ACCOUNTING ESSENTIALS

The Basics Of Accounting

To run a business successfully there are a few must haves/must do’s. The key is to invest in good software. You may think this is ‘expensive’ but your business will thank you for it as it grows. It can help you track how your business is operating and allow you one point of control. The cost is also tax deductible. Software will make the production of your Year End Accounts a much easier and less stressful process. It will also keep all your financial information in one place, including your receipts, which will make the completion of your tax return much simpler.

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Accounting Basics

ACCOUNTING ESSENTIALS

The Basics Of Accounting

To run a business successfully there are a few must haves/must do’s. The key is to invest in good software. You may think this is ‘expensive’ but your business will thank you for it as it grows. It can help you track how your business is operating and allow you one point of control. The cost is also tax deductible. Software will make the production of your Year End Accounts a much easier and less stressful process. It will also keep all your financial information in one place, including your receipts, which will make the completion of your tax return much simpler.

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Accounting Basics

Year-End Accounts

If you are a sole trader, partnership, or limited company there could be a variety of reasons you need a set of financial statements.

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Tax Returns

The requirements of financial statements, or ‘Year End Accounts’ as they are often affectionately referred to, are different depending on the business structure.

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Software

At Maine Accounting we like to make use of technology to ensure that everything for our clients and within our own office runs as smoothly as possible.

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Year End Accounts

Why does your business need Year End Accounts?

  • Banks like to see them as proof of how your business is performing
  • They can be used to calculate the success of your business
  • They are a good way to compare businesses
  • Potential investors may require them

  • It’s a legal requirement for some businesses

Year End Accounts

If you are a sole trader, partnership, or limited company there could be a variety of reasons you need a set of financial statements.

The requirements of financial statements, or ‘Year End Accounts’ as they are often affectionately referred to, are different depending on the business structure. Your ‘Year End’ will also vary depending on the structure of your business. For limited companies, it is the anniversary of the end of the month in which the company was first registered. If you are a sole trader or partnership, it is generally 5th April, however this can vary.

If you run a limited company, you are required by law to produce year end accounts in a specific format which complies with the Companies Act. These must be filed with Companies House generally within 9 months of your financial year end. You could face penalties and fines if the rules are not followed.

As a partnership, in addition to the reasons sole traders need them, you will need year end accounts to determine the partnership profit shares for the respective tax returns.

What all accounts have in common, regardless of the structure of the business, is that they are a useful tool for you as a business owner or investor to analyse a business.  Over several years, it is possible to see trends, make predictions and build up a picture of the business using the information held in its accounts.  We can assist you further with these types of analysis, and many others, through our Business Advisory service.

So, if you need some year end accounts prepared then please get in contact with us below.

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Tax Returns

You might need to complete a
tax return if:

  • You have income outside of your employment e.g. rental income, shares
  • You have multiple sources of income
  • You are the owner of a business and registered as self employed
  • You are the Director of a company
  • You are responsible for a limited company

You might need to complete a tax return if:

  • You have income outside of your employment e.g. rental income, shares
  • You have multiple sources of income
  • You are the owner of a business and registered as self employed
  • You are the Director of a company
  • You are responsible for a limited company

The type of tax return you need to complete depends on whether you are an individual or a company.

If, as an individual, you need to complete a tax return it will be a Self Assessment return. These cover a period of 12 months up to 5th April and any tax due must be paid by 31st January the following year.

A company must submit a Corporation Tax return.  This relates to the Company’s financial year and must be paid 9 months and 1 day after the end of the financial year.

Many people think a tax return is simple to complete, sure anybody can put a few numbers in a few boxes, right?!

Well yes that is true, provided you:

  • know which numbers to put in which boxes
  • ensure that all the expenses you have claimed are allowable for tax purposes – believe it or not just because you paid for it out of your business bank account does not necessarily mean it is an allowable business expense.
  • separate out all your capital and revenue spend and put them in the appropriate boxes
  • claim appropriate capital allowances, ensuring that your spend meets all the rules (yes there are actual rules which are sometimes quite different to what we Jonny from the online chat forum says)
  • ensure that all your income is included including pensions, some benefits etc.
  • claim allowances for all the things you are allowed e.g., charitable donations, certain types of pension payments, age related allowances, and many more that you probably have not even heard of.

and that is all before you try to remember your government gateway login and password since you have not used it since last year, to be able to submit it in time!

There are penalties for late submissions and deliberate errors. You could also end up subject to an HMRC investigation which can be a very time consuming and costly process.

Making Tax Digital for Income Tax

Making Tax digital for Income Tax comes into effect for accounting periods starting on or after 6 April 2023, for those businesses whose taxable turnover or income from property is great than £10,000.

It will mean that all sole traders and business owners must store information electronically, in approved software, and submit a summary profit report to HMRC every 3 months. A final declaration must then be submitted at the end of each year to confirm that the quarterly information you sent was correct and make any adjustments for claims of allowances etc. You will be able to calculate the amount of tax due through your software.

To prepare our clients for this we are insisting that all new clients move onto our partner software, which is HMRC approved, and we are migrating all existing clients on a staged basis to ensure that everyone has a smooth transition and has established good habits by April 2023.

If you need help with your tax returns please get in touch to see if we can assist you.

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Cloud Accounting Software

At Maine Accounting we like to make use of technology to ensure that everything for our clients runs as smoothly as possible. We recommend these pieces of software to our clients and also use them within our Virtual Finance Office provision.

CLOUD ACCOUNTING SOFTWARE

We as a practice use many of the leading brands of accounting software, but by far our favourite is Xero. It has revolutionised our Practice and the lives of the clients we have moved onto it. If you need a piece of software that can grow and adapt with your business this is the one for you. It is very user friendly, has great reporting capabilities and the ability to link lots of apps to further improve things for you. If you are in the market for software we highly recommend it.

With cloud based accounting software you can access your information anywhere you can get an internet connection. You can have an app on your phone or tablet, or you can access it from your desktop or laptop. There is no excuse not to be on top of your numbers.

There are lots of other advantages of cloud accounting software. A few examples are:

  • You can link your bank account(s) directly to your software so no more needing to wait on paper statements arriving.
  • You can link payment options like PayPal, Stripe and GoCardless so that your payments will integrate seamlessly with your accounts. You can also set these up as payment options on invoices so that customers can pay you at the click of a button.
  • You can set up recurring invoices so that you don’t need to remember to send repeat ones out each month – it does it automatically.
  • You can easily see who owes you money and how long the payment is overdue.
  • You can see who you owe money to and when the payments are due.
  • You can process VAT returns directly from the software.
  • You can store electronic copies of your receipts so you don’t have to keep the paper ones.
  • You can use it for stock monitoring.

As a Xero partner we have access to lots of information to help you get the most from your software and we also have the ability to raise suggestions with Xero for future product development. Your software will be linked to us so as well as having full support from Xero if you need some assistance, we can also jump into your system to help you sort it out or just check over your data to make sure everything seems ok.

The use of software will become even more important when Making Tax Digital for Income Tax is introduced in April 2024. When this happens you will need software, such as Xero, to send quarterly returns to HMRC showing your income and expenditure and then a final one at the year end to make any adjustments for things such as capital allowances.

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Praise

“Susan took the fear factor out of doing my first tax return, and made it all seem easy and straightforward! So lovely to deal with, highly recommend!”

– Aisling O’Connor

“Susan was extremely helpful in helping me with my payroll software for my employees. She explained everything in simple layman’s terms and I couldn’t recommend her enough – thank you”

–  Sinead Norton

“Susan was very responsive, helpful and thoroughly explained the aspects of self-assessments that I needed clarity on.

– Cormac Quinn

Any Questions?

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