Electric Trainer

'Small business mentioned in budget' shock!

Well Mr Osborne has spoken. There's plenty of analysis of the coalition's emergency budget elsewhere. Nick Robinson says 'age of austerity' and Robert Peston says...well, something I didn't quite catch.

As promised, I've been listening to it all and reading the press releases, so you don't have to.

Here are some of the areas I think will affect small businesses like you and me.

Value Added Tax

VAT up to 20% (from 17.5%): - the rise from 4th Jan 2011 (after the New Year bank holiday) may persuade some to register for VAT. Getting 20% back off business purchases is a pretty attractive proposition with a rate this high.

VAT Flat Rate Scheme: - because the standard rate is going up, so is the flat rate. For example the Film, radio, TV and video category is currently 10.5%. This will go up in January to 13%. Read more about the flat rate changes: http://www.hmrc.gov.uk/budget2010/bn45.htm

(The reduced rate of VAT will be unchanged at 5%, by the way. And exempt items like kids' clothing and newspapers will remain exempt.)

Income tax and National Insurance

Personal allowance:- individuals and sole traders will be allowed to have an income of £7,475 before paying any tax (up from £6,475). The rates of income tax stay the same.

National Insurance: sole traders' class 2 NI contributions might be unchanged at £2.40 per week. They'll come to a view about it in the autumn. But class 4 NI will be 9% (up from 8%) and the top rate will be 2% (up from 1%). Both from April 2011.

If you're operating as a limited company, class 1 NI on an employee's salary is 12% (up from 11%) and the employer's contribution is 13.8% (up from 12.8%), but with a 'tax holiday' on the latter if you set up from today, and if you employ fewer than 10 people, and set up outside London and south-east. (I'm still checking thresholds and other details on this...so don't quote me...will post again on this.)

Corporation tax for small businesses

Also for limited companies - the small business rate of corporation tax will be reduced to 20% (from 21%). In fact this is the first time I remember a Chancellor talking about the small business rate in a budget speech. He also said he recognised the importance of helping the smallest of businesses. Collectively they (we) are a significant force.

Capital allowances

This year you've been able to put up to £100,000 of capital equipment against your turnover to reduce your tax bill. This is called the Annual Investment Allowance. 

The cap has been reduced to £25,000 from next year - a reduction of 75%. This seems draconian, but most people I work with will not spend that much on capital equipment in a year. And even if you did you can spread the costs above that cap at a rate of (typically) 20% until April 2012, when it will go down to 18%.

Still checking the small print. If you want to have a look yourself (with a stiff drink close at hand*) try the treasury website:
http://www.hm-treasury.gov.uk/junebudget

Let me know how you feel the budget will affect you and your business. And feel free to point out anything I've missed.

Now - time to go out and enjoy the sunshine!

*I suggest cider or perry - the planned increase in duty has now officially been abolished

Dissecting the election: old media vs new

The always fascinating BBC College of Journalism blog has a couple of new posts about the recent election coverage.

Much discussion by a panel of journalists and political activists about the role of new media vs old.

Not many conclusions, but it seems that new media (Twitter & Facebook) furthered the conversation, but didn't start it.

Read a summary of the discussion here.

View a video of the discussion here. 

Getting tax back from HMRC

I'm sometimes asked about tax rebates, tax refunds and emergency tax in business skills workshops, particularly where people are changing from employee to freelance/self-employed status. Or where they are both employed and self-employed.

Well, as if by magic, Jasmine Birtles has talked about this on her wonderful MoneyMagpie.com website.

The key thing here is to check with HMRC, even if you're just vaguely thinking that you might be owed something.

Many people don't like contacting the Revenue because they think they are somehow going to be stung for more cash by umbrella-wielding, bowler-hatted monsters.

In fact the HMRC helplines - and the people who staff them - have been set up to be, well, helpful. In my experience they are also charming and polite.

We've got the new politics. Now we need a new phrase book.

If the country said anything in last week's extraordinary election it was that they want politicians to earn their right to positions of power. 

Part of that test is to demonstrate the ability to cooperate across traditional boundaries.

We're not used to seeing this played out in Westminster politics, and certainly not in the papers. Partisan reporting allows no shades of grey. 'The Sun says...' usually precedes a statement that allows no wiggle room and implies the readers can't cope with subtlety.

In the five days after the election result the media found themselves in a position of being shut out of the cosy briefings and off the record conversations. 

Some reporters (BBC's John Pienaar) took it on the chin and were happy to answer the question "what's going on" with "I haven't got a clue."

Memorably Adam Boulton lost his temper on air. Too many late nights. Too many thwarted predictions.

Others resorted to abuse born of frustration. ("Sort it out you clowns", Daily Star)

Even when it became clear that they had indeed been working hard to sort it out, as opposed to enjoying a bridge rubber in the cabinet office, the media took time to tune in to the new politics.

After complaining about a hung parliament (threat to civilisation), it then became a "love in" (implied threats to democracy).

Journalists started looking for splits between Lib Dem and Tories, implying any difference of opinion is, again, disastrous, or highlighting compromise (also bad, because they've "sold out").

It's interesting that most papers have been falling on some tired stereotypes in trying to get a handle on the David and Nick relationship: it's either a comedy duo or a civil partnership. 

No room, it seems, on the front pages to see it as workmanlike respect, or common enthusiasm to tackle an economic crisis.

While David and Nick appear to have had an epiphany over the weekend the rest of us are  still trying to catch up. As Benedict Brogan says in the Telegraph, electors and the media are experiencing a kind of time-lag.

What interests me is the way our language will have to catch up too. 

For journalists used to reaching for the familiar cliche of left and right there’s been a dawning realisation that we’re not in Kansas anymore.

If it's true that "language equals thought" it's going to be a while before we get our heads in the right place.

Sky News demonstrated the problem nicely during what we must now call “the Rose Garden love-in”.

While David Cameron was explaining the new paradigm before our very eyes - referring deliberately to a "Liberal Democrat-Conservative Coalition" - the on-screen graphic was shouting “Breaking News: Cameron Coalition”.  This was a bit like suggesting that someone could get married by themselves.

Sky’s Kay Burley also struggled a bit to formulate questions about the forthcoming Malton election. The ballot paper will include a Lib Dem standing against a Tory, amongst others. “WIll there be a coalition candidate?” she asked of her interviewee, who was polite enough not to suggest that the question totally misses the point.

We’re so used to the media and politicians trying to highlight the faults in others. It now comes as a shock to see the politicians refusing to play that game and highlighting the areas of agreement.

I suspect some in the media feel miffed that they weren’t asked. There is no greater demonstration of the limit of media power than the fact that it took 5 days for a dozen elected politicians to re-draw politics. And the only way they could do that was during a media blackout.

As Nick Cohen wrote in the Observer,  part of the problem with all-powerful, winner takes all politics is that it encourages crony journalism. If you think your man (always a man) is going to get in next time, of course you're going to big him up. If you didn’t you’d never get his ear when he was in power.

At a stroke this power partnership has been de-railed. And some papers look silly as a result. (Nick Clegg a Nazi sympathiser, anyone? I can't see the Mail running with that one again.)

Of course it might all go horribly wrong, with Tory and Lib Dem cabinet ministers briefing against each other off the record. But why should we assume that from day one?

An emerging peculiarity is that the most anti-European mainstream party is now part of a European-looking coalition, where skills in finding consensus are important and valued. Certainly more important than cheap points-scoring.

Le Monde reached for its own stereotypes, declaring on Tuesday that "British fair play" had won out in the end.

In fact that’s only true if you ignore the fact the British politics has been about ya-boo tribalism for the last 65 years. During the same period countries like Germany have realised fairness and concensus are better ways of running things, however imperfect.

We’ve just caught up with them. And they thought they were catching up with us. The irony.

(Cultural aside: "British fair play", like pea-souper fogs and bowler hats, is something everyone knows about the Brits. The German word for fair play is actually die Fairneß. They also insist on calling us all "the English".)

So will language change to accommodate the new politics? To quote John Pienaar "I haven't got a clue"

Expect to hear the word 'progressive' more, as Labour tries to work out what it's for. (No, I don't know what progressive is either - but it sounds better than regressive.)

Perhaps we'll adopt 'balanced parliament' from the Welsh and Scots Nats - though I think that sounds a bit too much like a tight-rope walker.

Perhaps 'hung parliament' will disappear as a phrase - tainted by its negative use in the days of old politics. And perhaps it will all seem 'unsurprising', to use Nick Clegg's words.

After all, the German for 'hung parliament' is 'parliament'.

Tip: Getting organised starts right now

Happy new year!

The start of another tax year is customarily greeted by a) daffs, and b) groans from the vast majority of self-employed people.  Where are those train receipts?  Who was the person I took out to lunch 8 months ago...and why? What is that PC World receipt for? Why can I only find half my invoices?

The one certainty is that you have a tax return to do and that you weren't as organised as you should have been for the last 12 months.

The worst of it is the knowledge that you have till the end of January to sort out the mess. Great! You can leave it, and leave it, and leave it....

But it doesn't have to be like that. 

Here are a few ideas we've kicked about on our business skills workshops:

1. Buy a concertina file (or just a box file) and put it next to your computer - or wherever you usually do your paperwork
2. Label it 'Receipts for tax year 2010-11' - and the time of the week you're going to sort receipts (see point 4)
3. Download one of our free spreadsheets for keeping track of everything and save it somewhere really obvious on your computer
4. Set aside 10 minutes at the same time every week to put any receipts in the file you just bought, and fill in the details on the spreadsheet you have downloaded

You won't need more than 10 minutes a week if you do this regularly. I find keeping all my receipts in the same place in my wallet works well. The wallet gets too bulky to close properly after about a week, so I'm forced to sort it.

The beauty of it is that by the end of this tax year you will have effectively done your tax return without even realising it.

If you have an accountant they should even charge you less.

So don't put it off. Get organised today. Think of it as a new year's resolution. 

And have a very, very happy new year.

"Calm man does something sensible" - a budget for small businesses?

Well there's a turn up for the books. A budget that was largely welcomed by the Federation of Small Businesses (FSB), and even described as 'clever' in an FT headline - though this was subsequently re-written to sound more wary.

The 'clever' epithet originally came from the CBI who also described Mr Darling's last budget before the election as 'modest but helpful'. Gosh.

You knew he'd done something clever when the British Bankers' Association tweeted that they were "not convinced on the "small business credit adjudicator"". So one of the most hated organisations in the UK is unconvinced by something that's going to threaten their hold on business lending. Excellent.

But what about all that nitty gritty stuff we cover on our workshops for freelances and small businesses?

We've known about the one major change to income tax since December - the new 50% tax rate for income over £150K. This will affect 1% of earners in the UK, so let's not dwell.

Away from the headlines about first time buyers and cider you can find some nods in the right direction for self-employed people and small businesses.

If you're wanting to buy a lot of kit for your new business, Mr D doubled the annual investment allowance to £100K. So this new-ish allowance is now even more attractive.

If you have a shop front or business premises paying business rates, you may be one of 345,000 that won't have to pay them for one year from October. (It's based on rateable value.)

The one threshold which seems to be going up is VAT. You can now wait until you have an annual turnover of £70,000 before you have to register for VAT.

On the down side, the upper limit for using the VAT flat rate scheme has now been stuck at £150,000 for three years.

Lots of small businesses have been complaining about the lack of access to loans, with the suspicion that the banks are hoarding money unnecessarily. The Chancellor seems to have lost patience - hence this idea of a "small business credit adjudicator".

Goodness knows how this will work, but speaking as someone who runs a small business, this is the first budget I can remember where there's an acknowledgement that small businesses actually exist.

Tucked away in the Treasury's budget documents is a description of better online support for SMEs, a personalised version of Business Link, and ways of "providing better access to relevant tax guidance and flexible tax payment plans to help businesses manage their cash flow". 

It almost sounds, well...sensible.

Before we get too carried away, it's worth reminding ourselves that lots might be undone with a change of government.

And yes - we might have another budget in June/July.

So if you're one of our trainees you know where to go for the updated handouts. If you're not, there's always the free stuff.

I nearly forgot...prize for the best budget headline? The Guardian's "The Good, The Bad and the Scrumpy".  

Allowable expenses and the naked presenter

We often have a long discussion during "finance for freelance" workshops and "setting up as a sole trader" courses about what's allowed as a business expense.

People who have only ever been employed are frequently dismayed that there appear to be no 'rules' - just guidelines.

I've never had a problem with this. Every business is different, and there needs to be flexibility in the system.

Once in a while a test case appears which suddenly brings the guidelines into focus. This week we have had one of those moments - of interest to everyone in the media industry who has asked me if they could put their clothes and hair-dos against tax.

Well you can't. Except perhaps to keep especially warm and cozy.

You probably spotted this already, thanks to the incendiary use of the word 'naked' in the story tags. Search engines seem to love that.

If you want to read about the tribunal ruling try the Times or the Indy or the Daily Mail.

Or Wales Online (yes folks - Sian Williams is Welsh.)

Of elections and budgets

As we head towards the end of another financial year it's time to consider what's on the horizon for small businesses like you and me, and how much Ryman's makes on those portable metal file holders we keep all our paperwork in.

First off, there's a budget coming up, which always means a flurry of activity for me as I update all the handouts for our business skills training. 

This year promises to be handout hell, as this budget will also be the last before a general election. The chances of some kind of emergency budget afterwards are high. Two budgets! Will my laser printer be able to cope?

Recent trainees will know I've been trying to re-invent my 'tax bathtub'® - the graphic disaster that is my attempt to show income tax in visual form.

The bathtub for 2010-11 has needed re-plumbing to allow for the new top rate of 50% for income over £150,000. But it also needs to spring a leak at the right moment to start wiping out the personal allowance once you have over £100,000 of taxable income. 

Tax Bathtub 2010 11

View more presentations from David Thomas.

It's not pretty, graphic-wise. (And all this just to represent the top 2% of UK earners.)

We've known about this for months now. So is there likely to be anything new in the pre-election budget?

Probably no more surprises. Mr Darling has no money to play around with and won't want to frighten the horses before we all go to the polls.

So what might happen when we've had the election and frightening horses is back on the agenda?

One view is that VAT may go up - to 19% or 20%. This is because VAT is one of the two main ways the Treasury collects our money, the other being income tax.

The 50% top rate of tax will probably stay for a while, whoever gets in. Watch someone reduce it just before the election after this one, in a vote-attracting gesture.

More likely: the point at which people pay taxes will not move up in line with inflation. In other words the thresholds will stay much the same, slowly putting more people into higher tax bands as their income rises slightly.

For those of us who are limited companies the Tories say they would reduce the small biz rate from 21% to 20%, and the mainstream rate from 28% to 25%. Keep an eye out for any pronouncements from other parties, but don't hold your breath.

Whatever happens, you'll get all the latest on forthcoming courses, and via the accompanying downloads on our site. And don't forget there is free stuff on the site as well if we don't see you on one of our workshops.

Happy Easter!

Hi-tech and lo-tech innovations in Africa

I spent Saturday at one of the most inspiring conferences I've been to. It was called Africa Gathering, and it was the first event under that banner to focus on mobile and other technologies being used in Africa. (My small role was to lead a discussion on distance learning for African trainees, something we've been doing for 4 years.)

I couldn't attend all the presentations, but the few that I sat in on were a revelation. Ken Banks talked about a nifty piece of software he's developed called frontlineSMS, which allows people to send alerts and information, not via the internet, but by hooking up a laptop to a mobile phone network. Mobiles are ubiquitous, but the internet is not. So SMS is a great way to disseminate info. (Check out kiwanja.net for more.)

Simon Berry spoke about his project colalife, which is based on the premise that if Coca Cola can reach every corner of Africa then why not use the same delivery network to distribute medicine, mosquito nets or anythings else. Simon's use of social media (Facebook, Twitter, etc) and old media (the BBC's PM programme) is an object lesson.

What made these speakers (and many others) stand out was their extraordinary tenacity in the face of big business sluggishness, and a seemingly limitless amount of energy to help people find their own solutions to local problems.

And here's a video from an Austrian agency which gives a flavour of how mobile phones are changing the lives of ordinary Africans – Tanzanians in this case.

Long may the dialogue continue. See you at the next Africa Gathering in Brussels?

Budget headline watching for beginners

There was enough in this year's budget to keep every headline writer happy, so I'm looking forward to browsing thought the newsstand tomorrow morning.

Most will probably focus on the devilish old labour plan to up the top rate of tax. I hereby predict that they will ignore the fact that 1% of the population earn over 150%, and that 99% of earners won't be affected. (I know I'm not. *sigh*)

Leaving that aside, what does this mean for survivors of our sole trader training courses? Well, I haven't been through all the budget small print yet, but I promise I will post the relevant bits here.

Most handouts are already updated, and it's mainly the VAT ones that need a quick tweak.