘wing it’ than their male counterparts, with 70% of women saying they did not have a marketing plan compared to just 62.2% of men.

 

LIRIC can work with you to help you identify your goals, document them and achieve them. Contact LIRIC  to see how our business growth programme can work for your business.