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Cryptoassets (also known as ‘tokens’ or ‘cryptocurrency’) are digitally secured representations of value or contractual rights that can be: transferred, stored, and traded electronically. The big question for crypto enthusiasts is whether cryptocurrency is taxable, and if so, what are the tax rates. We’ll take a look at the crypto tax of the UK and a few other things you need to know.

Cryptocurrencies are still considered new assets, and their regulations are still in the works. HMRC does not consider crypto assets such as exchange, utility, or security tokens to be money. The usage of the coins determines the taxation policy. There are a variety of exchange tokens that are accepted as a form of payment, similar to Bitcoin. As a result, if you own crypto-assets such as Bitcoin as a personal investment, you must pay Capital Gains Tax. On the profits, you make from them. HMRC has also agreed to disclose information on Coinbase users who have more than €5,000 in crypto assets on the platform during the 2019–20 tax year.

Types of Tokens

HMRC categorizes cryptocurrencies into four major heads:

Exchange tokens: They are meant to be used as a form of payment. One of the most widely known exchange tokens is bitcoin.

Utility tokens: These tokens provide holders with access to particular goods and services on a platform, usually using distributed ledger technology.

Security tokens: Tokens that represent ownership, the repayment of a sum of money, or future profits as a share of a company.

Stablecoins: Cryptoassets linked to the value of fiat money or other assets.

Crypto Tax (UK): Why is there a tax on cryptocurrency?

At different points in the ten-year history of cryptocurrency, Bitcoin has fluctuated significantly in value. In 2017, when the value of Bitcoin reached almost $20,000, those who bought it in 2008 when it was worth around a dollar could potentially have made hundreds of millions of dollars in profit.

Profits over £12,300 in the UK are subject to tax. No matter how you perceive cryptocurrency, the gains you make from your investments are always taxable.

The HMRC does not see crypto assets as money or a currency, and they have published a guide for filing taxes on cryptocurrency in the UK.

If you live in the United Kingdom and own crypto assets as a personal investment, you are liable to pay tax on any profits you make. However, you only need to pay capital gains tax on the overall gain above the annual exempt amount of £12,300. Cryptocurrencies received from mining, confirmation rewards, airdrops, and salary from an employer are taxable. Crypto assets donated to charity are not subject to capital gains tax unless the donation exceeds the acquisition cost.

The HMRC allows you to reduce the capital losses from the tax owed. When you sell the crypto asset, you can deduct the loss to reduce your overall capital gain. Remember that your crypto portfolio is similar to your stock portfolio. If you make a profit, you have to pay tax.

Do you need to pay crypto tax in the UK?

If you are attempting to avoid any type of tax, it is safe to assume that you are doing so in an unwise and, at worst, illegal manner! Crypto profits and taxes are no exception in the UK. If you have earned above the exempted limit, then it’s not possible to avoid paying the tax. You will, however, owe money only when you sell (or exchange for profit) your cryptocurrency, not when you buy or hold it.

Will I be taxed even if I am not a cryptocurrency trader?

There are several methods of acquiring cryptocurrency that may subject you to taxation:

Given to you as a non-cash payment by your employer

• By mining crypto

• If you have a cryptocurrency-backed business (i.e., you trade with crypto rather than fiat). In this case, you must also pay Income Tax and National Insurance.

• You trade cryptocurrency. If you trade in volumes that HMRC considers being financial trade, you must also pay Income Tax, though this is uncommon.

HMRC does not consider crypto trading to be gambling like some forms of forex trading. As a result, you must always pay taxes on your profits.

Can I deduct my cryptocurrency losses?

If you incur a capital loss (selling your cryptocurrency for less than you paid for it), you can deduct it from your gains. However, if you do this, you must report the loss to HMRC. This is something you can do on your tax return. You can claim your losses for up to four years after the end of the tax year in which they occurred.

In case you’re wondering, the tax year runs from April 6th one year to April 5th the following year. The fiscal year 2020/21 ran from April 6th, 2020, to April 5th, 2021.

How does the HMRC compute tax?

HMRC requires you to use share pool accounting while calculating the cost basis for a coin disposition. When you spend/sell/trade cryptocurrency, you are disposing of it in the following order.

1. The Same Day Rule: states that coins acquired on the same day as the disposal are consumed first.

2. Bed and Breakfasting Rule: coins acquired within 30 days of disposal (but the person making the disposal must be a resident in the United Kingdom at the time of acquisition)

3. Crypto-pool (Section 104 Rule): price average of all previous coins purchased

The cost basis refers to the purchase price plus any associated costs. When you sell cryptocurrency, you must determine the cost basis of the sold assets so that you can deduct your costs before paying taxes. If you buy 10 BTC and then sell the entire 10 BTC, your cost-basis is simple to calculate; however, if you buy 10 BTC, sell 5 BTC, buy another 10 BTC, and then sell 5 BTC again, your cost-basis becomes more challenging to track. An easy way to keep track of your costs is to take the average cost of all your holdings and multiplying it by the sold amount. This is referred to as the Average Cost Basis, and it is used to calculate capital gains in the United Kingdom and many other countries.

What are the tax rates?

Suppose your cryptocurrency profits exceed the Capital Gains Tax allowance. In that case, you must pay tax at 10% if you fall under the standard rate. For individuals who fall into the higher tax rate category, your tax rate will be 20%. However, keep in mind that these rates are subject to change and can be revised each year. When putting money aside to do your tax return, make sure you stay up to date on any changes to CGT rates.

How can I pay the crypto tax in the UK?

To declare your income to HMRC, you’ll need to file a tax return, just like you would for any other profit tax.

Don’t worry if you’ve never done one before. If you know what you’re doing, the process isn’t too tricky. You’ll be on the right track if you follow the steps below!

1. Be sure to register for Self Assessment by October 5th.

2. Keep detailed records of your trading profits and losses throughout the tax year.

3. Pay the tax you owe by January 31st.

Whenever you gain make money from marketing an asset, the Capital Gains Tax obligation starts. The key point to remember is that the tax is measured on the profit you make and not the amount you sold it for. How Capital Gains tax is calculated, what are the tax rates are some of the common doubts. CGT is fairly a wide subject and we take a quick peep into the subject.

Do Capital Gains Tax apply in all cases?

As a resident of the UK, you may be liable to CGT on disposals of assets located anywhere in the world, not just your UK-located assets.

Non-residents are liable if they carry on trade in the UK or dispose of any assets in the UK.

Likewise, you may have to pay a CGT when you hand it out as a gift in many cases. The worth of the present has to be identified, and if a capital gain arises when you take care of the present, you must pay tax. Gifts may qualify for a tax relief but you need to confirm it with an accountant.

When is your payment due?

Additionally, you can file a self-assessment income tax return. If you typically fill out an income tax return, you need to report any capital gains. Even if you have already utilized the online solution. You additionally need to include how you worked out each gain. If you have lost cash via a financial investment (for example, selling something for a loss). You should include this on your income tax return.

Since 6 April 2020, any residential or commercial property sales that produce a CGT cost have to be paid within one month. By sending a residential or commercial property return straight to HMRC. Building sales before 6 April 2020 come under the old regulations, where any CGT due on the sale of the building is payable by 31 January after the end of the tax obligation year in which the sale took place, which will generally be the day you file your tax return.

What profits are tax-free?

Any profits from the sale of cars used for business purposes.

Gifts to spouses or charitable gifts between husband and wife or registered civil partners are exempt from the capital gains tax. Though tax may be due later if the new owner sells the item.

The sale of your main home or a buy-to-let second home that was your main home within the past 18 months.

Personal possessions (also known as personal ‘chattels’) such as antiques are exempt from capital gains tax. If they are worth less than £6,000.

Capital gains tax (CGT) on financial products such as betting, pools, and lottery winnings, as well as Isas and Peps, as well as UK government gilts and premium bonds.

Investments products pensions, National Savings and child trust funds

Unless they are bought second hand, proceeds from life insurance policies.

Most corporate and local authority bonds you’ve owned directly (rather than holding them in an investment fund) Building society permanent interest-bearing shares (Pibs) and Sharia-compliant equivalents

Shares held in an approved share incentive plan due to your employment.

To encourage investment in a new and growing business, Capital Gains Tax on inheritance. However, you may have to pay an inheritance tax.

How Capital Gains Tax is Calculated and what is the allowance?

The calculation of capital gains tax is basically reducing the gain from the purchase cost. Any amount above the exempt amount is taxable. Your tax-free allocation on Capital Gains for the 2020/21 tax year is ₤ 12,300. Which is an increase from the 2019/20 tax obligation year amount of ₤ 12,000. You pay most sorts of CGT you owe as part of your yearly Self Assessment. Nevertheless, if you have CGT to pay due to selling a building that is not your primary residence from 6 April 2020, you should pay the amount you owe to HMRC within 1 month of the day of disposal.

What are the Capital Gains Tax Rates?

You pay the tax price depends on your overall gross income and your minimal individual tax price. So you must first figure this out. For the tax years 2020/21 and2019/20, the following Capital Gains Tax rates apply:

10% or 20% tax rates for individuals (not including residential property)

18% or 28% tax rates for individuals for residential property and carried interest

20% for trustees or for personal representatives of someone who has died (not including residential property)

28% for trustees or for personal representatives of someone who has died for disposals of residential property

If you come to the UK, become a tax resident here, and have foreign income or gains (that is, income and gains from outside the UK) during your stay, you must follow more complicated tax rules. This is due to the UK tax system’s attempt to tax UK residents on their worldwide income and gains.

Suppose you are a resident but non-domiciled person. In that case, the amount of UK tax you must pay on foreign income and gains may vary depending on whether you bring money or assets into the UK.

What is a tax residency status?

When determining whether you must pay UK tax on foreign income, your residency status is the most crucial factor. In case you are a UK tax resident. You must pay tax on all income and gains earned in the UK and abroad. All UK income and gains will be subject to UK taxation. For those not considered UK residents, but any foreign earnings will be exempt.

Your residency status is not set in stone. It is easily influenced by how much time you spend in a country. For tax purposes, your residency status is evaluated for each tax year.

What exactly is a domicile status?

Your domicile status is a secondary consideration that can influence how much UK tax you must pay on foreign income and gains. It is a legal concept that describes the country where you have a permanent home or “roots” throughout your life. It differs from other statuses such as nationality, citizenship, or residence.

If you are a UK resident and have a UK domicile. You must pay UK tax on all income and gains earned in the UK on an ‘arising basis.’ This means you pay tax on your income or gains as they arise during the tax year. If you are a UK resident but do not have a UK domicile. You can choose to tax your foreign income and gains on an arising or remittance basis. The remittance basis means that you will only be taxed in the UK if you bring foreign revenue into the country.

How do I determine my domicile status?

Your domicile of origin is determined at birth and will be the same as that of your father. This means that your domicile is determined by where your father’s permanent home was at the time of your birth rather than where you were born. If your parents were not married when you were born, you would inherit your mother’s domicile.

Your dependency domicile applies until you reach the age of 16. Because of this domicile status, your residence follows the person on whom you are legally dependent. If this person’s address changes, so will yours.

Your domicile of choice is where you can change your domicile of origin once you reach the age of 16. To obtain a new domicile, you must provide sufficient evidence that you have permanently relocated to another country and intend to remain there for the rest of your life. In general, you will need to demonstrate that you want to sever all ties with the country of your domicile of origin.

In addition to these domicile statuses, you can be considered a UK domicile. This is automatic if you are domiciled outside the UK but were born in the UK and have a UK domicile of origin. If you have been a resident for tax purposes in the UK for at least 15 years in the previous 20 tax years. This means that your foreign income and gains may be subject to UK taxation.

How to determine your residency status for foreign income in the UK.

Whether you are a UK resident during the tax year (6 April to 5 April the following year) is determined by the number of days you spend in the UK.

You are automatically a resident if either of the following conditions is met:

If you have spent 183 or more days in the UK during the tax year

If your only home was in the UK — that you must have owned, rented, or lived in it for at least 91 days in total — and you spent at least 30 days there during the tax year.

You will be considered a non-resident in the following cases:

If you have spent less than 16 days in the UK, you are automatically non-resident (or 46 days if you have not been classed as a UK resident for the 3 previous tax years)

You work full-time abroad (at least 35 hours per week) and have spent no more than 91 days in the UK, no more than 30 of which were spent working.

What are the definitions of foreign income and gains?

You can earn money in a variety of ways outside of the UK. However, they will still be subject to UK Taxation. Here are a few such examples:

Earnings from foreign employment

Profits from operating a business in another country

Rental income from a property in another country

Gains from selling or giving away assets such as real estate or stocks in foreign countries

Interest on foreign bank accounts

Pension income from abroad

However, some foreign gains are not taxable in the UK, as follows:

Any winnings from gambling in another country

If you have won from a lottery in another country

Any gifts are given to you by someone from another country.

How to pay tax on foreign income in the UK

You must report any foreign income and gains to HMRC if you are a UK tax resident and a UK domicile or a UK tax resident but a non-UK domicile who brings in foreign income to the UK. This is accomplished by filing a self-assessment tax return. In general, you have until 31 January of the following tax year. To complete both your tax return filing and the payment of any tax owed.

Self Assessment is a way of collecting income tax used by HM Revenue and Customs (HMRC). Wages, pensions, and savings are typically taxed automatically. Individuals and businesses must report other income on a tax return. You must send a tax return before the self-assessment deadline to avoid incurring any penalties.

When do I have to file my tax return?

Assume you need to file a tax return. In that case, the deadline for submitting it for the UK tax year 2021/22 (April 6 to April 5) is midnight on October 31 2021, if you submit it on paper, or midnight on January 31 2022, if you submit online. (Don’t forget that while filing your tax return, you may be eligible for tax relief.)

The tax return deadline in the United Kingdom will only change if you receive a notice from HMRC instructing you to file an online tax return after October 31, 2021. In that case, you’ll have three months from the date of the notice to file your tax return.

The deadline for paying your tax bill for 2021/22 is also January 31, 2022. If you still owe tax on your 2021/22 earnings, you should pay it when you make your first payment.

What happens if I don’t file my tax return by the deadline?

If you miss the self assessment deadline for filing your tax return, you may face the following penalties:

Even if you are only one day late, you can be fined £100 for failing to pay your tax on time.

If you pay more than three months after the deadline, you could face a £1,000 fine.

In case you pay your tax bill between six and twelve months late. You may be fined an extra £300 on top of your previous penalties. You may also be fined 5% of your tax bill, which can turn out to be costly in some cases.

If you pay more than 12 months late, you will be fined £300 or 5% of your tax bill, in addition to all other penalties. In more serious cases, you may be fined 100% of the tax you owe in addition to your original tax bill.

How do you submit your self-assessment tax return?

There are various tax allowances in the U.K to save tax. The UK government’s marriage allowance is one such saving option for married couples or for those in a civil partnership. We will take a look at who can apply and how to apply for a marriage allowance.

What is the Marriage Allowance?

As mentioned earlier, it is a tax-saving option for the married couples or for those in a civil partnership. If one pays the basic level of income tax and the other is exempt from paying tax. This allows you to transfer £1,250 of your personal allowance to your other non-tax paying partner. Therefore, the higher-earning partner will receive a tax credit equal to the amount that has been transferred. This allows you to save tax, but normally one person must have income below the personal allowance of £12,500 to benefit from the scheme.

How does Marriage Allowance Work?

The marriage allowance allows one of the partners to transfer up to £1,250 to the other person. However, individuals might have to pay a higher sum individually, but they will end up paying less as a couple. To enrol in the scheme, you need to register with the HMRC or through Self-Assessment. Once registered with the HMRC, the amount is then transferred each year to the partner’s account until you cancel.

What is the Eligibility?

To be eligible to apply for the marriage allowance, you need to meet the following criteria.

You must be married or should be in a civil relationship.

Should be born after 5 April 1935. Anyone born on this date or before then would be entitled to the married couple’s allowance instead.

One of the partners must be earning below the personal allowance, and the other must be paying the basic tax rate.

How to apply for the UK governement’s marriage allowance?

Before you apply, you also need to have your and your partners National Insurance number. You also need to prove your identity using any 2 of the following.

your P60

your U.K. passport details

using information held on your credit files like credit cards and mortgages

one of your three most recent payslips

details from your self-assessment tax return from any of the previous three years

your Northern Ireland driving Licence

The easiest way to apply for Marriage allowance is online through the HMRC’s website. If you are unable to apply, you can claim the allowance through self-assessment.

Will there be a change in the tax code?

Yes, the HMRC will give the allowance transferred to them by changing the tax code. For the partner who is receiving the allowance, their tax code will end with M. The partner who is transferring the allowance their new tax code will end with N.

How to cancel the Marriage Allowance?

A swot analysis is a system used to define your strengths, weakness, opportunities, and threats. It can be done on an individual project or a company. Strengths and weaknesses are internal to the company, things that you have some control over and can change. Whereas, opportunities and threats are external things that are going outside your company where you have little influence.

To create an accurate analysis, the company’s founding team and leaders need to play an important role. When you’re starting or running a business on your own. Creating a SWOT analysis will provide you many insights into your business prospects. An efficient report helps you to stay unique compared to your competitors and stay ahead of the race.

Why must you do a SWOT Analysis?

As discussed by many industry leaders, execution is the key to success. Having a great idea is a stepping stone and is the beginning of your journey but executing and proving yourself is the real challenge. Gary Vaynerchuck, the best-selling author and the CEO of VaynerMedia, a leading digital advertisement company once, said: “Execution is the game.” To have operational efficiency and achieve the best results, you must understand your business in and out. Let us discuss a few reasons why you must do a SWOT analysis.

A SWOT analysis ensures the efficient utilization of the resources.

It allows you to understand the needs and requirements of the business and allocate the resources accordingly. The resources can be labor or capital.

Helps you to assess and improve operations.

Learning from past experiences and converting past struggles into opportunities is the path for success. Moreover, understanding your past performances assist you in planning for the future and optimize your operations. Therefore, it’s very important to learn from previous hiccups and convert the experience into something beneficial.

A SWOT analysis helps in discovering new opportunities and creating strategies.

It allows you to plan ahead and establish the vision of your company. There will always be new technology or business like Uber or Instagram. Even if you don’t have that, a look into your organization’s future will let you draw your future predictions and help you set your action plan.

Helps in forecasting risk.

A homerun for any business is a dream, and in most cases, it stays as a dream. Undoubtedly a few roadblocks and barriers will arise. You must try to forecast the future risks that might arise from the availability of raw materials to government policies. Planning ahead keeps you with backup strategies, just in case an unexpected situation arises.

How to do a SWOT analysis?

For the best results, it’s best to involve a group of individuals involved in your business from the different departments. Hold a brainstorming section for all the major heads and collect the opinion of the people involved. If you are a small firm with limited employees or departments or a new business, then discuss with your friends and potential customers. Let’s now discuss the SWOT analysis components in detail.

Strengths

Strengths are the things which you are really good at or expect to perform well and keeps you apart from the competitors. Undeniably, they are the key factors that would lead to the success of your business. Ask yourself all the questions that make you better than the rest. What assets you have in your team must be considered unique compared to an existing company. Identify your Unique Selling Proposition (USPs) and add this to the strengths. You must also think from your competitor’s and the customer’s side to understand your strengths. Anything can only be considered as a strength if it provides you a clear advantage over your competitors. For example, if your competitors offer high-quality products. Then high-quality products are not a strength but, instead, it becomes a necessity.

Weaknesses

This is the part where you have to be honest, and you must strive to find things holding or might hold you back. Do this process with a clear mind and try to find the maximum number of weaknesses. The more you know, it provides you with an opportunity to rectify those and grow. Think about what you could improve and the sort of practices you should avoid. Just like how you found out why you are better, you must also evaluate why your competitors are better than your business.

Opportunities

They are external factors that might lead to the growth and prosperity of your business. Opportunities arise with the changes in the market you serve, technological upgrades, political reasons, or sometimes some random reasons. Therefore, you must be able to spot and forecast such opportunities and exploit them to be successful. These small factors would help your business to gain a significant advantage over your competitors in the market.

Threats

Threats include anything that can negatively affect your business from the outside. They maybe supply chain problems, logistics, a shift in consumer behaviour, shortage of recruits, and any other factors. You must anticipate the threats and prepare remedial actions to either stop or overcome the incoming problem. Think about all the factors that might lead your sales down and prevent your growth. Check whether your organization is exposed to external challenges or any internal issues that might arise within. Ensure you deal with any internal challenges that occur because any internal issue can drastically affect your business.

Few questions to be considered while preparing the SWOT analysis.Strengths

What is the unique value proposition of your business?

What internal resources do you have?

Do you have good research and development capabilities?

How flexible is your business to cope with change?

Weaknesses

What are the things where your business needs to be more challenging?

Which processes need improvement?

Is your location ideal for your business?

Opportunities

What are the present opportunities in the market?

Do you expect growth in the market or demand?

Do you expect any policy change that might benefit you?

Threats

Who are your existing or potential competitors challenging you?

What factors which you cannot control would put your business at risk?

What are the possible situations that might threaten your growth?

Do you expect any customer buying behaviour changes?

Are there market trends that could affect your business?

Once you exceed your personal allowance, you need to pay the tax to the HMRC every year. However, there are a few allowances that you could receive that will reduce the tax to be paid. The married couple’s tax allowance (MCA) is one such you can claim. It does not reduce the taxable income on which you pay the tax. But instead, it is to lower an amount from your tax bill. This allowance could reduce your tax bill by between £351 and £907.50 a year. However, the level of income determines the allowance. If your income is higher than £30,200, you might not qualify for a full allowance. Only one member in the couple can claim the

What is the Eligibility to claim a married couple’s tax allowance?

You are eligible to claim for the allowance if:

If married or in a civil partnership.

If you are living with your spouse or partner.

One of you was born before 6 April 1935.

In case both the couple are born after 1935, then you are not eligible for MCA. However, you could be able to apply for a marriage allowance.

What are the benefits of Claiming?

The primary advantage is tax reduction. Anyone in a married or civil partnership can reduce their tax bill. For the tax year of 2020–2021, it could cut your tax bill between £351 and £907.50 a year.

If you are married or registered as a civil partnership then you will receive the allowance proportionately for the remainder of the tax year. Even if one of the pair dies or separates the allowance continues to the end of the tax year. If you are separated for reasons that are not in your control then HMRC will still consider you as living together and you are eligible for the allowance.

Transferring the Married Couple Allowance

If your income is not high to pay tax and you do not have to use the allowance then you can transfer the allowance to your spouse or civil partner.

If you want to transfer before the tax year starts then you can fill out this form. This allows you to transfer the minimum of £3,510 for 2020/21 to your spouse or civil partner from the beginning of next year.

If you want to transfer after the tax year ends since you do not have a high tax bill and can’t claim the entire allowance. You can request to transfer the balance to your spouse or civil partner by filling the form 575.

How to Claim Married Couple’s Tax Allowances?

You can claim the allowance by filling your self-assessment and completing the section for the MCA. If you do not file a self-assessment you need to contact the HMRC with the details of your marriage and civil partnership ceremony. Also, with the details of your spouse or civil partner including their date of birth.

Who Claims the MCA?

For couples married before 5 December 2005, the income used to calculate the allowance is the husbands. Whereas for any marriages after this it’s the income of the highest earner.

If you are a couple and have qualified before 5 December 2005 as mentioned it is the husband’s income that is calculated. However, a married woman can choose to have up to £1,755 for herself i.e. £175.50 off her tax. If the husband agrees she can also have the entire £351 off her tax bill.

The husband can use the remaining to reduce his tax bill. However, if it remains unused then it can be transferred to the wife.

If you are a couple and have qualified after 5 December 2005 as mentioned it is the highest earner’s income that is calculated. Just like the previous case, the other partner can choose to have up to £1,755 for themselves i.e. £175.50 off their tax. If both parties agree then the other partner can also have the entire £351 off their tax bill.

The partner entitled to the allowance can use the remaining to reduce their tax bill. However, it is possible to transfer the surplus to the other partner.

The pandemic has struck the world and has had a massive impact on the economy. Therefore the government had announced that the VAT payments can be deferred. This is part of the government package of support worth more than £280bn. A business that had deferred VAT between 20 March 2020 and 30 June 2020 can now make the payment in installments. Let’s take a look at how to join the new vat deferral payment scheme of HMRC in detail.

How to make the VAT deferral payments?

Before we discuss how to join the new scheme here are the current options to make payments.

pay the deferred VAT in full, on or before 31 March 2021

The online service is open between 23 February 2021 and 21 June 2021 to join the new VAT deferral payment scheme.

Contact HMRC on Telephone: 0800 024 1222 by 30 June 2021 for any extra help needed to pay.

What is the benefit to join the new VAT deferral payment scheme?

The new scheme has been open from February 23rd and will remain the same till June 21. Anyone on the VAT Annual Accounting Scheme or VAT Payment on Account Scheme can join the scheme from March 10, 2021.

The major benefit offered by the new scheme is the ability to make the payments in equal installments. Moreover, offer support to the business by not charging any interest.

Installment options for the VAT deferral payment scheme?

The new scheme allows paying the VAT without any interest in equal installments. Therefore, it allows businesses to make smaller payments. However, all installments must be paid by the end of March 2022. Also, the initial installment must be paid at the time of joining and then in the succeeding months.

The number of months available for a business to make the payments is set on the date they join the scheme. If you join the scheme on 19 March 2021 then you receive 11 months to make the payment. The table below shows the HMRC’s deadlines and the number of installments available. Businesses can also opt to pay off much earlier.

If you join by Number of instalments available to you 19 March 20211121 April 20211019 May 2021921 June 20218

How to join the Vat Deferral Payment Scheme?

The online sign-up for the scheme is now open until 21 June 2021. Whereas, anyone on the VAT Annual Accounting Scheme or VAT Payment on Account Scheme can only join the scheme from March 10, 2021.

Hence, businesses can register by signing in through the government gateway. The scheme requires direct debit and therefore business must register themselves and agents can’t do it on their behalf.

What are the requirements?

The business must have its own government gateway account or create one.

You must submit any outstanding VAT returns of the past 4 years.

Ensure your VAT returns are correct and accurate.

You must know the amount you owe, how much was deferred, and how much was paid.

Must have deferred VAT to Pay.

Must also be ready to make the first installment.

If your business is not able to use the online service you can contact the COVID-19 helpline at 0800 024 1222. Such circumstances may arise when there is a lack of a UK bank account, cant pay direct debit or if there is dual signatories in the account.

How to correct errors on VAT returns for the VAT deferral period

The VAT deferral scheme covers accounting periods from February 2020 until May 2020. However, in May it’s only for payment on account customers and certain non-standard tax periods.

If you find an error on a VAT return for the above period that is covered by the scheme then you must:

Fill in Form VAT652 — It is used to inform the HMRC of any errors on previous VAT returns that are over the current reporting threshold.

Send it to the VAT correction team.

What are the adjustments that can be made?

When you have made a miss on previous VAT returns you can adjust the errors in the below situations:

Below the reporting threshold.

Not intentional.

For an accounting period that ended less than 4 years ago.

Any other errors must be informed to the HMRC using the VAT652 form.

What is the reporting threshold?

If the net value of the errors is £10,000 or less then you can adjust in your next return.

If the error amount is 1% of the box 6 figure up to £50,000.

Deferring extra payments resulting from error corrections.

Firstly the HMRC must have processed your correction. Then you must also receive a statement of account confirming the balance.

Once the above has occured you can then contact the COVID-19 helpline (Telephone: 0800 024 1222) to defer extra payments from error corrections.

You cannot include any extra payments once you have joined the new scheme. Also, any error correction for the deferral period that is notified after March 31st cannot be deferred.

You can pay the extra payment by any of the following ways:

You can include the payment in the deferred balance account and then pay it in full by 31 March 2021.

Join the new scheme while it’s open and include the amount in the deferred balance account.

It is essential for the success of the organization to hire the perfect candidate The most valuable resource of every organization is its employees. The success of your business depends upon the employees you hire. Job is an essential component for every individual and makes people accept everything during the interview. But this doesn’t mean that you are hiring the perfect candidate. One thing which you must note is that you should not hire someone when the work is starting to stack up. Especially if it is your initial hire, you have to take that decision very carefully. Numerous people can do a similar job, but only a few are perfect for your business. You must find that person to flourish.

Points to be noted while hiring the perfect candidate.Don’t hire anyone with a rush.

Take your time before you hire someone. Let’s say hiring an employee is like a marriage, where you shouldn’t jump into any decision. If you are a new or growing business, you are bound to increase the workload. If you are a sole proprietor doing all the work yourself, then you will have a situation where you need help. When you are in that phase, try to divide and complete your tasks before hiring someone out of desperation.

Go through a thorough interview process and hire the candidate you feel is the perfect candidate. Read about a few questions which you should ask during an interview for a growing business. Most importantly, you know what is required for your business. Set the right expectations with the candidate, ask them whatever you think is essential, and hire the one who you think is perfect for your growth. It doesn’t matter if the person does not have the needed experience or a fresher.

“I’d rather interview 50 people and not hire anyone than hire the wrong person.” — Jeff Bezos.

Hire a candidate who will bring value to your business.

You may have 10 applicants or 100 applicants that don’t matter. Of the people who apply for a job, only a handful of them will have the required mindset you desire. You require people who are willing to work with you and hustle with you for the success of the organization.

“I am convinced that nothing we do is more important than hiring and developing people. At the end of the day, you bet on people, not on strategies.” — Lawrence Bossidy, GE.

Are they Adaptable?

Any company would want employees who are adaptable to changes and can work according to the upcoming challenges. This creates a harmonious environment and also provides the company with support in the smooth functioning. I personally believe this is the most valuable quality for an employee. Having a lengthy resume and loads of recommendation does not always guarantee that they would be the best. You need employees in your organization who work not only for themselves but for others. People who are willing to cover for others and who can hop in to complete the tasks that come up.

Understand what the candidate’s aspirations are and see if it’s the right fit for you.

You have ambitions and targets for your business and your employees. The same applies to the people who are willing to work for you. It is essential to identify if yours and your candidate’s ambitions cross paths. When you hire, you must try to recruit someone who will be with you in the long term. Always try to keep your attrition rate as low as possible. If your attrition rate is high, it tends to keep the best away from your business as it sends out a signal that your organization is not the best place to work. If employees leave your organization, it means you will have to hire new employees, which will cost you money and time. So its always best that you recruit someone who tends to stay longer.

Ask questions like, “where do you see yourself in the next 3 years?” or “why do you think you are the perfect candidate for the job?”. As you would like your candidate, to be frank, it would be highly effective if you are the same.

Do they ask great questions?

Pay attention to the questions your candidates are asking you as it will show you how well they have prepared for the interview. This shows their interest in the job offered. Engaging and proactiveness shows glimpses about what they would offer.

Accounting is the process of recording the financial transactions of a business. The process includes summarizing, analysing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. It is one of the key functions of almost any business. The reports generated by various streams, such as cost and managerial accounting, are invaluable in helping management make informed business decisions.

Regardless of the size of a business, a well-managed book of accounts is a necessity especially for decision making, cost planning, and measurement of economic performance measurement.

Two important types for businesses are managerial and cost accounting. Managerial helps management teams make business decisions, while cost accounting helps business owners decide how much a product should cost.

When it comes to keeping good records we all seem to acknowledge that things could be done better.

But why is keeping good records important?Here are 9 reasons why it’s so important.Allows you to manage and grow your business effectively

No one knows your business better than you do, but reliable information can only be extracted from the records you keep. Good records help you to make better decisions.

Gives you a proper cash flow position

Producing invoices, quotations, and estimates promptly is vital. An early estimate can be the difference between winning and losing a job. Similarly do not rely on supplier’s statements. You need to know before they tell you how much you owe.

Makes it easy to prepare management accounts

Have you ever wondered whether you are making or losing money? You want to know how your business is performing over the years, are you improving, and your plan for the future. With management accounting, you can evaluate your past year’s performance with the present year.

Organized data lets you access information easily.

By being organized you can quickly and easily find information regarding the original order and the goods and work supplied.

Makes it easier to get a bank loan or overdraft

Yes, banks like it when you seek an overdraft for the right reason and at the right time. They obviously would be willing to give it to you if they think you know how to organize your finance. Don’t wait until you need one to ask for it.

Helps you plan in advance for tax payments and other liabilities

Tax planning is for everybody. Set money aside when you have the cash. Or make an arrangement with HMRC in good time.

Avoids interest and penalties by making it easier to pay the right tax at the right time

Well-organized accounts give you a proper idea regarding your payment due dates and help you to avoid the penalty.

Will support your claims to some tax reliefs or capital allowances

What are capital allowances? There are provisions which help you to save a lot of tax and you wouldn’t want to miss that because of not having a proper account.

Record keeping complies with the law

Good record keeping is a legal requirement under the rules of assessment. So, by being organized not only do you have all of the above benefits, but you stay within the law. Complying with HMRC requirements is in fact a very important reason why you should keep good records.

Why Is Accounting Useful for Small Business Owners?

Poor financial management is one of the primary reasons for small business failure especially in the first year of the business. For any growing or developing business cash is king. The proper management of cash and cash flow determines how you would prosper in the long run. Since small businesses have a limited budget and other resources, accounting plays a crucial role in providing information that helps businesses in their growth and development.

For small business owners, accounting is crucial due to the reasons below:

Keep a track of the cash flow. To prevent your business cash flow from running dry, you should implement policies for efficient record-keeping and a sound financial strategy. You must be able to operate according to the requirements of the business.

· Accounting gives you a better grasp of the well-being of the business. You can do this by learning to read a balance sheet, income statement, and cash flow statement. Let’s evaluate the position, the growth, and the trend shown by the business.

Helps you detect and avoid frauds and theft by customers, employees, and suppliers

When you understand the business finance and dealings, you are better equipped with facing audits

Bankers are more confident when dealing with business owners who have a handle on the business finances and actually understand financial implications

Whether you are a solopreneur or employ staff, the key to growing your small business is to review your financial statements regularly and establish a detailed budget that will allow you to discover operational inefficiencies. Saving a little bit on several expenses can add up to big results over the long run. “Never take your eyes off the cash flow because it’s the lifeblood of business.”

Over the years, most of us have met some aspirational women who have the potential and skillset to become successful entrepreneurs. But eventually, we only see a handful come forward and take a ride with their dream. The ability to build their own economic destiny by becoming an entrepreneur is a dream for everyone. Many of the leading companies of today were once said to be impossible. Today they are a reality because of individuals who believed. Entrepreneurship is open for everyone. However, the challenges for women entrepreneurs are significantly higher.

In a diverse country like the U.K, where women outnumber men in the population, the number of women entrepreneurs is significantly low. This is a worrying statistic for the government. For economic development, we need both men and women. According to the Alison Rose Review of Female Entrepreneurship, only 1 in 3 U.K entrepreneurs is a female.

What are the challenges faced by women entrepreneurs?Defying social expectations is one of the most challenging tasks for women.

Many people in a society tend to have a predetermined mindset about women when they see or interact. The women entrepreneurs feel the same and which holds many of them backward. The number of female entrepreneurs attending entrepreneurship events is significantly low making it difficult for women to interact.

Cash is the lifeblood of any business, and they need it for operation and expansion.

This is a time when women entrepreneurs face another roadblock. Generally, women entrepreneurs face it much harder to raise money than men. Looking at the past years, businesses led by women receive much lower funding. This is also because there is a low number of female entrepreneurs.

Even though we live in modern society, there are still times when women struggle to be taken seriously.

Sometimes the initial pressure gets to them and, they fumble. It is also difficult for women to find and build a support network or advisors with whom she is comfortable. It is difficult for women to establish their network as the majority of the high-level business is still dominated by men.

Balancing their entrepreneur life with their family life is a massive task for all women entrepreneurs.

Finding time for business and for the family is an uphill climb. It is one of the important reasons why many women are holding themselves back from entrepreneurship. Spending time with dear ones is the happiest moment for everyone. Especially when their kids are at a very young age or require their help in various activities, women, entrepreneurs find it hard to execute both together.

Coping with the fear of failure is something that all women entrepreneurs face.

It is a giant leap for them to leave their day jobs and to be an entrepreneur. Leaving the day job is a very tough decision as that takes away the fixed income. The path to success is difficult and everyone has a fear of failure until it’s achieved.

We live in a society where we say opportunities are there for each and every one. Can this be considered the same for our women entrepreneurs? Not yet, as we discussed above, women entrepreneurs find it much harder to establish and launch their business. However, over the years, women entrepreneurship is also one of the fastest-growing categories. More and more women are coming forward and starting their own ventures. Although even with these increases, according to a study conducted, it will take at least another 108 years to completely close the gender gap between men and women. Another 202 years is required to achieve equality between the two genders in the workplace.

Even with all these challenges, women entrepreneurs are coming forward. Some great women entrepreneurs are inspiring more women entrepreneurs to chase their dreams. The key to success is to start before you are ready — Marie Forleo.

Women play a pivotal part in society and the economy and will continue to spearhead the future. With more support offered to aspiring women entrepreneurs, the sky will be the limit.

It is important to name your business appropriately as it has a huge impact in the long run. A few questions that come to people’s minds are how can I find an appropriate name and what are the important factors while naming. If you are someone who has already commenced a business, you can understand the pain. If you are someone who found the name easily, then I have to say that you are very lucky. Often people face a dilemma while choosing, which is a good thing because it means you value your business. We take a look at some of the common naming techniques that can be used to find a name for your business.

5 ways to name your business.1. Try to invent a new name

You know a lot of organizations like this in which Google is the most famous. These words sound like a word but do not have a meaning. These are great ideas if you are creating a category of business or if you want to brand your business uniquely. Brainstorm ideas and words that you can potentially mix together and create a name. Such names are unique and the probability to get the .com domain will be high. However, being unique has its advantages, but also it will be a hard task to market and establish the brand.

2. Search for common words that are easy to read and pronounce

You do not want to keep a big or a tough name and make it hard for your customers. Keep it simple and make sure that it stays in their mind. If your name creates an enduring impression then that lays the foundation for a long-term valuable customer. An ideal name might not be a million miles away, it might be right in front of us. Therefore, it is always nice to look for something which is very common and something that resonates with your business service or product.

3. Descriptive names

Arguably the most simple method where your name conveys what you perform. It is a very effective naming technique that both the product and service industry businesses use. Such a name makes it easy for your customers to understand what is your business at a single glance.

4. Combining multiple words related to your business

Brainstorm words that convey the message and vision of your business. Then you can try to merge these words and create a brandable word that conveys the meaning to your customers. Facebook is a great example of such a name.

5. Misspellings

A technique that has been widely used over the past few years by numerous successful startups including Lyft. Such names are attractive and also when said convey a similar meaning. A major reason why companies use these tactics is due to the lack of availability of the domain for the original word.

A few important points to remember when choosing a name for your business1. Keep a name that also provides you with dimensions to grow.

Initially, when you start a business you might have a particular sector where you might focus to grow your business. But when you grow you will have possibilities to expand. Therefore, you should make sure that when you find a name for your business it does not restrict your growth and scope. It must be left open for the future and must not prevent you from entering different verticals. Any such limitations will mean that you will have to go through the hassle of branding and marketing again.

2. Try to get the .com name

Most of the businesses today have an online presence and with the pandemic where everyone has turned digital, this has become a necessity. The .com extension has the best appeal among people and also helps you in gaining a wider reach for the same reason. In case it is not available, you can try for any other top-level domains like .uk. However, it is always best to attain a .com domain.

3. Always check the ability to market the name of your business

Before you finalize your name, always ensure that you check your name is brandable. Ask for other people’s opinions and approach with an open mind. You should be flexible and willing to accept other’s opinions. Hence, finalize a name after gathering an initial response from a target group.

4. Give a clue about your business through your name

Sometimes when people walk down the lane or travel in a car or surf through the net they may see your advertisements or your shop. That would be the only attention span you get from certain customers. Hence, ensure the customers who see your company’s name must at least understand your business sector.

5. Check if your name is compliant with the Companies house rules.

Companies House has defined laws that need to be followed while naming your business. You cannot use a name that suggests a connection with the government. Anything considered offensive or would be considered as breaking the law can’t be used. You can’t use any sensitive words unless you have permission.

6. Get feedback on the name

There are different ways and legal structures to register your business. It really depends upon how you would like to structure your business. Some factors that you must consider are how much control you want, the type of work you’ll be doing, and your long-term plans. It is possible to change your status later, as you become more established and the business needs change. But obviously, it would require additional administration.

What is a Limited Company?

A limited company is a business structure that has its own legal identity, separate from its owners and managers. The decision-making and operation of the company are the responsibility of the director. However, if you register your business as a limited company that doesn’t put yourself or your personal assets liable for the business. The business and the director are two separate entities in front of the law.

Sole Trader

A sole trader is an individual who has complete ownership of the business and is also personally liable for the bills of the business.

What is an umbrella company?

An umbrella company acts as an intermediary between you and your agency or client. The umbrella company deals with a lot of the administrative side of things, particularly concerning tax and payroll. If you register your business as an umbrella company you become an employee. Your tax, pension, and NI contributions will be directly deducted from your income since you are an employee. However, statutory employment benefits like sick pay and holiday pay are an entitlement.

What are the advantages if you register your business as a limited company?

The primary advantage is the protection for the director’s personal finance and assets. Even if something goes wrong the director is not held personally liable.

The potential for profit is much higher in comparison to a sole trader. Since the profits generated in a sole trader business are calculated as income. Hence, you’ll pay income tax and National Insurance Contributions (NIC) based on government thresholds.

As a limited company you pay corporation tax, currently at 19%, on your company profits and you can also pay yourself through dividends and salary. This helps you to minimize PAYE (tax you pay on your earnings throughout the year) and NIC outgoings.

You can also claim more business expenses through your limited company than as a sole trader. Consult expert accountants or let them do the work. Regarding the claimable expenses, the HMRC has laid out strict rules on expenses that can be claimed.

Expenses claimed will be deducted from the company’s profit and hence will not be taxed.

A limited company can establish its own credit rating to borrow capital to grow business.

Professionalism increases confidence among others and some large corporations simply prefer to work with limited companies, but others don’t work with unincorporated businesses. Having a limited company can open new doors and it’s also much easier to raise capital providing ample opportunities to grow.

What are the advantages if your register your business as a sole trader?

First and foremost it is simple and inexpensive to start up.

Both the sole trader and the director of a limited company must submit the personal self-assessment to the HMRC. But those operating a limited company must also submit extra paperwork to regulatory authorities (Corporation Tax, Annual Accounts, VAT returns if VAT registered). As a sole trader, you save a lot of time and effort with these returns, and also if a limited company fails to submit on time then significant fines and penalties will be charged.

Compared to limited companies the accounting process is much simpler and cheaper.

Legally, limited companies must be transparent and share certain information with the public but as a sole trader, you don’t have to provide this information to Companies House.

What are the advantages if you register your business as an Umbrella Company?

Simplicity is a major advantage. The tax deduction is already done and thus prevents you from unexpected tax bills. You receive the pay along with a payslip and the breakdown calculation.

It’s very flexible, free from the stress of running your own company, although this does mean you work as an employee.

You get the statutory benefits of an employee, such as SSP (Statutory Sick Pay), SMP (Statutory Maternity Pay), and SPP (Statutory Paternity Pay)

How are taxes paid?

Sole traders pay income tax on their business profits by way of an annual self-assessment tax return.

In a limited company, the salary you pay yourself as a director is subject to PAYE tax. Which is deducted at the appropriate rate and paid at regular intervals to HMRC.

The company pays corporation tax at 19% of its taxable profits. Expenses such as salaries and pension payments can be deducted from the income. These are tax deductable since it is a needed expense for running the business.

Corporation tax is payable 9 months after the company’s year-end. Also, 12 months after year-end a tax return must be filed by the company. The profits available after paying the corporation tax can be distributed amongst the shareholders.

The Government Gateway was the portal where you can register for the government’s online services. Most people used this to log in to HMRC to file their tax returns. However, it was shutdown. The government has replaced and has introduced an alternative to login to the government gateway.

How can I log in to the Government Gateway now?

You can use HMRC’s alternative service to log in to the Government Gateway. Once you have registered, you can sign in to HMRC Online Services.

You might have trouble accessing some of the other services that were accessible through the gateway. Here is the full list of alternatives.

What are HMRC’s Online services?

HMRC offers a ton of digital services to make it convenient for people who want to do their tax returns.

Before you start using the digital services, you have to prove yourself to the HMRC. To use and verify, you can start using any service that uses GOV.UK verify. Once the account is created you can then verify your identity with an identity provider.

What if I lose my password?

Working capital and liquidity are two key terms from a business perspective and are related to each other. A company’s working capital measures the liquidity and the overall health of the company to meet its short term obligations.

Cash is the lifeblood of business that is needed for the day to day operations. Effective management or operation of working capital is a prerequisite for success. Now let’s take a look at the definition of Working Capital.

What is Working Capital?

Working capital is the funds available to the company to sustain its daily operations. It is essential for the core day to day activities of a business. Factors that determine the working capital requirements include the inventory requirements, the accounts payable, and accounts receivable, among a few.

Working Capital = Current Assets — Current Liabilities.

A positive working capital shows that the company can meet short term liabilities. It depends on how quickly you receive payments and the rate at which you make the payments to your suppliers.

A company will have a higher working capital if they receive the payments from their customers fast. But in most cases, customers purchase the goods on credit and pay the amount at a later stage.

The credit period varies from customer to customer. It could be 30, 60, and 90 even more, depending upon the customer. To maintain the cash flow of the company factoring services can be utilized. Working capital also increases with a high growth rate and the ability to increase profitability.

What are the components of Working capital?

Current assets and current liabilities are the two crucial components of working capital. Cash and other resources that can be converted into cash or will be used in a year are current assets. Whereas, current liabilities are the company’s obligations that are to be paid within the year.

Examples of current assets include cash, cash equivalents, accounts receivable, inventory, marketable securities, and prepaid expenses to, name a few.

Examples of current liabilities include accounts payable, wages, short term debt, and dividends to, name a few,

Calculation of Working Capital Ratio

The working capital ratio is a measure of liquidity or another way to compare a company’s current assets to its current liabilities. It directly expresses the relationship between your company’s short-term assets and liabilities. The higher the ratio, the better the position of the company,

Working Capital Ratio = Current Assets / Current Liabilities.

What is Liquidity?

Having the money to pay the obligations when they are due. In other words, liquidity is the ability to convert its current assets into cash to meet its current liabilities when they are due.

In most companies’ balance sheets, current assets are listed on the assets side in terms of their liquidity starting, with cash. Any failure to pay any obligations will have a hit on the credit rating. Therefore, it will act as a red flag for suppliers to extend credit for the company.

Calculation of Quick ratio

The quick ratio is also known as the acid test ratio. It allows you to have an understanding of the liquidity position of the company. A company that sells goods always has the risk of not converting its stock into cash. Without cash, a business would not be able to meet its operating expenses. Therefore we exclude inventory and any prepaid expenses while calculating the quick ratio.

Quick Ratio = (Current Assets — Inventories — Prepaid expenses) / Current Liabilities

Is there any difference between Working Capital and Liquidity?

Yes, working capital and liquidity are two related terms. But they don’t convey the same meaning. Having a ton of slow-moving inventory will increase your current assets but not your liquidity.