Throughout the pandemic and into the current recovery period, the Government has offered a number of loans to help businesses survive and invest for their future.

However, only the Recovery Loan Scheme remains open, and this is due to end on 30 June, with no replacement taking its place.

Despite the popularity and value of these loan schemes, there are concerns that, without them, small businesses will struggle to access the finance they need.

However, it is understood that the Treasury is now in talks with the banking sector about making Government-backed loans to SMEs permanent to help businesses grow.

According to an article in the Financial Times, the loans could mirror previous Covid financial support schemes, including the use of Government backing to give banks the confidence to loan to more businesses.

A source close to the ongoing talks told the Financial Times that the focus of any future funding would be on growth, rather than survival – as had been the case with the previous loan schemes.

Questions are now being asked about the level of support from the Treasury, whether personal guarantees would be needed, and what sort of companies should be eligible.

It is hoped that additional details about new loan schemes could be made public in the coming months, although concern remains about the abuse of COVID financial support measures after the Department for Business, Energy and Industrial Strategy revealed that £4.9 billion could be unrecoverable from the £47.4 billion Bounce Back Loan scheme.

Until then, the current Recovery Loan Scheme, which guarantees 80 per cent of a bank loan up to £10 million remains open until the end of June to support those in need.

Already more than £3 billion has been lent by British banks under this scheme, according to a senior industry executive speaking in the same Financial Times article.

Link: Treasury small business loans could be permanent

HM Revenue & Customs (HMRC) has retained its online portal for claiming working from home tax relief for the 2022/23 tax year.

But, while the rules and value of the relief remain unchanged, unless there are any further lockdowns this year far fewer people are likely to be able to claim.

That is because only people instructed by their employers to work from home some or all the time can make a claim. The rules once again require that costs must have increased as a result of the arrangement.

With most hybrid workers free to work in the office if they wish, most people in this situation will not be eligible for the relief.

Relief worth £6 a week can be claimed through the online portal without needing to provide evidence of increased expenses. Taxpayers benefit according to the rate at which they pay income tax. A basic rate taxpayer will save 20 per cent of £6 a week (£1.20).

If you have been instructed to work from home and have incurred increased costs as result, you can check your eligibility and claim here.

There has been a surge in new company formations in the last few years, as entrepreneurs develop new and exciting business ideas and bring them to market.

On top of this, there are a growing number of workers with ‘side hustles’, who are quickly scaling up their operations to deal with demand from their customers and clients.

While many businesses may initially rely solely on the work of their founder, there comes a time when operations grow so much that they need to consider hiring their first employee.

Hiring your first employee will lighten the workload, but it also brings with it new tax and payroll requirements.

If you have previously been one of the 4.2 million businesses in the UK with no employees, other than yourself, and you are looking to bring in a new worker here are our top tips to get you started.

Inform HM Revenue & Customs

Before you can hire someone, you need to register as an employer with HMRC. Doing so will provide you with an employer PAYE reference number so you can manage your payroll.

This must be done within four weeks of your new employee’s first payday. The registration process is fairly quick, but receipt of your reference number can take up to five working days, so you must factor this in.

Set up effective payroll processes

You will need to manage your payroll online each month, report this information to HMRC and make the correct payments of tax and National Insurance, as well as paying into any benefit schemes or pensions offered to your employees.

As such you will need to implement processes and payroll software systems that allow you to do this.

You may already have existing systems in place that manage your personal payroll, but you should consider whether these are still sufficient when you hire your first employee.

Don’t forget, you may also need to deduct student loan repayments, pension contributions, Payroll Giving donations and child maintenance payments.

The weekly or monthly administration of your payroll can be time-consuming and is often complicated by regular changes to the rules surrounding pay, which is why many businesses choose to have their accountant manage it for them.

Create a basic workplace pension scheme

If any of the workers you hire are eligible for a workplace pension you will need to set up and manage a scheme for them.

You must automatically enrol your staff into a pension scheme and make contributions to their pensions if all of the following criteria apply:

• They are classed as a ‘worker’
• They are aged between 22 and the State Pension age
• They earn at least £10,000 per year
• They usually (‘ordinarily’) work in the UK.

You will also need to calculate and make an employer’s contribution of at least three per cent each month to the scheme and ensure that an overall minimum contribution of eight per cent is made.

The additional five per cent is usually made up of an employee contribution, but both you and an employee can offer to contribute more should you wish to.

Your employees can choose to opt out and leave the scheme, but you will still need to re-enrol them every three years.

Paying the National Minimum Wage

You are legally required to pay your employees at least the correct National Minimum Wage (NMW) or National Living Wage (NLW) for those aged 23 and above. Failing to do so could result in you being fined and publicly named and shamed.

The current NMW rates, as of April 2022, are as follows:

Be careful if you make deductions from pay, other than for tax, National Insurance or a small number of other exceptions, as these cannot normally reduce a worker’s pay below the National Minimum Wage – even if they agree to it.

Many employers have previously been caught out by this, as well as other important changes, such as a person’s birthday where it carries them into the next NMW band.

Protect your business

Although not directly related to tax or pay, businesses should take steps to protect their interests. This includes ensuring the new staff member has the correct legal status to work in the UK, producing clear, written employment contracts and policies, and taking out employer’s liability insurance in case of accident or injury at work.

Failing to take these steps could leave your business exposed to costly risks, including fines and potential compensation payments.

Seek help

These are only a few of the steps that you as a prospective or new employer may need to take and it is well worth seeking payroll and HR advice before hiring your first employee, both to protect yourself and to take away the administrative burden.

Link: Becoming an employer for the first time? What you need to know

When HM Revenue & Customs’ (HMRC’s) current guidance on the tax treatment of tips and troncs was first published back in 2014, tips and troncs were paid almost exclusively in cash or through card transactions.

Of course, in the eight years since, things have changed dramatically and payments are frequently made via app-based platforms, whether for delivery drivers or waiting staff.

Now, HMRC has updated its guidance to take account of these changes and clarify the tax position that applies to different arrangements.

Importantly, the new guidance does not change the tax status of payments made through app-based platforms. Instead, it offers further clarification of the position and its application in various circumstances.

The two key takeaways are:

• Tips and troncs passed from an app to an employer without an independent troncmaster are subject to National Insurance and PAYE, even if they are intended by the customer to be passed to a specific member of staff.
• Tips paid directly by third-party apps to employees are not subject to National Insurance and PAYE. The onus is on employees to notify HMRC of this income.

App-based tipping arrangements can be set up in many different ways, with seemingly small variations in how they’re operated having sometimes significant impacts on the tax positions of employers and employees alike.

It is crucial not to make assumptions about the tax status of any app-based set-up you are using as errors can lead to HMRC inquiries and potentially hefty penalties.

From 1 September, changes to the rules regarding the Trust Registration Service (TRS) mean that more trusts will need to be registered with HM Revenue & Customs.

The TRS was introduced five years ago to make the beneficial ownership of assets held in trust more transparent.

While many trusts have had to sign up for the service already, the remit of the service is expanding to include a greater number and type of trusts than ever before.

What changes are being made to the Trust Registration Service?

From September, the requirement to register with the TRS will apply not only to trusts with a tax liability but to all trusts.

This includes trusts set up many years ago, which may have been forgotten about or left dormant, but which remain extant.

This registration process has been open since 1 September 2021, but time is running out to complete it.

Will your trust need to register?

If you operate a trust the answer is likely to be yes. Under the changes, only a limited number of exemptions exist.

Some other less common types of express trusts that are set up for particular purposes are also excluded from registration unless they are liable for tax.

Be aware that this change to the rules means that for the first time some offshore trusts will also need to be registered.

How do I register for the Trust Registration Service?

To comply with the registration requirements, trustees will need to input details of the settlor, trustees and beneficiaries into an online portal.

At a minimum, trustees will need to confirm annually that there have been no changes and notify the TRS of any changes within 90 days.

Some trusts may have already completed a 41G form containing some of this information. However, HMRC has confirmed that this did not collect sufficient evidence to meet the requirements of the new rules.

Therefore, those trusts which registered separately with HMRC before must now using this form must register and resubmit information via the TRS.

HMRC strongly recommends that trustees familiarise themselves with the TRS system and obtain the information required to register in advance of the deadline in September.

Link: Manage your trust’s details

You have worked long and hard to get your business up and running and have put your heart and soul into making it successful.

The thought of losing it can be incredibly stressful, both for you and any employees who could lose their jobs.

Equally, if you have a customer who owes you money, you may want to take more immediate action if it looks like they may be in distress.

So, how do you avoid getting into difficulties and spot the signs of business failure? And begin firefighting potential problems?

The warning signs that a firm is struggling include:

Problems with cash flow

They say that money isn’t everything, but poor cash flow is a problem in business and is often a clear indication that the business is in trouble.

Cash flow issues can be identified with proper forecasting, which will identify the cash shortage problem areas or overspending.

Excessive debts

Interest rates are creeping up again after more than a decade of historically low rates and having too much debt within a company may place it at risk.

If you are seeking out additional funding and lenders are seeking stronger personal guarantees or security against any money they lend this could be an indication that your own business is in trouble.

It can be more challenging to spot debt issues in another business, but regular late payments from a customer can be an indication that they are struggling to manage their own money.

Defaulting on bills

We have all heard the phrase, “you will be paid by the end of the month,” often used to overcome short term shortages.

If this becomes a regular occurrence, it could suggest a business can’t pay its way.

When it comes to your own finances, defaults on tax payments to HMRC or other formal payment arrangements can be particularly damaging and lead to penalties.

It can also be bad for your reputation and that of your business if it becomes clear that you are struggling to make payments on time.

Chasing payments

A lot of businesses are reluctant to chase payment because they do not want to damage their relationship with customers or reduce the prospect of future work.

However, regularly allowing late payments can affect your own finances and prevent your own suppliers from being paid.

If you are dealing with late payment issues you should seek professional advice to improve your credit control processes and, if necessary, eliminate late-paying customers from your business.

If you are unable to effectively chase payment it may cause future cash flow problems.

Either way, sudden changes in these numbers should be investigated to see whether they are signs of something more serious.

Falling margins

High sales are great, but profit is the key to survival and growth.

Falling margins suggest that costs are too high, and prices or income are too low. This is not a sustainable position for any company.

Indications that this may be happening within a customer’s business are changes within its own operations, such as the cutting of service or product lines, redundancies or an overall poorer quality of goods or services.

Low morale

Reduced hours, contractual changes and pay freezes can all be signs of trouble within a business.

All of these indications may not necessarily mean the end, but they are a clear indication of money troubles.

With employment costs rising suddenly this month, you may start to notice this within more businesses that you deal with.

If you are concerned about your own financial health or that of a customer, you should seek professional advice as soon as you can.

It is always a challenge to keep costs down for businesses, particularly at a time of soaring inflation and steep rises in the cost of utility bills.

An expense report is designed to report on any business-related expenses an employee incurs, either by using a company credit card or by using their own funds.

This might include spending related to work activities, such as a business trip, travel and transportation, meals, training and workshops, accommodation, business supplies and tools.

The easiest way to manage expenses and process expense reports is to use expense management software, which automates the entire process for you.

Why it is critical to keep spending under control

Keeping expenses under control is vital to the long-term health of any business.

While some of the cost of expenses can be recovered via the tax system, much of it still falls on you and could reduce your profitability.

In implementing an expenses management system several steps need to be undertaken.

Manual expense management demands a lot of time, money and effort.

An automated expense management system with ready-made templates and cloud-connectedness streamlines the spending and employee reimbursement process and helps you to be more efficient.

Avoiding costly mistakes and duplicating

The best part about digital expense management systems is that they make it far easier for employees to follow the rules.

This eliminates most potential mistakes, such as overspending, double-entry and lost receipts.

By employing some of the latest technology, businesses can track employee spending and determine how the business will reimburse staff.

What’s more, many of the apps out there can connect to existing cloud accounting software to automate much of the accounts process.

It also applies the procedures and policies used to control this type of spending. For example, if employees are given daily allowances for meals when travelling, then the expense management process accounts for those limits when generating reimbursements.

Make the system secure and compliant

These systems allow you to limit user access to the system and to configure the software so that it prohibits employees from entering claims that are clearly in breach of organisational policy or the expenses guidelines of HM Revenue & Customs.

You can set the system up so that disputed claims are easily moved up the chain to senior management once certain limits or rules have been breached.

Make sure that data is collected properly

One of the most common problems with employee expense claims is that not all of the information necessary to prove the validity of the claim is captured correctly.

The latest systems safely and securely store information on the cloud, often allowing staff to quickly take a picture of receipts or invoices so they don’t have to be processed manually or stored.

Publish analysis of the data

If a claim looks ridiculous or excessive, allowing the claimant to see might lead to more sensible claims and can allow you to reinforce your rules surrounding expenses.

In many instances, it is entirely appropriate for expenditure to pursue a new client or the management of an existing one.

Transparency of the spending involved ensures that everyone can see the true cost of client acquisition or retention.

Businesses without automated expense software should explore the options available to them to help them save time, and money and reduce the strain of managing expenses manually.

Financing a new venture is a challenge, even harder in the current climate of high inflation, global uncertainty and the backdrop of war in Europe.

Difficult, but not impossible. With planning, careful research and the right advice, you should be able to find the finance that is right for you.

If traditional funding is difficult, other forms of finance may also be a good option and are generally easier to obtain than bank funding.

Peer-to-peer, crowdfunding, angel investors and other forms of alternative funding can be more flexible and may not require the extensive credit history of a bank loan.

However, with all forms of finance some pitfalls are best avoided:

Lack of preparation

In some ways persuading a financial institution or financier to lend you money for a business is a bit like getting a mortgage.

They will want to see that you can afford the loan or support being offered and have a clear plan for repayments and the initial equity to kick start the company.

They may take the view that if you are not prepared to invest in yourself, then why should they?

For most loans you will need to provide some collateral, should there be a default in payment, but lenders will also want to see a clear business plan and some indication of income to support regular repayments and interest.

Planning is the key

You know what they say, failure to prepare is preparing for failure.

As mentioned, you must have a business plan. Unfortunately, many start-ups apply for finance with an underprepared or even non-existent business plan.

To persuade a lender to part with the funds, a clear and costed business plan is essential for them to see your goals and specifically, how you intend to reach them.

Choosing equity or loans

Equity investments can come from friends and family, angel investors online or even crowdfunding platforms.

Equity is less risky than a loan because there is typically less or nothing to pay back. Instead, investors enjoy a cut of your profits by being given shares in your company.

This can free up additional funds needed early on within a business but can create conflict, especially where investors are friends and family.

On the other hand, a bank or lender doesn’t have any ownership of your business and has no say in the way you run your company.

A loan can be short-term or long-term. Whatever the loan’s terms, however, you must pay the money back within a set time frame, plus any interest.

If you are not sure which option is best for you, speak to a professional adviser beforehand.

Know your borrowing limits

It seems obvious, but you should not borrow too much (or too little).

You should have a clear conversation with potential lenders about how much you need and how much they think you can afford.

You shouldn’t make the mistake of asking for more than you need, but it is a good idea to build a contingency into the amount of working capital you budget for, just in case something unexpected arises.

Make sure you manage your credit score

Your credit score will always be a factor when a lender considers offering you a business loan.

A lender may take the view that if a business owner hasn’t taken care in managing their personal credit, there is the potential that they will take the same approach to their business credit.

Because of that, managing your personal credit is critical and starts with knowing your current score and creating a plan to improve it if necessary.

If you are looking to start up or scale up a business then you must seek professional advice on financing beforehand.

National Insurance and Dividend Tax rates have increased by 1.25 percentage points as of 6 April, as part of the new Health and Social Care levy.

These changes have brought additional complications to the payments of National Insurance Contributions (NICs) and dividends that businesses are just getting to grips with.

How have NICs changed as a result of the increase?

The 1.25 percentage point increase in NI affects the contributions made by employees, employers and the majority of self-employed workers.

While the move will help to raise more than £12 billion for the NHS and social care system, it will mean that businesses face a sudden rise in their employment costs this month.

The increase in NICs will initially affect everyone over the age of 16, but below the state pension age, earning more than £190 per week through employment (rising to £242 from July 2022) or with profits of £9,880 or more a year in self-employment (rising to £12,570 from July 2022).

The 1.25 percentage point increase also applies to employer NICs, minus any reliefs that a business may be entitled to.

The increase will not apply to Class 2 NICs, which is the flat rate paid by the self-employed with profits above the Small Profits Threshold or Class 3 NICs, made up of voluntary contributions from taxpayers to fill in gaps in their contributions’ records to qualify for benefits.

How are dividends changing?

Most businesses have favoured a balanced pay strategy for directors, which saw a larger proportion of their income paid through dividends versus a regular salary, to reduce the amount of tax and NICs the business is liable for.

Dividends are paid out of a company’s profits to its shareholders and every individual also benefits from a £2,000 tax-free allowance for dividend income.

Any dividends over this amount are taxed at different amounts depending on a person’s marginal rate.

Businesses do not pay any NICs on dividends, providing a clear benefit to the company.

Before the increase in the Dividend Tax rate, most people were taxed as follows:

• Basic rate – 7.5 per cent
• Higher rate – 32.5 per cent
• Additional rate – 38.1 per cent

However, as of the start of the new tax year, these rates are now as follows:

• Basic rate – 8.75 per cent
• Higher rate – 33.75 per cent
• Additional rate – 39.35 per cent

From an employer’s NIC perspective, paying out more in dividends may make more sense given the upcoming changes.

However, those in receipt of dividends may not be as happy as it could affect how their income is taxed.

What about the changes to the NIC thresholds?

To soften the blow of the increase to NI rates, the Chancellor announced in his Spring Statement that the Primary Threshold (PT) – the point at which employees start paying National Insurance – will increase by £3,000 from July to bring it in line with the personal tax allowance of £12,570, which is the rate at which workers begin to pay income tax.

The change does not affect the Secondary Threshold, which is the point at which Employers start paying National Insurance Contributions (NIC). This will remain the same.

However, the Chancellor has extended the annual Employment Allowance to eligible businesses (those with employers’ Class 1 National Insurance liabilities that are less than £100,000 in the previous tax year) by an additional £1,000 a year to £5,000.

The Treasury has said that the changes to thresholds will help cut up to £6 billion worth of NICs – cutting the NIC bill for the ‘typical employee’ by around £330 a year.

Although this does represent a saving, in reality, much of this ‘tax cut’ is taken up by the rise in NI rates.

Links: Four things to know about National Insurance contributions and the April increase

The majority of adults will have flirted with the idea of starting a business and becoming the next Branson or Musk.

That idea would have been firmly buried for many during the pandemic, but new figures show that nearly 13 per cent of UK adults are running fledgling businesses, according to research, the highest percentage since the late 1990s.

They are in the first three months of starting a new business or are already running a young enterprise, according to the Global Entrepreneurship Monitor. This compares to just eight per cent of adults in 2020.

Indeed, more than 70 per cent of Britons believe it is easy to start a business in the UK, but less than one in 10 has any intention of doing so.

For those willing to take the leap, here are just a few tips to get you started:

Be prepared and plan carefully

Overnight success is a rarity, so remember to focus on what’s achievable and be consistent.

You should create good habits and follow routines that power you on when that initial motivation wanes.

Taking one step at a time is important, as diving in headfirst can be disastrous.

The best way to accomplish any business target is to plan it out step by step.

Decide what kind of business you want

Think about what you love and what you are good at can lead you to a brilliant idea for your next business.

If you already have an idea, measure it against the market, consider whether you’re good at it and have the passion to succeed, and most importantly consider whether it is truly profitable.

Research thoroughly

The first stage of any competition study is primary research.

This entails obtaining data directly from potential customers rather than basing your conclusions on past data.

You can use questionnaires, surveys and interviews to learn what consumers want.

You should also review similar ideas within existing markets and see whether your product or service has a sufficient unique selling point that could beat the competition.

Create Your Business Plan

A business plan is a dynamic document that serves as a roadmap for establishing a new business.

This document makes it simple for potential investors, financial institutions, and company management to understand and absorb.

Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems.