The FreeAgent Blog
This year’s Budget announcement is right around the corner - so what might be in store for freelancers and small business owners?
More information about Making Tax Digital
The Chancellor could well use the Budget as a launch pad to give more information about the details of how Making Tax Digital will work for businesses. Will the minimum threshold for compliance be the originally proposed £10,000, for example? And what figures will actually be required for a quarterly submission under Making Tax Digital?
We also await with keen interest any announcements about how the government plans to help and support small businesses transition to Making Tax Digital, through the provision of information, funding or training for example.
The future of IR35
Changes to IR35, which will make public sector engagers (i.e organisations in the public sector that take on contractors) responsible for checking a contractor’s status and operating PAYE and NI for those contractors who are deemed to be quasi-employees, come into force on 6th April 2017.
What the entire contracting sector is keen to know, and what may be revealed in the Budget, is whether the changes will be extended to cover the private sector in the future. Even if the government is planning to do this, they may hold it back for a few years to see how the changes “bed in” in the public sector - so we may or may not see more about IR35 in this year’s Budget.
Business rates review
Small business rate relief has been kept at double the normal 50% rate for a number of years.
While this 100% relief is currently due to drop back to 50% on 31st March 2017, the Chancellor could use the Budget as an opportunity to keep the 100% relief for small businesses, either temporarily or permanently.
On the other hand, as business rates are about to be increased for certain businesses in many parts of the country, the 100% relief may be terminated in accordance with the existing plans.
Are freelancers in for another tough time?
With the changes to IR35 and the introduction of the new limited cost trader rate of 16.5% on the VAT flat rate scheme, freelancers have already felt the impact of recent legislative updates.
Will this Budget be used to introduce other measures that might affect freelancers, such as a restriction on what travel or food and drink costs may be used to reduce a small business’s tax bill? We can only hope not!
And finally a wish: more green tax reliefs!
If I could make one wish for what the Chancellor would include in the Budget - apart from radical tax simplification - then it would be for an increased level of environmentally-friendly tax reliefs for small business owners.
The flat rate allowance for the electricity and gas used by sole traders is a good start, because it saves sole traders some time in calculating their homeworking costs. Tax relief on bicycle business travel for sole traders, similar to that available for employees, would also be very welcome, and would also potentially encourage more sole traders to travel by bicycle.
Meanwhile, a simpler way of calculating how much sole traders can claim for other homeworking costs, such as rent, rates and council tax, would also save time and possibly encourage home working - which, in turn, could save on pollution caused by commuting!
Dusters at the ready! It’s National Spring Cleaning Week from 6th-12th March 2017, aiming to inspire and educate the UK to spring clean not just their homes, but their lives as well. Here’s some simple ways to give your small business a refresh.
1. Tidy your bookkeeping routine
It might not be that exciting but regular bookkeeping is an essential part of running a small business. By always knowing how much you’re spending, how much tax you owe (and when) and which clients haven’t paid you, you’ll be able to make informed decisions about how to run your business.
Spring Cleaning Week is the perfect time to tidy up your routine. To make sure you stick to a regular plan, start by picking an hour a week that you can dedicate to your bookkeeping routine. Make that time an appointment like any other in your diary, so that you’re not tempted to put other meetings there. You can then use this ringfenced time to keep up to date with your invoices, reconcile your bank transactions, chase up invoices and log expenses - saving you a lot of hassle in the long run.
For more tips on how to use the ‘hour a week’ system, take a look at this handy checklist.
2. Brush up your contract
It’s essential that you agree a written contract with each client before you begin work, otherwise it’s all too easy for a client for delay and dispute payment. Take some time this week to check that your contract template covers you for all potential disputes.
Here’s some things to consider when you’re reviewing your current contract:
- How quickly do you want to be paid? If you usually give clients 30 days to pay, consider changing your terms to zero days for a much better chance of being paid within a week.
- Your contract should make it clear that the client is paying for your work whether they use it or not (for example, in case they say ‘we decided to do the work in-house’ once you’ve completed the job).
- Consider including a clause that states that the client doesn’t own, and may not use, the work you produce until you’ve been paid in full. Make sure it’s very clear in your contract who owns the rights to your work, and when.
These sample contract agreements from Elance will also help you check your contract template is watertight.
3. Collect old debts
Now is a great time to go back through your list of invoices that you haven’t been paid for yet. Accountants call this your “aged debtors report” and it is part of the standard set of accounting reports that an accountant or accounting software would prepare for you.
Use this aged debtors report to check who should have paid you, then proactively contact those customers by phone or by email and make sure that payment is on its way. If you are VAT registered, don’t forget that the aged debtors report will show the amount of money owed including VAT, which you’ll need to pass on to HMRC, so remember you don’t get to keep all that money owed!
In FreeAgent you can set up automatic email reminders for invoices, so going forward your invoices will chase payment themselves - easy!
4. Give your business plan a polish
The new business year begins in April so now is a good time to review the business plan you hopefully made when your business began (if you don’t have a plan, here’s some useful information from Freelance UK on creating one).
Your business plan should have covered details about who your customers would be and how the business operations would work, as well as how much you expected to sell, and how much profit you estimated you’d make.
Take the time to think about how you would like to develop your business in the next year. Are you planning to take your business into a new market, for example by selling offline as well as online, selling to overseas customers, or bringing out a new product or service? Will there be changes to your operations, such as moving from working at home to an office or other workspace? Are you still buying from the same suppliers? All of these factors could affect what you need to include in your updated business plan so that it’s as helpful for you as possible.
Those of you with a penchant for precision billing and/or laser-like time management will be delighted to see the introduction of practically genuine Swiss-engineered stopwatch timers on FreeAgent Mobile.
When you create a timeslip on FreeAgent Mobile, you’ll now see a new time picker, which gives you the option of either selecting a duration for the timeslip or tapping a ‘record’ button to activate a stopwatch timer.
Once you’ve hit ‘record’, the timer runs in the background while you complete the task in hand. When you’re finished, just tap the ‘pause’ button to stop the timer and generate a timeslip for the work you’ve just completed.
Running timers will sync between FreeAgent’s desktop and mobile versions, so you can start a timer on FreeAgent Mobile and then stop it when you’re back on your laptop.
As ever, you can download FreeAgent Mobile for iOS and Android from the usual places:
Now, go make every second count!
Roan and the team at FreeAgent
We know that VAT can be a confusing topic for small businesses; our chief accountant, Emily, nicknames it “Very Awkward Tax” for a reason!
With this in mind, we teamed up once again with our friends at HMRC to produce a webinar introducing some of the key principles of VAT for businesses.
If you’ve ever felt confused by VAT, or if you’re simply unsure how it affects your business, this webinar will come in very handy. Presented by HMRC, the session covers:
- what VAT is and how it works
- when you need (or can choose) to register for VAT
- what you must do once you're registered
- how and when to claim, charge and pay VAT
Looking for more support?
If you’d like to learn more about VAT after watching the webinar recording, why not head over to our VAT hub page, where you’ll find lots of helpful articles and other resources to help you get to grips with VAT!
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- Last-minute tax saving tips
- Budget 2017 update: some good news for freelancers
- Could you run your small business from your smartphone?
- Budget 2017: another rough ride for freelancers
- Budget 2017 - what can we expect?