Change to ISA rules means ISAs can continue a period of growth
TALK THE TALK
Understanding the terminology is key to staying on top of your business finances
To run a successful business, directors and selfemployed workers need to have a certain level of understanding of the information provided by their accountant and submitted to HMRC and Companies House. So, do you understand what your accountant gives you?
Profit and loss – what comes in and what goes out The profit and loss is a summary of what comes in from sales, interest etc and what goes out in the form of business expenses to achieve those sales. Business expenses are categorised into cost of sales, those costs directly attributable to a product such as the ingredients and lazbour, or overheads which are more fixed regardless of sales. Overheads might include wages and salaries, rent, marketing and insurance. By having a good handle on these costs, you can ensure that all expenditure is helping to fulfil your business goals. In summary, the profit and loss shows your financial performance in terms of whether your activities for a given period are making money! Not to be confused with …
Cashflow – cash receipts and cash payments You could report a profit in a given period but find that you have no cash! Cashflow is about the timing of when you physically pay out or receive money. For example, if you have £ 100 of sales and £ 50 of expenses in a 30-day period you would have £ 50 profit. However, if the sales are not due to be paid until the following month but the expenses were paid upfront you would have negative cashflow of £ 50.
However, it is important to understand if you use the cash basis of accounting or the accruals basis. Cash basis means revenue is reported when cash is received, and expenses are reported when cash is paid, and can only be used by self employed or partnerships with a turnover of less than £ 150,000. Accruals basis is when revenue and expenses are reported in the period they are earned – so if you put on a festival in July, all the ticket sales and associated expenses would be reported in July.
Balance sheet – what you have and what you owe The balance sheet is a snapshot of what you have in the form of cash, investments and assets( building, equipment, patents etc) and what you owe in the form of loans, mortgages, suppliers, tax payable etc. This is a statement of your financial position.
If you need help understanding any of your financial reports, let us assist you in gaining more control over your own business finances.
ISAs adapt to thrive
Change to ISA rules means ISAs can continue a period of growth
EACH TAX YEAR, UK residents over 16 years old can save in an ISA without having to pay income tax or capital gains tax on the increases in their value. For the 2018 tax year, this is up to a limit of £ 20,000.
Before 6 April 2018, any money in an ISA lost all tax advantages at the point of the ISA holder’ s death. After this date, investments within ISAs at the time of the account holder’ s death will continue to retain their tax advantaged status for three years after the death. This is good news as it means that the ISA can continue to grow tax free until the estate is finalised or three years is up. There will be no income tax or capital gains tax charges in this time.
In addition, surviving partners through marriage or civil partnership will be able to make additional subscriptions up to the higher value of the deceased’ s ISA investments on the date that the account is closed. For example, if the deceased held £ 30,000 in a cash ISA at the time of death, the surviving spouse or civil partner would be allowed £ 30,000 on top of their own £ 20,000 allowance for 18 / 19.