Knowledge Bank

Knowledge Bank

A ROUNDUP OF SEED ACCOUNTING SOLUTIONS' MOST FREQUENTLY ASKED QUESTIONS

Do I have to register for VAT?

In the UK, the VAT threshold is currently set at £85,000 (for the 20-21 tax year). This means that if your taxable turnover in a rolling 12-month period exceeds £85,000, VAT registration is compulsory. (Please note that it is not £85,000 in a financial

or a tax year, so if you are approaching the threshold, you will need to monitor this every month).

Your taxable turnover is made up of sales of products or services to customers in the UK or the EU. Sales outside of the UK or the EU do not count towards to your taxable turnover BUT you must ensure you keep detailed records of those Rest of World sales to prove they do not count towards your turnover. We would recommend keeping these sales separate to your UK and EU sales so that they can be monitored carefully.

In addition, if you sell digital products (eg downloadable documents, pre-recorded training courses etc), there is a different threshold of £8,818. This is covered in another FAQ post.

Payment on Account

If you file a self assessment tax return, you will have to make a Payment on Account (POA). This applied if you have tax to pay of over £1,000, and you haven’t already paid 80% or more of your total tax liability through PAYE.

Each

payment on account is half (50%) of your previous tax year’s tax bill and are due by midnight on 31st January and 31st July.

If, after filing your Self Assessment Tax Return, you still have tax to pay in addition to your payments on account, you will have to make a balancing payment by the following 31st January.

You can apply to reduce your Payments on Account if you expect your profits to decrease significantly, however if, when you file your Self Assessment, it transpires that you should have paid the original amounts, you will be charged interest on the unpaid amounts.

Example: Your tax bill for the 2019-2020 tax year is £3,000. You have not paid any payments on account until now. You will have to pay £4,500 by 31st January 2021 (made up of £3,000 for the 19-20 tax year, and a first POA for the 20-21 tax year of £1,500) and a second POA by 31st July 2021 of £1,500.

What is my UTR? And where do I find it?

Your UTR (or Unique Taxpayer Reference) is provided to you by HMRC when your business starts trading, or you register for Self Assessment. You will usually receive your UTR within 2 weeks of registering a business (whether self employed, limited company or partnership).

In addition,

you will find your UTR on any correspondence from HMRC in relation to your business or tax affairs.

The following UTRs will be issued:

  • Individual UTR for anyone required to submit a Self Assessment (High Net Worth individuals, self employed, partners, limited company directors etc)
  • Company UTR for a limited company in order to file a Corporation Tax Return
  • Partnership UTR for partnerships and LLPs in order to file a Partnership Tax Return

It is important you keep this safe as it is required to file your tax returns. If you lose it, you can contact HMRC to provide you with a reminder (you will have to go through security to get this).

Can I include my accountancy fees?

As a sole trader, you may think you can include all your accountancy fees as a tax deductible expense however this is incorrect. You are allowed to claim for the fees incurred for providing services to your business, but some of your Self Assessment

is deemed to be a personal expense.

We recommend our clients put through all their accountancy expenses, and we will then deduct an amount in line with the amount of time it takes to file your return. We will allow for costs such as software, our time on support and advice for your business, any accounts that require preparation, and any other services that are provided to your business (as opposed to you as an individual).

Who needs to file a Self Assessment tax return?

You must file a Self Assessment tax return with HMRC every year if you are self employed (and earn more than £1,000) or you are a partner in a business partnership. You need to file a return regardless of whether you have any tax

or National Insurance to pay.

In addition, if your main income is from employment, but you earn money form renting our property, earn additional money in tips and commission that isn’t taxed through payroll, you have income from savings and investments exceeding £10k, if you earn dividends or foreign income. You also need to submit a tax return if you earn over £100k per year, if you receive Child Benefit and you or your partner earn over £50k per year.

If you are a higher rate taxpayer, you may wish to file a self assessment to claim tax relief on Gift Aid donations and personal pension payments.

If you have Capital Gain Tax to pay, and you have used the quick service, you will also need to declare this in a Self Assessment.

What is the difference between the terms ‘sole trader’ and ‘self employed’?

The easiest way is to break down the two terms:

Self Employment means you are responsible for declaring your taxes, managing your business, and deciding what work you do, and when and how you do it. If you’re self employed you won’t be entitled to

holiday or sick pay. You can work for more than one client. You might be a sole trader, or you might be a partner in a partnership.

A sole trader is a self-employed person who is the sole owner of their business.

In summary, there isn’t really a difference between being a sole trader and being self employed – sole trader describes the structure of your business, whereas self employed shows that you don’t work for an employer or pay your taxes through PAYE.

I sell digital services/products – what do I need to do for VAT?

If you sell digital services (such as downloadable documents, training courses etc) through your own website/shop to individuals in the EU (non-UK) you must register for VAT when the sales of these services exceeds £8,818. This is because the ‘place of supply’ is

deemed to be outside the UK.

You can register for the EU’s VATMOSS (Vat Mini One Stop Shop) to make this process a little bit easier, or you can consider selling through a marketplace that will deal with the VAT on your behalf. (Etsy, FastSpring and others can do this for you – there is a good list here.)

We would recommend planning ahead and deciding how you’re going to set up before you  launch your products – you don’t want to get on the wrong side of the HMRC VAT team!

Do I have to register for VAT?

In the UK, the VAT threshold is currently set at £85,000 (for the 20-21 tax year). This means that if your taxable turnover in a rolling 12-month period exceeds £85,000, VAT registration is compulsory. (Please note that it is not £85,000 in a financial

or a tax year, so if you are approaching the threshold, you will need to monitor this every month).

Your taxable turnover is made up of sales of products or services to customers in the UK or the EU. Sales outside of the UK or the EU do not count towards to your taxable turnover BUT you must ensure you keep detailed records of those Rest of World sales to prove they do not count towards your turnover. We would recommend keeping these sales separate to your UK and EU sales so that they can be monitored carefully.

In addition, if you sell digital products (eg downloadable documents, pre-recorded training courses etc), there is a different threshold of £8,818. This is covered in another FAQ post.

What are the workplace pension contributions at the moment?

For eligible employees, the rates for 2020/2021 tax year are 5% for employees, with the employer paying 3%, giving a total minimum contribution of 8%.

How do I record charity donations – Limited Companies?

Limited companies can donate money to charities and claim the corporation tax back on the value of the donation. Sponsorship of a charity or community sports association is different to a donation, but can also be claimed. If you are donating to charity in

return for something (eg a raffle, or for tickets to an event), you can only claim a percentage of the donation back (25% of the donation up to £100, £101-£1,000, £25 can be claimed, £1,001 or more, 5% of the donation, up to a maximum of £2,500). Simply spend the money out of your company bank account and ensure the transaction is logged against the relevant category in Xero.

What is the best way to pay myself as a limited company director?

The most tax efficient way of paying yourself through a profitable limited company is with a salary within the NICs threshold (£8,632 for 19/20 tax year), plus dividends. This ensures maximum money from the business, with the least amount of taxation.  This is not

always the case, for example when there is negative equity in the business, when the director has other employment or when there is more than one employee. As clients of ours, we will always advise you on the best way to pay yourselves.

Working from Home – Director and Employees?

Director or employee: Directors and employees of a business can claim £18 per month for use of home on a flat rate basis.

Alternatively, you can claim actual costs which may include itemised business calls from a home phone, or a second business line, light,

power and heat, and any insurance policies which have business elements added on. These would be apportioned based on the amount of time spent at home, and the percentage of home used. It is usually more cost- and time-efficient to claim the flat-rate amount, however if you believe the amount to be more than £18, it would be worth doing the calculations. Our clients are provided with a spreadsheet to calculate this at the end of their financial year.

NOTE: council tax, water and mortgage interest or rent cannot be claimed as they would be paid anyway, and are therefore not deemed to be incurred wholly and exclusively for the business.

Working from Home – Sole trader?

Sole Trader: Sole traders can claim ‘use of home as office’ under HMRC’s simplified expenses system. This equates to £10 per month for 25-50 hours worked at home per month, £18 for 51-100 hours, and £26 for 101 hours or more. This is usually

best for anyone who owns their house with a repayment mortgage. For those with an interest-only mortgage, or who rent, using the calculation method is usually more effective. This would involve collating all your household utilities for the year (gas and electric, water, council tax, rent/mortgage interest) and working out a proportion of your costs depending on the floorspace utilised whilst working from home, and the percentage of time used.

Our clients will be provided with a detailed spreadsheet so that the calculations can be done quickly. Once you have chosen the method of calculation, you are unable to change over.

What can be claimed for working from home? 

There are different rates depending on whether you are a sole trader or a director or employee of a limited company. As a director, running a business from home, it may be more tax-efficient to ‘rent’ the space to your business. Please book in

a call to discuss this with us as it requires a more detailed explanation of how it works, and to discuss the implications.

How can I claim mileage? 

You can claim mileage for any wholly and exclusively business travel in your car (45p per mile), your motorbike (24p per mile) and on your bike (20p per mile). The car rate reduces to 25p per mile for any mileage over 10,000 miles in

a tax year. There are a number of apps out there that can automatically calculate your mileage (TripCatcher and MileIQ are two of them, but also several others), but this is one of the few occasions we to like to use a spreadsheet (app fatigue anyone?) . We are happy to share this with anyone who needs it. The most important thing for mileage is to ensure you log three things: date, purpose of the journey, and number of miles. Without these three pieces of information, HMRC are likely to reject a claim in the event of an investigation. We recommend building the claim over a month, and then processing it into the accounts on a monthly basis. If you have a lot of mileage, you may wish to do this more regularly.

To actually claim the mileage back, you have a choice: actually withdraw the money from the business bank account each month (or whenever you submit the claim), or leave it until the end of the financial or tax year and adjust your profits accordingly. We usually recommend doing it as part of the process at the end of the year.

What VAT can be claimed on entertaining, subsistence and general food purchases?

There are complex rules for food expenses, and it is always worth remembering this when you are paying for a meal, or buying food. Not only are the VAT rules relatively complex, the distinction between what is entertainment, (and what is client entertainment and

what is staff entertainment) and what is subsistence adds further complexity. As a very basic rule, VAT can be claimed on subsistence purchases for directors and employees. VAT cannot be claimed on client entertainment expenditure (the term ‘client’ meaning either existing or prospective),  VAT can be claimed on staff entertainment (eg the annual Christmas party). Remember that this answer is in relation to VAT, there are separate rules for Corporation Tax – don’t assume they are the same. If you have a specific question relating to food expenditure, please do get in touch for us to explain in more detail.

How can you get in contact with us?

If you would like to find out more about how we work, and can help you, the best way to contact us is to book a Discovery Call here: https://calendly.com/team-seed/discovery-call . For existing clients, we recommend emailing one of the

team, or book in a call via the link in the team member’s email signature.

Who will I be dealing with?

We currently have a small team, with each team member responsible for their own roles. Kally is your main port of call for anything tax and accounts-related. Tamsyn is the go-to for Xero help, forecasting, management accounts, or general queries. Rosie will help update

any personal details, get you set up and running with us, and send you helpful reminders! Linda deals with our client bookkeeping, so if you use our bookkeeping service and have any questions about receipts, bank statements, invoicing or VAT and so on, she’s your person. Kiran is our in-house payroll guru so any questions you have about payroll and workplace pensions need to go to her. You may from time to time also reach our answering service. They are a lovely bunch, and ensure all messages reach us, with a contact number and a reason for calling – we will get in touch as soon as we can if you get through to them.

How can you get in contact with us?

If you would like to find out more about how we work, and can help you, the best way to contact us is to book a Discovery Call here: https://calendly.com/team-seed/discovery-call . For existing clients, we recommend emailing one of the

team, or book in a call via the link in the team member’s email signature.

I need to raise an invoice in Xero in a different currency

If you need to raise an invoice in Xero in a different currency you have two options:

  1. Upgrade Xero to their Premium subscription to enable multi-currency functionality
  2.  Manually calculate the GBP amount using a foreign exchange calculator such as xe.com

Upgrading your subscription will

definitely be worth it if you have bank accounts in different currencies, or if you raise invoices regularly that are in a different currency. Using the multi-currency function in Xero is straightforward and easy to set up. Read more over on their website here.

For a one off invoice, we would recommend using xe.com to find today’s FX rate, and working out the GBP equivalent of the Euro invoice. You will then need to state the FX rate and the Euro amount in the description box of the invoice.

What is Senta for?

Senta is a CRM system, workflow management tool and document portal. We use Senta to store all your data, but we also use it to share documents safely and securely with you, and you with us. We also use it to keep track of

the jobs that we need to complete for you.

When we upload documents to the portal, you will receive an email informing you there has been something uploaded to your portal, that you have an action to complete, or a document to sign. If you are responsible for a number of entities in Senta (eg if you are a limited company director, you will have an account for you as an individual, and for the company), you will use one login, and you will choose which account you wish to access when you login.

If you have any problems with your Senta access, please do let us know.

How do I access Senta?

When you first sign up as a client with Seed Accounting Solutions, we will ensure you are fully set up on our portal, Senta. We use Senta to store all your data, but we also use it to share documents safely and securely with

you, and you with us.

In your first couple of weeks, you will receive an Activation Email from one of our team which will confirm you have been set up in the Senta Portal. You will be required to set a password. These login details will then need to be kept safe. When we upload documents to the portal, you will receive an email informing you there has been something uploaded to your portal, that you have an action to complete, or a document to sign. If you are responsible for a number of entities in Senta (eg if you are a limited company director, you will have an account for you as an individual, and for the company), you will use one login, and you will choose which account you wish to access when you login.

If you have any problems with your Senta login, please do let us know.

Why do you need ID Documents for all Directors?

As a Licensed Accountant with the AAt, we are required to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). As part of these regulations, we are required to do an Anti-Money Laundering check

on all new clients. In the case of limited companies, we will be required to carry out AML checks on all beneficial owners of a business (ie directors and/or shareholders). We will therefore request proof of ID, and proof of address. We will then carry out a more in-depth AML check using a third party provider (Senta) to confirm all details.

All information in relation to our AML policy and processes are detailed in our Letter of Engagement.

Why do you ask for our bank statements at our year end?

After your company financial year end we will ask for your bank statements as part of our Year End Accounts preparation procedure. We will usually ask for them in both PDF and CSV format. The reason we need your bank statements is to check

that the balances in Xero match the bank balances. It is a common misconception that because the bank feeds information directly into Xero that it must be correct. However there are occasions when the bank feed stops working or something is amended accidentally. We use the bank statements to confirm the bank balance is correct at the end of the year, and to go back and identify where things have gone wrong if it doesn’t match. If we identifies large chunks of missing data, we will use the CSV to import the data into Xero rather than manually adding individual lines in.

How do I get a copy of my P60?

When we process your payroll you will receive a P60 after the end of the tax year. A P60 summarises the amounts you have received and the tax and National Insurance deducted in the tax year. It will not show any student loan or

workplace pension deductions. An email will be sent to you from Xero with a link to your P60. If you have lost the email, we can re-send this to you through Xero, or we can also download a copy and email it to you. You should keep you P60 safe as it will be needed for tax returns, potential loan or credit card applications and other official reasons. You should keep this for 6 years.

What software do we use at Seed for our clients – Limited Companies/Partnerships/LLPs?

All our LLPs and Limited Companies are set up in Xero, Receipt Bank and Futrli Flow. Integrating Receipt Bank with Xero helps with efficiency, reduces workload and increases accuracy. Futrli Flow pulls data through from Xero to provide short-term cashflow insights, risk assesses customers,

and gives you action points to improve your business’ cashflow. With this information business owners are able to keep an eye on their business’ performance more effectively, and make data-driven decisions.

In addition to the basic setup mentioned above for all our clients, we also have an array of other software that our clients will have access to. We use Senta as our client portal and CRM system, ensuring safe transfer of sensitive documents, to enable us to obtain digital signatures, and to maintain all our client details effectively. Some of our limited companies also choose to add in management account and forecasting services to their basic package, and for this we use Futrli Advisor, integrating with Xero to provide real time information. For clients that we provide bookkeeping services for, we use Xavier to enhance the accuracy of our bookkeeping, flag issues and give us an all-round Health Score of our clients’ Xero accounts. For those with credit control requirements, we partner with Chaser to provide streamlined and effective credit control. We use Calendly to schedule calls with our clients, GoCardless to collect our Direct Debits, Zoom for video conferencing and Loom for quick demo videos.

What software do we use at Seed for our clients – Sole Trader?

Sole Trader: Most of our sole traders start off on 1tap ( https://1taptax.com/) – helping collate and organise all their business receipts, log their income, and keep an eye on their estimated tax liability. For some of our sole trader clients,

they prefer to use our recommended combination of Xero and Receipt Bank

What holiday entitlements are employees entitled to?

Employee holiday entitlement ultimately depends on the contract of employment, but for the majority, a statutory minimum is in place. For most employees working a 5-day week, they are entitled to 28 days’ holiday (5.6 weeks) per year. This is inclusive of bank holidays.

Part-time workers are entitled to a pro-rated amount. The statutory holiday entitlement is limited to 28 days, so for employees working 6-day weeks, they are still only entitled to 28 days’ holiday. We use the government’s holiday entitlement calculator ( https://www.gov.uk/calculate-your-holiday-entitlement) to calculate employees’ holiday entitlement. This is especially useful when a team member starts partway through the holiday year.

Are we Making Tax Digital (MTD) Ready/Compliant? 

As Xero is MTD-compliant, all our clients who need to file VAT returns are set up in the necessary software. There is a process to go through if you were VAT-registered before the mandation date of 1st April 2019, which we can provide you

in more detail if you get in touch with us. Any new businesses registering for VAT after 1st April 2019 will automatically be enrolled in the MTD process.

How do I record charity donations – Limited Companies?

Limited companies can donate money to charities and claim the corporation tax back on the value of the donation. Sponsorship of a charity or community sports association is different to a donation, but can also be claimed. If you are donating to charity in

return for something (eg a raffle, or for tickets to an event), you can only claim a percentage of the donation back (25% of the donation up to £100, £101-£1,000, £25 can be claimed, £1,001 or more, 5% of the donation, up to a maximum of £2,500). Simply spend the money out of your company bank account and ensure the transaction is logged against the relevant category in Xero.

How do I record charity donations – Sole Trader?

As a sole trader, you cannot put charitable contributions through the business, although you should log any Gift Aid donations in your self assessment. You may be able to claim tax relief if you are a Higher Rate tax payer.

Working from Home – Sole trader?

Sole Trader: Sole traders can claim ‘use of home as office’ under HMRC’s simplified expenses system. This equates to £10 per month for 25-50 hours worked at home per month, £18 for 51-100 hours, and £26 for 101 hours or more. This is usually

best for anyone who owns their house with a repayment mortgage. For those with an interest-only mortgage, or who rent, using the calculation method is usually more effective. This would involve collating all your household utilities for the year (gas and electric, water, council tax, rent/mortgage interest) and working out a proportion of your costs depending on the floorspace utilised whilst working from home, and the percentage of time used.

Our clients will be provided with a detailed spreadsheet so that the calculations can be done quickly. Once you have chosen the method of calculation, you are unable to change over.

How can I claim mileage? 

You can claim mileage for any wholly and exclusively business travel in your car (45p per mile), your motorbike (24p per mile) and on your bike (20p per mile). The car rate reduces to 25p per mile for any mileage over 10,000 miles in

a tax year. There are a number of apps out there that can automatically calculate your mileage (TripCatcher and MileIQ are two of them, but also several others), but this is one of the few occasions we to like to use a spreadsheet (app fatigue anyone?) . We are happy to share this with anyone who needs it. The most important thing for mileage is to ensure you log three things: date, purpose of the journey, and number of miles. Without these three pieces of information, HMRC are likely to reject a claim in the event of an investigation. We recommend building the claim over a month, and then processing it into the accounts on a monthly basis. If you have a lot of mileage, you may wish to do this more regularly.

To actually claim the mileage back, you have a choice: actually withdraw the money from the business bank account each month (or whenever you submit the claim), or leave it until the end of the financial or tax year and adjust your profits accordingly. We usually recommend doing it as part of the process at the end of the year.

What VAT can be claimed on entertaining, subsistence and general food purchases?

There are complex rules for food expenses, and it is always worth remembering this when you are paying for a meal, or buying food. Not only are the VAT rules relatively complex, the distinction between what is entertainment, (and what is client entertainment and

what is staff entertainment) and what is subsistence adds further complexity. As a very basic rule, VAT can be claimed on subsistence purchases for directors and employees. VAT cannot be claimed on client entertainment expenditure (the term ‘client’ meaning either existing or prospective),  VAT can be claimed on staff entertainment (eg the annual Christmas party). Remember that this answer is in relation to VAT, there are separate rules for Corporation Tax – don’t assume they are the same. If you have a specific question relating to food expenditure, please do get in touch for us to explain in more detail.

What is included in a monthly package?

Seed Accounting’s monthly package is built with you, and for you. You only have in there what you require. Our most common package for limited companies includes Annual Accounts and Corporation Tax Returns, the filing of the Confirmation Statement, Xero and Receipt Bank subscriptions,

director payroll, director tax returns, VAT return preparation and submission. In addition to these services, we include free basic support and advice, access to our quarterly Xero webinars and discounted tickets to our workshops and seminars.

I sell digital services/products – what do I need to do for VAT?

If you sell digital services (such as downloadable documents, training courses etc) through your own website/shop to individuals in the EU (non-UK) you must register for VAT when the sales of these services exceeds £8,818. This is because the ‘place of supply’ is

deemed to be outside the UK.

You can register for the EU’s VATMOSS (Vat Mini One Stop Shop) to make this process a little bit easier, or you can consider selling through a marketplace that will deal with the VAT on your behalf. (Etsy, FastSpring and others can do this for you – there is a good list here.)

We would recommend planning ahead and deciding how you’re going to set up before you  launch your products – you don’t want to get on the wrong side of the HMRC VAT team!

Do I have to register for VAT?

In the UK, the VAT threshold is currently set at £85,000 (for the 20-21 tax year). This means that if your taxable turnover in a rolling 12-month period exceeds £85,000, VAT registration is compulsory. (Please note that it is not £85,000 in a financial

or a tax year, so if you are approaching the threshold, you will need to monitor this every month).

Your taxable turnover is made up of sales of products or services to customers in the UK or the EU. Sales outside of the UK or the EU do not count towards to your taxable turnover BUT you must ensure you keep detailed records of those Rest of World sales to prove they do not count towards your turnover. We would recommend keeping these sales separate to your UK and EU sales so that they can be monitored carefully.

In addition, if you sell digital products (eg downloadable documents, pre-recorded training courses etc), there is a different threshold of £8,818. This is covered in another FAQ post.

I’m a student – do I need to file a tax return?

It is a common misconception that as a student you don’t have to file a tax return, or pay any tax. However, if you are a student and you carry out any self employed work (either as a sole trader, or in a partnership),

you will need to file a Self Assessment tax return, just like any other person.

You will have the same Personal Allowance and National Insurance thresholds as all other individuals, regardless of whether you are a student or not.

There is further information on PAYE and holiday jobs on the HMRC website.

Payment on Account

If you file a self assessment tax return, you will have to make a Payment on Account (POA). This applied if you have tax to pay of over £1,000, and you haven’t already paid 80% or more of your total tax liability through PAYE.

Each

payment on account is half (50%) of your previous tax year’s tax bill and are due by midnight on 31st January and 31st July.

If, after filing your Self Assessment Tax Return, you still have tax to pay in addition to your payments on account, you will have to make a balancing payment by the following 31st January.

You can apply to reduce your Payments on Account if you expect your profits to decrease significantly, however if, when you file your Self Assessment, it transpires that you should have paid the original amounts, you will be charged interest on the unpaid amounts.

Example: Your tax bill for the 2019-2020 tax year is £3,000. You have not paid any payments on account until now. You will have to pay £4,500 by 31st January 2021 (made up of £3,000 for the 19-20 tax year, and a first POA for the 20-21 tax year of £1,500) and a second POA by 31st July 2021 of £1,500.

Can I claim for childcare?

No. There aren’t any exceptions to this rule. It is not a business expense (whether you are an employee, limited company director or sole trader). If you need help with your childcare costs, it is worth looking into the Tax Free Childcare scheme run

by the government. You can pay money into your account, and the government tops it up with a tax credit. You then pay your childcare costs (to an approved provider, usually Ofsted-registered) from this pot.

If you attend a coworking session (for example) that includes a childcare element, you need to ensure you break out the different costs to only claim for the business expense, and not the childcare cost.

Can I claim for my coworking space? (Sole Trader)

The simple answer is – yes! In fact, it can sometimes even work out more cost-efficient to use a coworking space than your home (when you take the additional heating, electricity and internet usage in your home). You need to be aware that whilst

you can claim for the coworking space, you cannot claim for the travel cost from your home to the coworking space, as it is deemed to be a commute. If you usually work from home, and use the coworking space only for meetings, or very sporadically, you can claim the mileage as it would not be a routine journey.

Can I claim for a desk and chair purchase for my home office? (Sole Trader)

When you set up as a sole trader, you may also decide to set up a work space at home. As long as this work space is used ‘wholly and exclusively’ for business purposes (ie your kids don’t use it for homework/it isn’t the

kitchen table/dining table/coffee table), you can claim for this as an expense in your business. If you are on the cash basis, you can claim this as an allowable expense, if you are using the traditional accounting method, you can claim it as a capital allowance.

How do I access Senta?

When you first sign up as a client with Seed Accounting Solutions, we will ensure you are fully set up on our portal, Senta. We use Senta to store all your data, but we also use it to share documents safely and securely with

you, and you with us.

In your first couple of weeks, you will receive an Activation Email from one of our team which will confirm you have been set up in the Senta Portal. You will be required to set a password. These login details will then need to be kept safe. When we upload documents to the portal, you will receive an email informing you there has been something uploaded to your portal, that you have an action to complete, or a document to sign. If you are responsible for a number of entities in Senta (eg if you are a limited company director, you will have an account for you as an individual, and for the company), you will use one login, and you will choose which account you wish to access when you login.

If you have any problems with your Senta login, please do let us know.

Can I include my accountancy fees?

As a sole trader, you may think you can include all your accountancy fees as a tax deductible expense however this is incorrect. You are allowed to claim for the fees incurred for providing services to your business, but some of your Self Assessment

is deemed to be a personal expense.

We recommend our clients put through all their accountancy expenses, and we will then deduct an amount in line with the amount of time it takes to file your return. We will allow for costs such as software, our time on support and advice for your business, any accounts that require preparation, and any other services that are provided to your business (as opposed to you as an individual).

Who needs to file a Self Assessment tax return?

You must file a Self Assessment tax return with HMRC every year if you are self employed (and earn more than £1,000) or you are a partner in a business partnership. You need to file a return regardless of whether you have any tax

or National Insurance to pay.

In addition, if your main income is from employment, but you earn money form renting our property, earn additional money in tips and commission that isn’t taxed through payroll, you have income from savings and investments exceeding £10k, if you earn dividends or foreign income. You also need to submit a tax return if you earn over £100k per year, if you receive Child Benefit and you or your partner earn over £50k per year.

If you are a higher rate taxpayer, you may wish to file a self assessment to claim tax relief on Gift Aid donations and personal pension payments.

If you have Capital Gain Tax to pay, and you have used the quick service, you will also need to declare this in a Self Assessment.

Where can I find my Companies House authentication code?

When you incorporate your limited company or limited liability partnership, you will receive a letter form Companies House shortly after with your companies House Authentication Code on it. You MUST keep it safe. It is what is required in order to submit any statutory

filings such as your Year End Accounts and your Confirmation Statement. It will also be required if you need to change any details with Companies House such as a new director, a change of address, or an amendment to shareholdings.

If you become a client of ours, you will need to share this authentication code with us which shows that we have permission to file on your behalf. If you have misplaced the code, you can request a new one by going to the Companies House website. It will take 10 days for a new one to be sent out.

What is the difference between the terms ‘sole trader’ and ‘self employed’?

The easiest way is to break down the two terms:

Self Employment means you are responsible for declaring your taxes, managing your business, and deciding what work you do, and when and how you do it. If you’re self employed you won’t be entitled to

holiday or sick pay. You can work for more than one client. You might be a sole trader, or you might be a partner in a partnership.

A sole trader is a self-employed person who is the sole owner of their business.

In summary, there isn’t really a difference between being a sole trader and being self employed – sole trader describes the structure of your business, whereas self employed shows that you don’t work for an employer or pay your taxes through PAYE.

How do I get a copy of my P60?

When we process your payroll you will receive a P60 after the end of the tax year. A P60 summarises the amounts you have received and the tax and National Insurance deducted in the tax year. It will not show any student loan or

workplace pension deductions. An email will be sent to you from Xero with a link to your P60. If you have lost the email, we can re-send this to you through Xero, or we can also download a copy and email it to you. You should keep you P60 safe as it will be needed for tax returns, potential loan or credit card applications and other official reasons. You should keep this for 6 years.

What are management accounts?

Management accounts are interim reports usually requested by the owners/shareholders of the business to assess its performance. They are often used by lenders to assess the business in applications for financial assistance. On a basic level, they include the Profit and Loss Report, and

the Balance Sheet. They might also include a Statement of Cash Flows, Aged Receivables and Aged Payables (outstanding amounts owed to, and owed by, the business) and an analysis.

Our management account service includes a detailed report with a Profit and Loss and Balance Sheet as a minimum. Other report will be included as necessary. We will also provide a detailed analysis of the report to help business owners understand the information and make necessary decisions. Along with the figures we also include visual graphs and charts to make the information more understandable, and ensure the period we are reporting for is compared against relevant prior periods to provide context.

Do you offer a review service?

A review service is sometimes requested from smaller businesses where they have prepared their own tax return or accounts and wish for us to review their work. Unfortunately we do not currently offer this service.

Can you help with loan applications?

Yes we can – we partner with a number of platforms which will help find you the best funding solution for your business. You don’t always need to go to your main bank first, nor do you necessarily need a traditional loan. Usually in

a loan application, they will ask for management accounts, a minimum of a 12-month forecast and your last filed accounts. For startups with little or no trading history, a business plan may also be required. If you don’t usually take out these services with us, we are able to provide them all as a one off service. The fee will depend on the size of your business but as always we will provide a price in line with our clear and transparent pricing policy. No work will be completed without the fee being in agreed in advance.

What software do we use at Seed for our clients – Limited Companies/Partnerships/LLPs?

All our LLPs and Limited Companies are set up in Xero, Receipt Bank and Futrli Flow. Integrating Receipt Bank with Xero helps with efficiency, reduces workload and increases accuracy. Futrli Flow pulls data through from Xero to provide short-term cashflow insights, risk assesses customers,

and gives you action points to improve your business’ cashflow. With this information business owners are able to keep an eye on their business’ performance more effectively, and make data-driven decisions.

In addition to the basic setup mentioned above for all our clients, we also have an array of other software that our clients will have access to. We use Senta as our client portal and CRM system, ensuring safe transfer of sensitive documents, to enable us to obtain digital signatures, and to maintain all our client details effectively. Some of our limited companies also choose to add in management account and forecasting services to their basic package, and for this we use Futrli Advisor, integrating with Xero to provide real time information. For clients that we provide bookkeeping services for, we use Xavier to enhance the accuracy of our bookkeeping, flag issues and give us an all-round Health Score of our clients’ Xero accounts. For those with credit control requirements, we partner with Chaser to provide streamlined and effective credit control. We use Calendly to schedule calls with our clients, GoCardless to collect our Direct Debits, Zoom for video conferencing and Loom for quick demo videos.

What software do we use at Seed for our clients – Sole Trader?

Sole Trader: Most of our sole traders start off on 1tap ( https://1taptax.com/) – helping collate and organise all their business receipts, log their income, and keep an eye on their estimated tax liability. For some of our sole trader clients,

they prefer to use our recommended combination of Xero and Receipt Bank

What holiday entitlements are employees entitled to?

Employee holiday entitlement ultimately depends on the contract of employment, but for the majority, a statutory minimum is in place. For most employees working a 5-day week, they are entitled to 28 days’ holiday (5.6 weeks) per year. This is inclusive of bank holidays.

Part-time workers are entitled to a pro-rated amount. The statutory holiday entitlement is limited to 28 days, so for employees working 6-day weeks, they are still only entitled to 28 days’ holiday. We use the government’s holiday entitlement calculator ( https://www.gov.uk/calculate-your-holiday-entitlement) to calculate employees’ holiday entitlement. This is especially useful when a team member starts partway through the holiday year.

What are the workplace pension contributions at the moment?

For eligible employees, the rates for 2020/2021 tax year are 5% for employees, with the employer paying 3%, giving a total minimum contribution of 8%.

Are we Making Tax Digital (MTD) Ready/Compliant? 

As Xero is MTD-compliant, all our clients who need to file VAT returns are set up in the necessary software. There is a process to go through if you were VAT-registered before the mandation date of 1st April 2019, which we can provide you

in more detail if you get in touch with us. Any new businesses registering for VAT after 1st April 2019 will automatically be enrolled in the MTD process.

How do I record charity donations – Limited Companies?

Limited companies can donate money to charities and claim the corporation tax back on the value of the donation. Sponsorship of a charity or community sports association is different to a donation, but can also be claimed. If you are donating to charity in

return for something (eg a raffle, or for tickets to an event), you can only claim a percentage of the donation back (25% of the donation up to £100, £101-£1,000, £25 can be claimed, £1,001 or more, 5% of the donation, up to a maximum of £2,500). Simply spend the money out of your company bank account and ensure the transaction is logged against the relevant category in Xero.

How do I record charity donations – Sole Trader?

As a sole trader, you cannot put charitable contributions through the business, although you should log any Gift Aid donations in your self assessment. You may be able to claim tax relief if you are a Higher Rate tax payer.

What is the best way to pay myself as a limited company director?

The most tax efficient way of paying yourself through a profitable limited company is with a salary within the NICs threshold (£8,632 for 19/20 tax year), plus dividends. This ensures maximum money from the business, with the least amount of taxation.  This is not

always the case, for example when there is negative equity in the business, when the director has other employment or when there is more than one employee. As clients of ours, we will always advise you on the best way to pay yourselves.

Working from Home – Director and Employees?

Director or employee: Directors and employees of a business can claim £18 per month for use of home on a flat rate basis.

Alternatively, you can claim actual costs which may include itemised business calls from a home phone, or a second business line, light,

power and heat, and any insurance policies which have business elements added on. These would be apportioned based on the amount of time spent at home, and the percentage of home used. It is usually more cost- and time-efficient to claim the flat-rate amount, however if you believe the amount to be more than £18, it would be worth doing the calculations. Our clients are provided with a spreadsheet to calculate this at the end of their financial year.

NOTE: council tax, water and mortgage interest or rent cannot be claimed as they would be paid anyway, and are therefore not deemed to be incurred wholly and exclusively for the business.

Working from Home – Sole trader?

Sole Trader: Sole traders can claim ‘use of home as office’ under HMRC’s simplified expenses system. This equates to £10 per month for 25-50 hours worked at home per month, £18 for 51-100 hours, and £26 for 101 hours or more. This is usually

best for anyone who owns their house with a repayment mortgage. For those with an interest-only mortgage, or who rent, using the calculation method is usually more effective. This would involve collating all your household utilities for the year (gas and electric, water, council tax, rent/mortgage interest) and working out a proportion of your costs depending on the floorspace utilised whilst working from home, and the percentage of time used.

Our clients will be provided with a detailed spreadsheet so that the calculations can be done quickly. Once you have chosen the method of calculation, you are unable to change over.

What can be claimed for working from home? 

There are different rates depending on whether you are a sole trader or a director or employee of a limited company. As a director, running a business from home, it may be more tax-efficient to ‘rent’ the space to your business. Please book in

a call to discuss this with us as it requires a more detailed explanation of how it works, and to discuss the implications.

How can I claim mileage? 

You can claim mileage for any wholly and exclusively business travel in your car (45p per mile), your motorbike (24p per mile) and on your bike (20p per mile). The car rate reduces to 25p per mile for any mileage over 10,000 miles in

a tax year. There are a number of apps out there that can automatically calculate your mileage (TripCatcher and MileIQ are two of them, but also several others), but this is one of the few occasions we to like to use a spreadsheet (app fatigue anyone?) . We are happy to share this with anyone who needs it. The most important thing for mileage is to ensure you log three things: date, purpose of the journey, and number of miles. Without these three pieces of information, HMRC are likely to reject a claim in the event of an investigation. We recommend building the claim over a month, and then processing it into the accounts on a monthly basis. If you have a lot of mileage, you may wish to do this more regularly.

To actually claim the mileage back, you have a choice: actually withdraw the money from the business bank account each month (or whenever you submit the claim), or leave it until the end of the financial or tax year and adjust your profits accordingly. We usually recommend doing it as part of the process at the end of the year.

What VAT can be claimed on entertaining, subsistence and general food purchases?

There are complex rules for food expenses, and it is always worth remembering this when you are paying for a meal, or buying food. Not only are the VAT rules relatively complex, the distinction between what is entertainment, (and what is client entertainment and

what is staff entertainment) and what is subsistence adds further complexity. As a very basic rule, VAT can be claimed on subsistence purchases for directors and employees. VAT cannot be claimed on client entertainment expenditure (the term ‘client’ meaning either existing or prospective),  VAT can be claimed on staff entertainment (eg the annual Christmas party). Remember that this answer is in relation to VAT, there are separate rules for Corporation Tax – don’t assume they are the same. If you have a specific question relating to food expenditure, please do get in touch for us to explain in more detail.

What is included in a monthly package?

Seed Accounting’s monthly package is built with you, and for you. You only have in there what you require. Our most common package for limited companies includes Annual Accounts and Corporation Tax Returns, the filing of the Confirmation Statement, Xero and Receipt Bank subscriptions,

director payroll, director tax returns, VAT return preparation and submission. In addition to these services, we include free basic support and advice, access to our quarterly Xero webinars and discounted tickets to our workshops and seminars.

What is my UTR? And where do I find it?

Your UTR (or Unique Taxpayer Reference) is provided to you by HMRC when your business starts trading, or you register for Self Assessment. You will usually receive your UTR within 2 weeks of registering a business (whether self employed, limited company or partnership).

In addition,

you will find your UTR on any correspondence from HMRC in relation to your business or tax affairs.

The following UTRs will be issued:

  • Individual UTR for anyone required to submit a Self Assessment (High Net Worth individuals, self employed, partners, limited company directors etc)
  • Company UTR for a limited company in order to file a Corporation Tax Return
  • Partnership UTR for partnerships and LLPs in order to file a Partnership Tax Return

It is important you keep this safe as it is required to file your tax returns. If you lose it, you can contact HMRC to provide you with a reminder (you will have to go through security to get this).

What is Senta for?

Senta is a CRM system, workflow management tool and document portal. We use Senta to store all your data, but we also use it to share documents safely and securely with you, and you with us. We also use it to keep track of

the jobs that we need to complete for you.

When we upload documents to the portal, you will receive an email informing you there has been something uploaded to your portal, that you have an action to complete, or a document to sign. If you are responsible for a number of entities in Senta (eg if you are a limited company director, you will have an account for you as an individual, and for the company), you will use one login, and you will choose which account you wish to access when you login.

If you have any problems with your Senta access, please do let us know.

How do I access Senta?

When you first sign up as a client with Seed Accounting Solutions, we will ensure you are fully set up on our portal, Senta. We use Senta to store all your data, but we also use it to share documents safely and securely with

you, and you with us.

In your first couple of weeks, you will receive an Activation Email from one of our team which will confirm you have been set up in the Senta Portal. You will be required to set a password. These login details will then need to be kept safe. When we upload documents to the portal, you will receive an email informing you there has been something uploaded to your portal, that you have an action to complete, or a document to sign. If you are responsible for a number of entities in Senta (eg if you are a limited company director, you will have an account for you as an individual, and for the company), you will use one login, and you will choose which account you wish to access when you login.

If you have any problems with your Senta login, please do let us know.

Where can I find my Companies House authentication code?

When you incorporate your limited company or limited liability partnership, you will receive a letter form Companies House shortly after with your companies House Authentication Code on it. You MUST keep it safe. It is what is required in order to submit any statutory

filings such as your Year End Accounts and your Confirmation Statement. It will also be required if you need to change any details with Companies House such as a new director, a change of address, or an amendment to shareholdings.

If you become a client of ours, you will need to share this authentication code with us which shows that we have permission to file on your behalf. If you have misplaced the code, you can request a new one by going to the Companies House website. It will take 10 days for a new one to be sent out.

Why do you need ID Documents for all Directors?

As a Licensed Accountant with the AAt, we are required to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). As part of these regulations, we are required to do an Anti-Money Laundering check

on all new clients. In the case of limited companies, we will be required to carry out AML checks on all beneficial owners of a business (ie directors and/or shareholders). We will therefore request proof of ID, and proof of address. We will then carry out a more in-depth AML check using a third party provider (Senta) to confirm all details.

All information in relation to our AML policy and processes are detailed in our Letter of Engagement.

Why do you ask for our bank statements at our year end?

After your company financial year end we will ask for your bank statements as part of our Year End Accounts preparation procedure. We will usually ask for them in both PDF and CSV format. The reason we need your bank statements is to check

that the balances in Xero match the bank balances. It is a common misconception that because the bank feeds information directly into Xero that it must be correct. However there are occasions when the bank feed stops working or something is amended accidentally. We use the bank statements to confirm the bank balance is correct at the end of the year, and to go back and identify where things have gone wrong if it doesn’t match. If we identifies large chunks of missing data, we will use the CSV to import the data into Xero rather than manually adding individual lines in.

How do I get a copy of my P60?

When we process your payroll you will receive a P60 after the end of the tax year. A P60 summarises the amounts you have received and the tax and National Insurance deducted in the tax year. It will not show any student loan or

workplace pension deductions. An email will be sent to you from Xero with a link to your P60. If you have lost the email, we can re-send this to you through Xero, or we can also download a copy and email it to you. You should keep you P60 safe as it will be needed for tax returns, potential loan or credit card applications and other official reasons. You should keep this for 6 years.

What are management accounts?

Management accounts are interim reports usually requested by the owners/shareholders of the business to assess its performance. They are often used by lenders to assess the business in applications for financial assistance. On a basic level, they include the Profit and Loss Report, and

the Balance Sheet. They might also include a Statement of Cash Flows, Aged Receivables and Aged Payables (outstanding amounts owed to, and owed by, the business) and an analysis.

Our management account service includes a detailed report with a Profit and Loss and Balance Sheet as a minimum. Other report will be included as necessary. We will also provide a detailed analysis of the report to help business owners understand the information and make necessary decisions. Along with the figures we also include visual graphs and charts to make the information more understandable, and ensure the period we are reporting for is compared against relevant prior periods to provide context.

Do you offer a review service?

A review service is sometimes requested from smaller businesses where they have prepared their own tax return or accounts and wish for us to review their work. Unfortunately we do not currently offer this service.

Can you help with loan applications?

Yes we can – we partner with a number of platforms which will help find you the best funding solution for your business. You don’t always need to go to your main bank first, nor do you necessarily need a traditional loan. Usually in

a loan application, they will ask for management accounts, a minimum of a 12-month forecast and your last filed accounts. For startups with little or no trading history, a business plan may also be required. If you don’t usually take out these services with us, we are able to provide them all as a one off service. The fee will depend on the size of your business but as always we will provide a price in line with our clear and transparent pricing policy. No work will be completed without the fee being in agreed in advance.

What software do we use at Seed for our clients – Limited Companies/Partnerships/LLPs?

All our LLPs and Limited Companies are set up in Xero, Receipt Bank and Futrli Flow. Integrating Receipt Bank with Xero helps with efficiency, reduces workload and increases accuracy. Futrli Flow pulls data through from Xero to provide short-term cashflow insights, risk assesses customers,

and gives you action points to improve your business’ cashflow. With this information business owners are able to keep an eye on their business’ performance more effectively, and make data-driven decisions.

In addition to the basic setup mentioned above for all our clients, we also have an array of other software that our clients will have access to. We use Senta as our client portal and CRM system, ensuring safe transfer of sensitive documents, to enable us to obtain digital signatures, and to maintain all our client details effectively. Some of our limited companies also choose to add in management account and forecasting services to their basic package, and for this we use Futrli Advisor, integrating with Xero to provide real time information. For clients that we provide bookkeeping services for, we use Xavier to enhance the accuracy of our bookkeeping, flag issues and give us an all-round Health Score of our clients’ Xero accounts. For those with credit control requirements, we partner with Chaser to provide streamlined and effective credit control. We use Calendly to schedule calls with our clients, GoCardless to collect our Direct Debits, Zoom for video conferencing and Loom for quick demo videos.

What software do we use at Seed for our clients – Sole Trader?

Sole Trader: Most of our sole traders start off on 1tap ( https://1taptax.com/) – helping collate and organise all their business receipts, log their income, and keep an eye on their estimated tax liability. For some of our sole trader clients,

they prefer to use our recommended combination of Xero and Receipt Bank

What holiday entitlements are employees entitled to?

Employee holiday entitlement ultimately depends on the contract of employment, but for the majority, a statutory minimum is in place. For most employees working a 5-day week, they are entitled to 28 days’ holiday (5.6 weeks) per year. This is inclusive of bank holidays.

Part-time workers are entitled to a pro-rated amount. The statutory holiday entitlement is limited to 28 days, so for employees working 6-day weeks, they are still only entitled to 28 days’ holiday. We use the government’s holiday entitlement calculator ( https://www.gov.uk/calculate-your-holiday-entitlement) to calculate employees’ holiday entitlement. This is especially useful when a team member starts partway through the holiday year.

Are we Making Tax Digital (MTD) Ready/Compliant? 

As Xero is MTD-compliant, all our clients who need to file VAT returns are set up in the necessary software. There is a process to go through if you were VAT-registered before the mandation date of 1st April 2019, which we can provide you

in more detail if you get in touch with us. Any new businesses registering for VAT after 1st April 2019 will automatically be enrolled in the MTD process.

What is included in a monthly package?

Seed Accounting’s monthly package is built with you, and for you. You only have in there what you require. Our most common package for limited companies includes Annual Accounts and Corporation Tax Returns, the filing of the Confirmation Statement, Xero and Receipt Bank subscriptions,

director payroll, director tax returns, VAT return preparation and submission. In addition to these services, we include free basic support and advice, access to our quarterly Xero webinars and discounted tickets to our workshops and seminars.

Will my price change?

Once we have quoted a fee, if nothing changes, you will have that fee guaranteed for 12 months. 3 months before the end of your financial year, we will contact you to book in what we a call a GLOSS review. This is to

review your goals for the year ahead, and is also an opportunity for us to check that the services we are providing you with are still relevant to your business. In addition to the annual overall review, bookkeeping services are loosely reviewed every 3 months (if transaction volumes have changed as an average over the previous 3 months, the price will adjust accordingly), and payroll is reviewed every month depending on number of employees.

What isn’t included in a monthly package?

Seed Accounting’s monthly package is built to reflect the needs of the individual client – we don’t have a ‘one size fits all’ approach, or have packages that include a load of features that just aren’t required. That being said, there are

some costs that arise throughout the year which will bill additionally for, once they have been authorised and approved by you (again – no surprise bills here!) Here are some of the common ones here: mortgage and tenancy references; changes to share allocations/registers; research into a specific subject; bespoke tax planning calculations; VAT registration; PAYE registration.

Why do you bill monthly?

At Seed Accounting, we believe that monthly billing helps keep our clients’ cashflow steady, with no surprise bills at the end of the year. In addition, a monthly fee reflects the ongoing working relationship we strive for with all our clients.

How are our fees generated?

We utilise a revolutionary pricing tool designed especially for accountants, called GoProposal. We have it configured to suit our business and our clients. This tool enables us to price all our clients consistently, ensuring clear and transparent pricing for everyone. You pay only for

the services you need, and after we’ve had an in-depth Discovery Call to establish your goals for your business.

 

What happens once a client signs up?

  • When you accept our proposal and have signed your letter of engagement there are two paths depending on whether you had a previous accountant or whether we are your first accountant appointment.

How can you get in contact with us?

If you would like to find out more about how we work, and can help you, the best way to contact us is to book a Discovery Call here: https://calendly.com/team-seed/discovery-call . For existing clients, we recommend emailing one of the

team, or book in a call via the link in the team member’s email signature.

Who will I be dealing with?

We currently have a small team, with each team member responsible for their own roles. Kally is your main port of call for anything tax and accounts-related. Tamsyn is the go-to for Xero help, forecasting, management accounts, or general queries. Rosie will help update

any personal details, get you set up and running with us, and send you helpful reminders! Linda deals with our client bookkeeping, so if you use our bookkeeping service and have any questions about receipts, bank statements, invoicing or VAT and so on, she’s your person. Kiran is our in-house payroll guru so any questions you have about payroll and workplace pensions need to go to her. You may from time to time also reach our answering service. They are a lovely bunch, and ensure all messages reach us, with a contact number and a reason for calling – we will get in touch as soon as we can if you get through to them.

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