Helpful Advice if your business is facing uncertainties over the looming Brexit
As we approach the first anniversary of the Brexit vote, Carol Warburton, director of our Cardiff office, shares her advice on dealing with the many of the uncertainties facing business every day.
It is still beneficial to pay myself dividends rather than PAYE?
One of the main benefits of working via a limited company is that you can take advantage of tax planning measures not available via other business structures. The main benefit of drawing down dividends from your company is that they are not subject to National Insurance deductions unlike salaried income.
In addition, as you are in control of your own finances, you can decide when to declare company dividends. You many want to postpone taking a certain amount of dividends until a future tax year for example.
In the last budget, however, it was announced that the £5,000 tax-tree dividend allowances is to be cut to £2,000 from 35,000 from April 6 2018. This shows that tax rules can and do change over time and the effect on you will depend on your individual circumstances.
Will I still charge VAT to customers?
This will depend on the level of sales you make in your business. A business must register for VAT if sales are forecast to exceed £80,000 in 2017/2018. but the key questions for consumers is at what rate will VAT be charged in the future and how will Brexit impact this? From the moment the UK officially leaves the EU, UK VAT law will no longer be bound by European VAT law and our courts will no longer be bound by European Court decisions.
As the UK Parliament implements and focuses UK VAT law as an independent country, we can expect UK VAT law to diverge over time from the EU model. There are unlikely to be any sudden changes, after all, the level of funds raised from VAT is second only to income tax and as such VAT will likely remain.
I am not earning much interest on my savings. If I invested in stocks and shares would I be better off investing in UK or EU companies?
That depends on your attitude to risk and whether you want to save or invest. you should seek the advice of an independent financial adviser when considering the best solution for you. Investing comes with risk, remember that investment values can fall as well as rise and you could get back less than you invest.
In addition, the impact of Brexit is difficult to forecast on the stock market. It is possible though that as Britain negotiates its way out of the EU, the eventual deal, if there is one, will likely impact markets. So, if you don’t wish to take a risk, then saving is the best option. But make sure that you have the best blend of bank savings and ISAs to get the most out of your savings.
I am spending too much time keeping my accounting books up to date when I should be spending my time generating new business in non-EU markets, what can you suggest?
Take on a reliable accountant! Their job is to free up your time to focus on running your businesses rather than worrying about day-to-day accounting. You do need to understand what it is that is driving ‘the numbers’ though – a good accountant will assist you in that.
We do a lot of work within the EU, we are finding it difficult to provide prices in sterling and in Euros on our website – how can we make sure we manage our foreign currency risks?
Foreign currency risks, particularly if material to a business, are best managed by hedging against fluctuations expected to occur. This means that future movements in currency rates are offset for example, by buying currency forward at a favourable rate today in the expectation that currency shifts will be worse by the time you need to make payments in that currency. Your bank will be able to assist you in that process.
You may also be able to negotiate with customers and suppliers to agree a fixed price at an agreed rate or perhaps agree to sell or buy only through sterling – this would reduce the risk of currency fluctuations.
How would you best maximise the increase in my savings fund?
Look for the accounts that pay the highest interest rates and use your ISA allowance. A note of caution though – if you are switching, never withdraw your savings from your current ISA to pay them into your new account, or your savings will automatically lose their tax free status. Instead, contact the ISA provider you want to switch to and they will arrange the switch on your behalf. The ISA allowance for the new 2017/18 tax year, which started on April 6 is £20,000.
Despite the introduction of the personal savings allowance (PSA) last year, which reduces the tax on returns from savings held outside an ISA, cash ISAs are still worthwhile for savers with large balances. The PSA enables basic rate taxpayers to earn their first £1,000 of interest tax-free, while higher-rate taxpayers can earn up to £500 of interest tax-free.
Additional rate taxpayers aren’t entitled to a PSA so if you don’t have one, or have already used yours, ISAs are a tax effective option.
How can I best manage my clients during this period of uncertainty?
- Don’t panic – carry on with business as usual, but be aware of any risk that may come into play and discuss these with your business associates through the course of your business dealings. You will identify the key risks that impact your business in that way and in so doing will be able to address them.
- Continue to negotiate effectively with your suppliers and your customers.
- Take advice from your professional advisers throughout. Use your trusted business adviser, and if you don’t have one, find one.
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