Recovery, recruitment and modernising the tax system

As we head into autumn, it finally feels as if many companies are starting to recover and grow their teams and recruit – we are in the process of doing that ourselves.

So although not unexpected, it came as a bit of a blow to many businesses and freelancers when the Treasury decided to raise taxes on workers, employers and some investors.

The rate of National Insurance payroll taxes paid by both workers and employers will now rise by 1.25 per cent, with the same increase also applied to the tax on shareholder dividends.

It will then become a separate tax on earned income from 2023 - calculated in the same way as National Insurance and appearing on an employee's payslip.

As well as a negative reaction from many, there's also been criticism from professional organisations around plans to change the 12-month period that partners and sole traders use to calculate their profits, which are due to come into effect from next year.

Another major change on the horizon for small businesses and the self-employed to get to grips with is the switch to 'Making Tax Digital' (MTD) - the modernising of the UK's tax system for the UK's estimated 4.3 million self-employed and small businesses, which will see the end of the traditional tax return.

Are you ready for Making Tax Digital?

Our team have been busy preparing for the switch to MTD for some time – ensuring software is compatible and focusing on any related client issues, such as what counts as VAT-taxable turnover.

The most recent announcement confirms that all VAT registered businesses will have to comply with the new system from 1 April 2022, whilst MTD for income tax has been delayed until 6 April 2023.

We've had countless questions from clients about how the change will impact them and their business.

Of course, many businesses already file their tax returns online, but they will need to ensure they are using MTD-compatible software for the implementation. We can help with this by ensuring that the right Application Programme Interface (API) is used. For individuals, they are required to send the information directly to HMRC via a personal account.

As small businesses and contractors are squeezed by additional taxation and changing systems, it's more important than ever that people ensure their accounts are automated. As 2022 draws to a close, we are helping an increasing number of clients move to streamlined systems, saving them time and money in the longer-term.

It's estimated that around one in five (20%) businesses are still using Excel spreadsheets and manual processes for their accounting - with just 18% going fully digital with end-to-end invoice capture, approval and payment.

Manually entering invoice details and initiating payment is not only time consuming, it also increases the risk of mistakes as well as incurring higher staffing costs.

The pandemic seems to have accelerated adoption of new technology for many of our clients – if you haven't yet switched, talk to us about the benefits and how we can help you move to a more efficient way of doing business.

Giltinan and Kennedy works in partnership with many businesses, charities and individuals across West Sussex and beyond. Please feel free to get in contact with us for an informal chat about your business finances on 01403 337490 or learn more at https://www.giltinan-kennedy.co.uk/services/tax-advisers