Tag: "Money"

Change your financial future today

Change your financial future today

We all have areas in our lives in which we want to see change, but for one reason or another, we put off doing anything about them. Personal finances happens to be one of the biggest areas in which people tend to procrastinate. For some, it is not knowing how to make the most of their money or how to take control of their personal finances that they gets them doing nothing. For others, the very thought of money makes them scared to the point of becoming immobile. And for others still, it’s the hope that it’ll all be okay in the end. Whatever the reason, what we all need to remember is that actions have consequences. And while many of us tend to think of this in the negative, I’d like to say that the converse is also true. Positive actions have positive consequences.

So when it comes to your money positive actions have positive consequences. And the amazing thing about personal finances is that small positive actions add up very quickly to bring long-term positive change. I always say that no matter how old you are or how you’ve been managing your personal finances to date, you can make a significant difference to your financial future by taking control of your money today. Yes, it is true that the younger you start the better but that doesn’t change the fact that it is never too late to start. Don’t look at the state of your personal finances and feel there is no hope. Because there is always something you can do to change your financial future.

So what can you do today that can make a significant difference to your financial future?

  • Perhaps it is finally sitting down and setting that budget that you know you’re meant to have done ages ago.
  • Or maybe it’s finding cheaper alternatives for some of your expenses so you can keep your current lifestyle.
  • Or finding creative ways to boost / supplement your income.
  • Or how about coming up with a step-by-step plan to get yourself out of debt.
  • It may even be to learn how to make the most of your savings and investments. Even the simple action of finding a savings account that pays a % or two more than you are currently getting can have a tremendous impact on your financial wealth.
  • Or perhaps it’s time that you finally get to grips with understanding your pension.

Maybe you’re reading this and thinking you need to do all the above to get your personal finances in shape. I get it; that can be overwhelming. And feeling overwhelmed can keep you in that cycle of procrastination. So let me ask you, how do you eat an elephant? The answer is one bite at a time. And just as you eat an elephant, so you tackle your personal finances, one step at a time. You can make a significant difference to your financial future by tackling one aspect of your personal finances every month. I guarantee you that your financial future will be positively different as a result.

Author: Liz Lugt. Liz offers help with any of these topics,  and if you don’t know where to turn, consider looking at her Road Map to Financial Freedom E-course to take you through each area step by step. It’s designed to be fun, practical and easy to follow.

Or just SIGN UP  to our Mum & Career web portal before 31st of January, that will give you a chance to win the e-Course for FREE. Signing up is FREE and EASY.

 

Dec 05, 2012 | 0 comments View Post
Top tax tips for start ups

Top tax tips for start ups

You’ve had your big idea, honed your business plan and decided to take the plunge into being your own boss and start up. Tax might be the last thing on your mind as you’ve just started your business and work to build your customer-base, suppliers and administration. But don’t bury your head in the sand: a little time spent planning for tax issues now will reap benefits in the long-term as you’ll be set up for the long-term from the outset. Here are five top tax tips to ensure you’re properly set up as a start up from the word ‘go’:

Think about business structure and tax

While a sole trader setup is the most simple option, there comes a point where incorporating the business to operate as a limited company means you’ll pay less tax because you can draw out some profit as dividends which have a lower effective tax rate. The definitive position depends on how much cash you need to draw from the business as well as any other sources of income you may have. Sole traders can offset any losses against other income, whereas companies can use losses against other company income but not against the income of an individual shareholder. However, using a company allows you to plan the timing of withdrawal of profits if your tax rate is likely to decrease. There are also non tax related advantages to operating as a limited company such as increased perception of professionalism and limited liability in the event of business failure.

Plan who will be involved

It’s possible to use the tax allowances of a non-working spouse to minimise the tax you pay as a family. For 2012-2013 the tax-free allowance is £8,105: even above this level dividends paid to a basic rate tax payer attract an effective tax rate of 0% because of the tax credit applied. Everyone is entitled to receive annual income of £8,105 with no tax deducted so using a spouse’s allowance can double the household’s tax free income.

Think about whether you need an accountant

Do you know your AIA from your WDA? Your VAT from your FRS? An accountant may seem like an expense you can do without, but often they will save you money by making you aware of allowances and claims you would otherwise have missed. But beware: anyone can call themselves an accountant as the term is not protected so ensure they are a member of a professional body such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA). Many offer a free half hour consultation to small businesses.

Monitor your expenses

Most expenses can be claimed in your company or sole trader accounts as long as they are ‘wholly and exclusively for the purposes of the trade’. This includes premises costs, wages and salaries, utilities, administration costs and professional fees. If you run your business from home you can claim a reasonable proportion of domestic overheads. Keep receipts for all purchases, bills for all utilities and records of expenses such as hotel incurred when visiting clients. This will make your life a great deal easier when preparing end of year accounts and tax returns. Key expenses which are not allowable for tax purposes are company formation costs, depreciation and client entertaining so these must be added back to your accounting profit when calculating your tax liability.

Plan ahead for VAT

Broadly speaking, once your turnover of VAT taxable goods or services exceeds £77,000 (2012-2013 figure) you must register for VAT. You can register voluntarily if you feel this would be beneficial: this may be the case if you suffer VAT on purchases and wish to reclaim the tax you have paid. There are schemes available to small businesses which simplify the administrative and cash flow burden including the cash accounting scheme and the flat rate scheme. If you’re charging VAT remember that certain things must be included on your VAT invoice: see http://www.hmrc.gov.uk/vat/managing/charging/vat-invoices.htm for details.

Author: Sarah Gardner is a Chartered Accountant specialising in tax advice at TWP Accounting LLP. She specialises in helping small businesses with their start up tax planning and assisting growing businesses with their ongoing tax issues. TWP Accounting provides accounting, audit, corporate finance and tax services to businesses nationwide.

If you have any questions contact s.gardner@twpaccounting.co.uk, visit www.twpaccounting.co.uk or follow @SarahGardnerACA and @twpaccountants on Twitter.

Jul 25, 2012 | 0 comments View Post
Can you sustain your lifestyle when one income falls away?

Can you sustain your lifestyle when one income falls away?

It’s this question that is on most of our minds before and perhaps even after we have our first baby (or babies, in my case): can we live on one income?  It is one thing going back to work after you have a child if you want to, but it is quite another if you have to.  Are you really able to exercise a choice at all?  The answer, for the most part, is yes.

Most people I speak to want more money, regardless of what they earn.  So whether they earn £30k, £45k, £60, £80k, or more, it never seems to be enough.  The truth is that it’s not necessarily a case of earning more, but of managing our money better and learning how to make our money work for us.

Not quite sure you believe me?  Look at Michael Jackson, the king of pop, he died leaving millions of dollars of debt and only a couple of valuable assets.  And it was only a few years ago that Whitney Houston had to sell off many of her assets to pay off her debts.  Both of these stars earned millions during their singing careers.

So how do we manage our money better and how can we get our money working harder for us?

1. Know what is important to you

We have to start off by knowing what is really important to us.  In other words, we need to know what we truly value and then spend our time and our money accordingly.  If we know what we value, it is easier to make difficult choices.  For example, if it is more important to you to be able to spend time with your children than to have all the little luxuries that having more money has to offer, then you’ll make the choices necessary for you to be able to do this i.e. working or spending less.

2. Set yourself a budget

We need to set ourselves a budget and stick to it, as closely as we can.  Budgeting is one of those things that many of us know we need to do, but fail to.  However, budgeting is the one thing that will let us have a little of all the things we want, i.e. the annual holiday, our weekly entertainment, nice clothes, a decent haircut, etc, while making sure we are saving for our futures.  It’s also the one thing that will keep us out of the red.

We have to plan how we’re going to spend our money otherwise we spend it as the need / want arises in the moment, without a thought for tomorrow.  Budgeting is also the best tool I can think of to not only show us where we are wasting our money, but also that we do not need as much as we think.  If, like many others, you don’t know where your money is going, I can guarantee you that a budget will help you sort out this problem.

3. ‘Get the most bang for your buck’

Martin Lewis, Money Saving Expert, would agree with me when I say that it is very often not a case of doing / having less or earning more but rather a case of finding cheaper alternatives for the things we do / want.  It’s often our apathy that keeps us from putting in the effort to find the best deal for our money on things like utilities, phone and internet, holidays, etc.  If it all seems overwhelming, try tackling one of these things a month.

 4. Be proactive about growing the money you have

We need to have a strategy that will get us the best deal for our savings and investments.  Our strategy has to be balanced in terms of our short, medium and long-term financial goals and it needs to be sufficiently diversified across the various asset classes (cash, property and equities) to give us a stable return in the long run.  I know this part of money management can be a little overwhelming, but it doesn’t need to be.  If you know the basic principles, you can take it from there.

So, can you sustain your lifestyle when one income falls away and you live on one income?  You can more than you think.  Yes, it may take some effort and it may mean doing some things differently, but it can be done, especially if you set as a pilot light the things you really value in life.

If you need help with any of the things I have mentioned here, please do take a look at my Road Map to Financial Freedom , 21 lessons to help you make the most of your money.

 Author:  Liz Lugt, Speaker, Trainer and Mentor.  Liz can help you discover what your passion is, make a living out of doing what you love and overcome the things that hold you back.  She does this by drawing on her skills as a qualified Chartered Accountant, her experience in business and her own personal journey in following her passion.  Liz lives in Twickenham with her husband and three children. 

 

Jun 01, 2012 | 0 comments View Post
Why a husband should pass all his assets to his wife – save tax!

Why a husband should pass all his assets to his wife – save tax!

I might wish it wasn’t so but working mums often earn less than their husbands, and this article is especially for those mums that don’t have a high income at this point in their lives. To be truthful, the correct headline for this article should be: ‘why the higher tax paying spouse should pass their assets to the lower paying/ non earning spouse’. But I love starting off with something controversial.

It is very straightforward for a couple to introduce some simple strategies that would reduce the amount of money you pay to the taxman, and it’s all totally legal and above-board.

This rule applies to couples that are married and in a civil partnership. It doesn’t apply to couples cohabiting.

Women get tax rights too!

Can you believe that just over 20 years ago married women did not have to do their own tax return? Not because the Government decided that they didn’t have to pay tax, but because it was the husband’s responsibility to do a joint tax return. The wife therefore provided all her financial information to her husband and he then made the return.

Presumably it was thought that women had too much to think about with looking after the husband, the children & doing the washing & cleaning of the house. Why would she want to worry her pretty little head by doing something as difficult as dealing with her finances? After all, that’s probably why she got married…to have her man deal with this for her!

Luckily for all us independent married women this is no longer the case. The rules changed on 5th April 1990. Good job they didn’t choose April 1st or it may have just been considered a good joke!

What this means for a non earning spouse

Each individual under the age of 65 has a personal allowance, which for the 2012/13 tax year stands at £8,105. The allowance increases after age 65. Any earnings (including investment income) below that amount will not suffer any tax. So this means, you can earn £8,105 each year before you have to pay anything over to the taxman. After that level, tax rates then rise to 10%, 20%, 40% and 50% dependent on your total taxable income.

You can’t transfer any unused portion of your personal allowance to your partner if your income is less than this amount. However, if one partner is a non earner (or low earner) and the other partner is paying tax at a higher rate, there is some basic straightforward tax planning that can be done.

What you can do

Ownership of joint assets or assets held in the sole name of the higher rate tax payer can be transferred to the non earning spouse. Dependent on the level of income some significant savings can be made. The level of saving depends on the specific circumstances but will be greatest when there is significant investment income suffering tax at 40% or 50% by one partner and the other partner is a non earner or low earner.

How do I do it?

Any income on assets held jointly (including rental on an investment property) is deemed by the tax authorities (HMRC) to be split equally between the joint owners. If you want to change this ratio you would need to complete a deed of declaration to show that the legal ownership has changed. You then submit Form 17 to HMRC. http://www.hmrc.gov.uk/forms/form17.pdf

Is there a downside?

Do be aware that signing a declaration to say one party owns say 90% of a jointly held asset makes that person the legal owner of it. In a separation or divorce that spouse is deemed to be the owner. It is no longer split 50:50.

What if I’m not a tax payer?

Most banks and building societies deduct tax at 20% before you receive your interest. This tax can be reclaimed if you are not a taxpayer. However, it is possible to have the interest paid gross, without deduction of tax, by completing form R85.

Many bank accounts allow you to have ½ the interest on a joint account paid without deduction of tax where only one of the members is eligible.

What about capital gains tax?

The same planning tip also applies for Capital gains tax (CGT). CGT is payable on gains made on the sale of an asset. Each individual has an annual tax-free allowance of £10,600. Gains above this are charged at either 18% or 28% dependant on your tax rate.

It is therefore possible to save tax if one partner owns an asset in their sole name. If ½ the asset is transferred to the other spouse both parties can use their annual allowance. Alternatively a larger share or the entire asset could be transferred to a non earning spouse to reduce the tax payable.

Good luck with your tax planning. Isn’t it great you can earn something just by being clever with your taxes?

working mumAbout the author: Mary Waring is a Chartered Financial Planner with Informed Choice, and specialises in giving financial planning advice to women. She also enjoys giving talks to local female networking groups entitled “A man is not a financial plan.”.

 

 

 

Levels and bases of reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investment can go down as well as up and you may not get back the full amount invested. MDM Associates Limited is authorised and regulated by the Financial Services Authority. Registered in England No.3306225
Apr 19, 2012 | 0 comments View Post