How to set your business up for success in the new tax year

The new tax year is a prompt for small businesses and the self-employed to get their finances in order – if they haven’t done already – and to ensure they’re aware of new changes to tax rules.

You also need to make sure you’re aware of new legislation that affects tax, payroll, business affairs and employment.

Not complying with new legislation and tax regulations could lay you open to investigation by the tax authorities. HMRC tax investigations into individuals and small businesses increased from 232,000 in 2021/22 to 248,000 in 2022/23, according to recent research.

But it’s also an opportunity, as you look forward to the next 12 months, to update your accounting, payroll and HR operations and to review your entire business strategy.

In this article, we’ll look at recent changes to legislation, why now is a great time to start using tech to manage your business (if you’re not already), finding the right accountant for your business, and how to make the most of your accountant or bookkeeper.

Here’s what we cover:

Be aware of 2024 new tax year legislation changes

We’ve covered legislation changes that have come into force in a wide-ranging 2024 new tax year article. However, below, check out a few highlights of things you need to be aware of.

On 6 April 2024, the main rate of employee’s Class 1 National Insurance contributions (NICs) was cut from 12% to 10% for earnings above the primary threshold and below the upper earnings threshold.

This comes on top of the 2% cut that the Chancellor announced in the 2023 Autumn Statement, and which took effect from 6 January 2024.

According to the government, the average worker on £35,400 will receive a tax cut of more than £450 in the 2024/25 tax year.

Also, since 6 April 2024, the self-employed with profits above £12,570 no longer have to pay Class 2 NICs but they will continue to have access to contributory benefits such as the State Pension.

If you’re self-employed and your profits are between £6,725 and £12,570, you’ll continue to have access to contributory benefits through a National Insurance credit, without paying NICs.

The rate of employer’s NICs stays the same at 13.8% on earnings above the relevant threshold.

The government reduced the main rate of Class 4 NICs for the self-employed from 9% to 8% from 6 April 2024.

One change that affects small businesses and the self-employed is that the turnover threshold for mandatory VAT registration rose from £85,000 to £90,000 on 1 April 2024.

So, if your business’s taxable turnover is £90,000 or more, you need to register for VAT.

Thinking of selling your business or disposing of some large assets? It’s worth noting that the Capital Gains Tax (CGT) allowance has been halved.

Previously, you could make gains of up to £6,000 before paying any tax but since April 2024, the CGT allowance has been reduced to just £3,000.

The Dividend Allowance (the amount of money in dividends that you can earn tax-free each year) has been reduced from £1,000 to £500.

You also need to be ready to give anyone who was in your employment on 5 April 2024 a P60 form. You must provide this information to your employees by 31 May 2024.

Make the move to technology

Are you using technology to manage your business processes or are manual processes (think paper and spreadsheets) still leading the way?

if it’s the latter, the new tax year is the perfect time to review your processes and see where tech can make you both more efficient and effective.

Technology can be used to manage many of the manual, repetitive tasks involved in running a business and managing your accounts.

This frees up time for you to speak to clients, suppliers and your teams as well as enabling you to think creatively and strategically.

Take your bookkeeping, for example.

There’s no need to plough through spreadsheets, making calculations and then checking them.

By using cloud accounting software, you can keep an eye on your finances in real time from your laptop or mobile phone, wherever and whenever you want.

Not only you use it to send invoices, it can automatically chase them up if they haven’t been paid within a set period.

As well as keeping an eye on cash flow, it can identify which products, lines and business activities are the most and least profitable.

Additionally, at Self Assessment time, you’ll have easy access to your income and outgoings, which will make things more straightforward when you have to file your tax returns.

When it comes to paying your staff, rather than tracking payroll with spreadsheets and sending paper payslips, you can use cloud payroll software to manage your processes.

And it’ll come in handy when it comes to dealing with your payroll year end tasks.

Meanwhile, cloud HR software can also automate every aspect of your people management from holiday requests and onboarding new staff.

With the self-service tools that are part of a good cloud HR software package, your employees can put in holiday requests, update their personal details such as their address and contact numbers, and even access their own, personalised learning and development content.

By automating these manual processes, from now on you can save time and money – and free up time to talk to your teams and enjoy the kind of human interactions that can improve their engagement and commitment.

Very importantly as you work your way through the new tax year, as well as looking backwards to manage your balance sheets and profit and loss accounts, new technologies can look forward and make projections.

AI and predictive analytics can help you to get an idea of where your business might be in six or 12-months’ time. You can use it to model what happens if raw material costs rise or your increase or cut your prices. You’ll be able to plan ahead with more precision and confidence.

Understand why a digital approach can help your business

Pulling together your bank statements, income, expenses, receipts, lists of invoices and other details can take time and effort.

If you’re running a small business or you’re self-employed, it’s very possible that you’ve been so focused on doing your job, keeping your customers and your employees happy and seeking out new business opportunities that your financial paperwork isn’t up to date.

By taking a digital approach to your business all of these figures can be automatically updated and stored in one place.

With digital technology it’s very often a case of simply clicking on the relevant button on a screen to produce the kind of calculations that could take hours or even days to do manually.

This means that you can devote more time to the aspects of your business that you enjoy and excel in. You’re less likely to make mistakes and you can also connect more easily with your accountant and bookkeeper and HMRC’s systems.

Digital technology doesn’t just make life easier for you – your teams can benefit from it too.

Increasing your digital capability will help you to find new business opportunities and make your marketing and communications more targeted.

Once you’ve won some new business digitisation will enable you to service those clients more effectively.

You can respond to their requests more quickly – even outside working hours, through the use of chatbots and automated responses.

You can use the data that you’ve collected on your customers to offer them products and services that are more relevant to their needs.

Find the right accountant or bookkeeper and make the most of them

The new tax year provides an opportunity for you to find the right accountant or bookkeeper so you’re getting the best professional support around your finances.

Obviously, you’ll want your accountant to help you with calculating and paying your tax as well as other aspects of financial management such as:

• Handling your payroll
• Completing your P11D forms
• Advising on what you can and cannot set off against tax.

But a good accountant should be able to do more.

They should act as an advisor, a business partner, providing you with ongoing advice and support rather than simply getting in touch when your accounts are due.

They need to understand your business.

This means knowing about the sector that you operate in as well as having an appreciation of the particular challenges that you face – as well as having an eye to the opportunities.

Your accountant should be proactive.

This means letting you know about changes to regulations and legislation ahead of time so that, together, you can plan your strategy.

It also means warning you about any problems with your cash flow before they become serious.

An accountant should be ready to act as a critical friend to your business, offering independent insights based on their knowledge and experience.

If your accountant is not adding this extra value, it’s worth asking them whether they can.

Check beforehand whether they will charge you more for the extra hours they give you and, if so, how much this might be.

You’ll find that with a good accountant this increase in fees can end up being a sensible investment that brings longer term returns.

You might ask whether you need a bookkeeper to manage your day-to-day financial transactions.

This usually involves issuing invoices and chasing them up and ensuring that your expenditure records are accurate and that you have receipts for all the chargeable items that you’ve bought.

It’s important to ensure that your accountant and your bookkeeper, if you have one, are both using the latest digital technology.

As well as providing more accurate, timely information about your business and ensuring that you’re already to pay your tax, this means that they’re not charging you for the hours they spend doing manual calculations.

You should also ensure that the accounting software that they use is compatible with your own systems.

Final thoughts on the new tax year

Many of us make new year’s resolutions – and some of us even keep them. It’s well worth taking the opportunity at the start of the tax year to make some new resolutions for your business.

Now is the time to ensure you’re using the latest digital technology to handle your accounting, payroll and HR processes so you can focus on your business.

In these times of disruption, economic uncertainty and technological transformation, it’s also important to spend time with your accountant and your business partners, if you have them, to look beyond the day-to-day challenges.

The new tax year provides a great opportunity to develop your business strategy and future proof your company.