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 .