The FreeAgent Blog
Posted on 14 September 2017 by FreeAgent - Jump to comments
The Finance Bill 2017-19 is on its way through parliament, breathing new life into Making Tax Digital (MTD) and bringing a controversial cut to the dividend tax-free allowance a step closer to reality.
Making way for Making Tax Digital
MTD was one of the tax measures dropped in the pre-election Finance Bill, due to the lack of time for scrutiny in parliament before the snap general election took place in June. While the timeline for implementing MTD was subsequently scaled back, the government said that it remained “committed to the digital future of the tax system” and that it would pursue measures to legislate for MTD in the next parliament.
Now that the post-election dust has settled, the new Finance Bill puts MTD back on track with proposals to legislate for MTD for VAT as well as for Income Tax. In the revised timescale for MTD, which was announced in July this year, deadlines for keeping digital tax records were only confirmed for VAT figures, with similar requirements for “other taxes” only coming into effect in 2020 at the earliest. The inclusion of MTD for Income Tax in this Finance Bill is a strong signal that the government is still committed to rolling out MTD beyond the boundaries of VAT reporting.
The Finance Bill 2017-19 also seeks to introduce a minimum threshold for businesses to be mandated to participate in MTD. The government has previously said that this will be £10,000 annual turnover.
Dividend tax-free allowance to be cut in April
As proposed in the Budget in March, the Finance Bill confirms that the government still plans to drop the dividend tax-free allowance from £5,000 to £2,000 from the 6th of April 2018. The government says that this move is to make the total amount of income investors can receive “fairer and more affordable”. As we reported in March, however, company directors/shareholders who take a low salary from their company and make up the rest of their income with dividends will have to pay more tax on that income as a result of this measure.
The Finance Bill 2017-19 is currently being considered in parliament, and will not be fully introduced until after the Autumn Budget has been announced on the 22nd of November.
Posted on 30 August 2017 by Mark James - Jump to comments
Perhaps one of the biggest challenges of self-employment is that you have to fend for yourself. There’s no HR department to deal with details like your pension, and no sick pay, holiday pay or paternity leave. You’ve got more costs to contend with than you would in traditional employment, along with the panic about how to pay for them.
It’s against this backdrop that millions of people neglect their retirement, with more than a third of Britain’s 5.2 million micro-businesses holding no pension plans. We get the inertia: life is expensive and retirement can feel like a distant expense. But as the sums show, it’s better to start saving sooner rather than later. Your pension needn’t be abandoned and with some small lifestyle changes you could start saving tomorrow, without noticing the impact on your pocket too much. Here Mark James, Content and Communications Manager at PensionBee, explains how.
Why a comfortable retirement might not be as expensive as you think
There are a lot of figures thrown around when it comes to retirement, and it can be tricky to work out exactly what you’ll need to save. However, perhaps the best source of inspiration is Britain’s pensioners, as who knows the cost of retirement better than them?
To this end Which? recently conducted some research, surveying close to 2,000 pensioners. On average, retired couples in their study found they needed £18,000 a year to cover household essentials - such as food, utilities, transport and housing costs - rising to £26,000 allowing for extras, such as a European holiday and leisure activities. Check out the pie chart below for an in-depth breakdown.
This £26,000 figure works out per person at £13,000 a year. So, if you’re entitled to the full state pension of £8,296, then according to the Which? research you only need to supplement it with around £5,000 per year. Still, that’s not a negligible amount when you’ve got plenty of other costs to pay - so how can you reach the £5,000 that's required?
How some small lifestyle changes can have a big impact
To generate that Which? sum of £26,000 a couple would need a pot of £210,000 in today’s money, in addition to their full state of pension £8,296 per year*. Based on the current retirement age and state pension entitlements this means that couples who are starting from scratch need to be saving:
- £131 a month from age 20
- £198 a month from 30
- £338 a month from 40
- £633 a month from 50
Take a minute to consider those figures - they’re not too scary, are they? Especially given that they’re based on a couple saving for retirement together. Break them down per person and they become even less daunting, for instance:
- £65 a month from age 20
- £99 a month from age 30
- £169 a month from age 40
- £316 a month from age 50
Now start thinking about your spending habits - dinners out, expensive lunches, your coffee habit perhaps - and it’s possible to see where that extra pension money might come from. For instance, one OpenTable study revealed that the average Brit eats out six times a month and spends up to £53 per meal, bringing the average annual restaurant spend to £4,000 per person. If that sounds familiar then by simply cutting back on eating out, you could start funding your retirement!
The same goes for those lunches grabbed when you’re out and about, and those coffees from expensive chains. Every one of us has a guilty pleasure that we know we spend a little too much on (beer in my case…) so start by identifying these costs and work out how you can spend less.
But hold on, why is it so necessary to make these sacrifices? What makes a pension so essential?
Why a pension is so important
As things stand, the average life expectancy is around 81, and it’s a number that’s only expected to rise in the coming years. In parts of the UK, babies being born now are expected to live up to 105 and beyond, illustrating the shifting demographics of the country.
All of this change is having an impact on the state retirement age, with one recent government report suggesting that by 2050 it could be increased to 70. Whichever way you look at it the wait for your state pension is only likely to get longer, so your personal pension will become more important than ever. The good news is that pensions are a tax-efficient way to save (if you’ve got an accountant they’ll be able to tell you more) and with a bit of digging you might discover you have more saved than you think.
There’s an estimated £400 million in unclaimed pensions out there in old workplace schemes, so if you’ve ever worked for someone else it could be worth doing some searching. Chances are you may have been signed up to their pension scheme, so sift through that old pension paperwork if you think this might be the case. Alternatively, contact the government’s Pension Tracing Service and see if they can help.
Ultimately, the state pension alone is unlikely to be enough to support you in later life, so a personal pension is essential if you want a comfortable retirement. In addition to the Which? figures, our pension calculator can give you an indication of what you should be saving, plus if you’ve got old pensions that you’d like to consolidate, PensionBee will be more than happy to provide a helping hand.
Above all else don’t panic, as there’s still time to build that comfortable retirement! Some small sacrifices really can go a long way, whether in your 30s, 40s or 50s.
PensionBee puts you in control of your pension saving by finding and combining your old pensions into a new online pension plan. From fairer fees to a beautiful digital dashboard, we’re building a pension service that’s fit for today, and for tomorrow. Sign up to PensionBee now to take control of your pension.
Risk warning: as with any investment, your capital is at risk when you invest in a pension. The value of your pension may go down as well as up, and you may get back less than you invested.
* Which? assumed that the sum saved receives tax relief at 20%, and savers are targeting a retirement pot size of £210,000 (what you need in order to generate enough private pension income to add to state pension income to give the joint retirement income required for a retired couple - £26,000). The sum saved is assumed to grow by 3% a year after charges. The £210,000 figure is for an initial defined contribution pot, which then goes into income drawdown at retirement. Figures shown are in today's money; to save the future equivalent, your contributions need to keep pace with inflation and your pension savings will need to grow by more than inflation (after charges) as well.
Posted on 17 August 2017 by Fiona Hendrie - Jump to comments
Sun, sea and… spreadsheets? If that combination just made you feel a tad queasy, then - a) I’m sorry and b) don’t worry.
There is absolutely no need to lug your laptop with you when you head off on holiday, especially if you’re just looking to keep one eye on your business. So when you're next killing time whilst travelling, take a break from the never-ending Insta-scroll and check these satisfying FreeAgent Mobile tasks off your to-do list instead.
1. Explain transactions ✅
Explaining transactions might just be one of the most satisfying things you can do with your phone. For the uninitiated, explaining transactions is a way of categorising all the transactions FreeAgent has pulled through from your bank account.
Categorising your spending like this helps FreeAgent to auto-populate your Self Assessment tax return (which is a HUGE time saver) and helps to build cashflow insights. To explain transactions in the mobile app, simply head to ‘Banking’, and then with just a few swift taps, your transactions will change from a mildly unsettling red, to a lovely, soothing green. Find out more about explaining transactions in our Knowledge Base.
2. Create a bill ✅
The word ‘bill’ might not inspire feelings of joy from most of us, but FreeAgent Mobile is here to change all that.
While you don’t want to be worrying about admin on holiday, it’s still handy to be able to keep on top of what you owe. If you receive a bill, for example from a supplier, you can easily log it in the app, no matter where you are. All you have to do is enter the amount, due date etc, and then it will appear on your ‘Bills’ screen. Done.
Then, when you’re back on home turf, you can view all of your upcoming bills at a glance - no risk of forgetting to pay anyone, no matter how jet lagged you are.
3. Record expenses ✅
There’s nothing worse than a wallet clogged full of old receipts, so why not make room for some exciting new holiday currency instead?
Whip out good old FreeAgent Mobile again, and tap ‘Add a new expense’. From there, you can snap photos of those old business expense receipts that you’ve been clinging onto, and store them digitally in FreeAgent instead. Once finished, you can safely discard those old bits of paper and fill your wallet with something much more exciting. Like Euros, Kuna, Krona, Rupee, Yuan...
4. Create estimates & invoices ✅
Is one of your super keen clients champing at the bit for you to start a new project for them - while you’re just trying to top up your tan? Create an estimate of the work you’re going to do for them in FreeAgent Mobile, and you can email it over without leaving the app. Similarly, if you forgot to fire off an invoice before you began your break, you can take care of that in FreeAgent Mobile too.
Now that you’ve checked in on your business, shouldn’t you be getting back to more important things? Now, where is that sun cream?
Posted on 10 August 2017 by Adrian Mather - Jump to comments
Looking to kick back and kick your small business up a notch? If you’re lucky enough to be heading off on holiday soon, here are five books that will keep your brain ticking over while your body unwinds. Grab a cool drink and get refreshed, revitalised, and most importantly - get reading.
As Mark Twain once said “If it’s your job to eat a frog, it’s best to do it first thing in the morning. And if it’s your job to eat two frogs, it’s best to eat the biggest one first”. By ‘eating the frog’ and getting the tasks you most dislike out of the way first thing, you’ll start your day feeling accomplished and productive. This helpful book gives you 21 practical and doable steps that will help you leave procrastination behind and become your most focused, productive self.
Lean In: Women, Work, and the Will to Lead Sheryl Sandberg
Sheryl Sandberg - Facebook COO and one of Fortune magazine's Most Powerful Women in Business - explores the topic of women and ambition in this bestselling 2013 book. Drawing on her own experience of working in some of the world's most successful businesses, she looks at at what women can do to help themselves, and explores how making small changes can cause a huge ripple effect.
A Field Guide to Freelancer Finances FreeAgent
We may be biased, but we think this free ebook by FreeAgent is super useful! This collection of business finance tips tells a story about not just surviving as a freelancer, but thriving. It’s a handy guide that includes first-person advice, industry research, survey results and expert tips. There are over 30 contributors to the book, giving an inside view into how they’ve overcome problems such as chasing payments to succeed as independent freelancers.
How to Style Your Brand: Everything You Need to Know to Create a Distinctive Brand Identity Fiona Humberstone
Whatever your business, your brand is key to getting clients’ attention. Drawing on her experience of developing hundreds of identities for companies worldwide, Fiona Humberstone walks you through the process of styling your brand. From finding your focus, creating an inspirational vision and unlocking the power of colour psychology; Fiona aims to help you discover the design details that will make your business irresistible.
The Tipping Point: How Little Things Can Make a Big Difference Malcolm Gladwell
The tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire. Just as a single sick person can start an epidemic of the flu, so too can a small but precisely targeted push cause a fashion trend, the popularity of a new product, or a drop in the crime rate. If you’re interested in the psychological side of marketing and promotion, this book is for you.
- Turning over a new leaf: tips for organising your bookkeeping in autumn
- MTD for Income Tax: next steps for sole traders
- Hack to the future: how hack days inspire creativity at FreeAgent
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda