It may not be a question that you thought you’d have to ask yourself, but as a Director, part of your legal undertaking requires you to ensure that the business remains solvent and trades within its means. Operating outside of these boundaries could see the company being declared insolvent, struck off and you, as a Director, being penalised or disqualified – meaning you cannot be a Director again.
EBITDA or the shorter, EBIT or EBT, is a financial reporting term which identifies the profit generated from trading activities of an organisation. However, it is fundamentally different to Net Profit which states the profit left after all costs have been applied. The acronym in full is Earnings Before Interest, Taxation, Depreciation and Amortisation and whilst historically used within larger corporations, is now a relatively common reporting metric in management accounts for SMEs.
The number of companies collapsing into insolvency towards the end of 2022 increased significantly. Having already seen 1,948 businesses closing down in October, the November figure was even higher with 2029 shutting up shop. As well as showing an increasing trend for the year, these figures also represent an alarming jump year-on-year and also when we look back to pre-pandemic statistics.
We’re inundated with news about rising prices and the cost of living crisis and yet it would seem the majority remain unaware of some of the opportunities that exist to help reduce the pressure on household budgets. One notable solution being Social Tariffs.
Social tariffs are specific contracts offered by mobile phone and broadband suppliers that have lower fixed term rates. These have been negotiated on mass by the government to provide targeted help.
If you have responsibility for budgeting in your business, the events of the last couple of years will undoubtedly have kept you busy and will probably have thrown some challenges your way. You’re not alone. Businesses everywhere are struggling to set and maintain accurate budgets, beset on all sides by world events and economic trends.
So how do you budget effectively, and more to the point accurately, with so many external influences at play?
As costs continue to rise, some employees may be considering ways of increasing their household incomes to help manage the pressure. One means of achieving this could be seeking additional employment, over and above their main/primary job. How should you prepare for the inevitable discussions and what can you do to support your staff?
Back in 2015, then Chancellor George Osborne, shook up the dividend taxation system, overhauling an area of economic policy that had not been touched for years. But now the present day Chancellor, Jeremy Hunt, has signalled what appears to be the death knell for the allowance as he set out plans in November 2022, to reduce it to just £500 in the 2024/25 tax year.
The Chancellor’s budget announcement that personal allowances and the threshold for the higher rate tax band will be frozen until April 2028, will see thousands more individuals paying higher levels of tax as a result. It is estimated that the move will see more than 200,000 (two-hundred-thousand) individuals moving into the higher rate tax band alone.
It has been calculated that some top earners, with a salary in excess of £100k, could end up paying an effective tax rate of more than 90% as a result of the recent changes to the additional rate threshold announced in the Autumn Statement cum Budget.
With an uncertain economic outlook, it’s a great time to get on top of company finances and refocus on your budget plans. But where do you start with budgeting and what should you look out for? Our handy 3 step guide will help you plan and execute your budget and stay on top of your finances.
Whilst we’re happy to act as a virtual accounts’ office, we always say to our clients that it’s fine to outsource all your accounts work but please don’t outsource your thinking. Keep an active understanding as to what is happening and remain aware of your obligations. A recent tribunal between a company owner and HMRC has demonstrated the importance of knowing what’s going on – even if you choose to outsource.
One of the problems with historical records is they sound grand but often end up obfuscating other historical records. The announcement by The Bank of England on 3rd November that interest rates were to rise by three-quarters-of-one-percent (0.75%) meant that this was the biggest single jump in rates for more than three decades, thirty three years to be precise. Whilst not ignoring the significance of this move, it could allow us to forget that this also brings to an end one of the longest periods of low interest rates in history.