The run up to Christmas always demonstrates how much we can get done when we have a deadline. It’s a bit like when we’re about to head off on holiday and we’re amazed about the amount of work that we can get done when we put our heads down and get to work.
There’s nothing like a deadline to get the job done!
So this makes you think about how important setting a deadline is in the first place. If we did this more often with tasks, then we could get more done in a shorter amount of time, leaving us with more free time to do the things that we want to do.
Work will always fill up our time if left to its own devices.
Parkinson’s Law states that a task will fill the amount of time that you allocate for it. We’ve all experienced this phenomena, right? Where we set to work on a task to complete and it takes a full day (and we just about squeeze it in) then later on that week, we have a bigger task and less time (say a morning) yet we still get this task done. How did that happen…?
Errr, it’s in the deadline.
Whatever time you allocate (assuming that you allocate any time at all…?) then the task will invariably fill it. On the flip side, if you had set up say a couple of hours to get a task done, you would more than likely get it done entirely or at least get the majority of it done within that two hour time frame – as opposed to perhaps a full day or even longer if you let it have an open end.
Maybe that should be our New Year’s resolution – to set deadlines (hard meaningful deadlines) for every task and to get it scheduled in our calendar with a set amount of time to complete it. We can then have more time to enjoy the finer things in life (but just don’t set a time-limit on those things ;)).
Judging by the rapid uptake in the number of calls and enquiries we are receiving on a weekly basis from entrepreneurs and founders looking to ensure that their company is SEIS / EIS tax ready – I think it is fair to say that SEIS / EIS tax benefits are now getting the attention they deserve!
So if you are a star company looking for rapid growth and you’re in search of investment, then you really need to get up to speed with the tax benefits that SEIS / EIS government tax incentives can potentially bring you.
I’m afraid to say that it can be quite complex in parts – good news is that we’ve set up an email course to help you swot up!
We are delighted to launch our new SEIS / EIS training course. This free course will be delivered via email in a series of bite-sized chunks.
Aimed at company founders seeking SEIS and / or EIS investment, the course should prove to be an excellent primer in helping entrepreneurs educate themselves on how they can make the most of the generous opportunities offered by these government tax incentives – whilst steering clear of some of the pitfalls!
Business angels (both budding and existing!) could also benefit from this course as it sets out in plain English how the schemes operate and points to watch out based on practical experience of working with these schemes on a daily basis.
We hope you find benefit in this course and look forward to your feedback.
Sign up via the form below to get started immediately:
Our resource of the week is Rapportive – a useful Gmail extension that brings your social media connections, such as Linkedin, directly into your inbox. It is a good way of keeping in touch with existing contacts and for reaching out to potential new connections…
In this conversation, we cover how Modwenna made the transition from corporate financier to entrepreneur and founded Angel News which brings thought-leadership and insights into the field of private company investment – aimed at both investors and entrepreneurs.
Please get in touch with your questions and feedback via Twitter: @iptaxsolutions and/or #fgbpodcast
If you are a UK entrepreneur and would like to share your story, please get in touch as above. Also, if you are involved in advising entrepreneurs on building scalable businesses, we would be delighted to hear from you and to get you involved if you’re the right fit.
Listen to an audio version of this Summary Budget 2015 round up of the key tax changes impacting on entrepreneurs or read the text version below:
An audio download link is available at the end of this post!
Reduction in Corporation tax
Continuing George Osborne’s pledge to make the UK one of the single most attractive places to do business in the G20 he continued with his downward pressure on the UK corporation tax rates. Not content with reducing the main rate to 20% from 28% not too many years ago, he pledged to reduce it further to 19% by 2017 and down to 18% by 2020.
Before we get too excited about the CT rate reductions, it was once again a “give and take budget” as Mr Osborne announced some far reaching changes to the dividend tax regime that will impact on many entrepreneurs and increases to the minimum wage – the now so called “Living Wage”.
Dividend tax changes
It has long been the case that entrepreneurs could extract profits from their companies as dividends rather than salary – the key advantage being NIC savings as dividends are not (currently) subject to NIC. The income tax suffered on dividends is lower than salary as dividends are only available from retained profits that have been subject to corporation tax – so a tax credit system is applied to dividends that, in essence, results in 0% income tax payable by basic rate tax-payers (so broadly up to £42,000 – £43,000); 25% of the net dividend payable for higher rate tax payers and 30.6% for additional rate tax payers.
Seemingly forgetting about the double taxation impact on dividend payments, the Chancellor announced that there will be a £5,000 dividend allowance from 6 April 2016 (whoop whoop!) and then a 7.5% additional tax applied to dividend income – so our rates now become basic rate: 7.5%; higher rate: 32.5% and additional rate: 38.1%.
Looking at the HMRC projected figures, they are looking to net quite a windfall on this change that is a tax grab via the back-door – I don’t think many entrepreneurs have quite grasped this change as it was positioned as a change that might impact on those with substantial quoted shareholdings and contractors.
Will we see larger dividend payments pre 5 April 2016 with founders leaving credit loan balances to draw down over the foreseeable future?
Employment allowance increase
We should see the £2,000 NIC allowance for employers increase to £3,000 from 6 April 2016
Annual investment allowance
The annual allowance for investment into capital equipment (e.g. PCs, servers, desks, chairs, machinery etc) was set to fall to £25,000 pa by the end of this year but this was increased and pegged at £200,000 for the next five years.
There were some further changes to EIS building on proposals from the Autumn Budget Statement that include proposals to cap the total amount that can be raised under EIS at £12m (£20m for ‘knowledge intensive’ companies).
Also, a new limit on companies raising EIS making it available only to those companies that have been trading for less than 7 years (10 years for knowledge intensive companies) – this change seems unreasonably harsh for longer more established companies that might want to access capital. The requirement for 70% of the SEIS cash to be invested before shares can be issued under EIS will also be removed as originally noted in the March 2015 Budget. Finally there was reference to ensuring that EIS funds are directed toward developing companies so there will be restrictions on using EIS monies for buyouts and acquisitions and more of a need to demonstrate that the funds are being employed to develop and grow trading companies.
There were no changes announced to the SEIS regime.
Many entrepreneurs will have diversified their risk with potentially one or more buy to let properties within their portfolio. These were also hit with some quite serious changes to the tax regime with the most hard hitting being the reduction in interest relief on buy to let mortgages being reduced to the basic rate of tax only. Currently, landlords can offset the mortgage interest at their marginal rate of tax (so potentially up to 45%). These new rules will be phased in to ease the pain of potential deleveraging for some landlords but the writing is on the wall for many – and who’s to say that this is the end with potential for 0% interest relief in the future….?
There will also be the removal of the 10% wear and tear allowance from 6 April 2016. Yet more pain for landlords.
On the downside, there were announcements that those with total income over £150,000 would be hit with reductions in the amounts they can put into their pension with the £40,000 annual allowance being tapered away with it hitting just £10,000 for those earning £210,000 or more. This is a admin headache all round and it comes into force from 6 April 2016.
On the plus side, there was a consultation announce to explore the best ways for pensions to be saved and a seemingly open approach to considering alternative finance in line with improvements to ISAs – this is great news for our thriving Fintech sector.
Inheritance tax changes
Long discussed and unsurprising was the pledge to increase the inheritance tax level to £1m to allow homes to be passed on without incurring IHT. Slightly odd in that the £325,000 nil rate band remains in place for the next 5 years but we have this additional £175,000 especially for the family home. Inflation may start to dig a hole into that £325,000 allowance rendering this less beneficial over time than the headlines suggest.
It was a shame that we didn’t see any changes to the VAT MOSS / (#VATmess) regime and I think the changes to dividends and pensions will add to uncertainty for many entrepreneurs and their advisors as the goalposts keep moving which is disappointing.
I don’t want this to fall into a political rant but I sense there is a lack of transparency in the Labour party’s stance on how it might build on the successes that we have already seen in terms of tax policy for UK tech and fast growth companies.
For example, the Conservatives have made great strides in the following areas:
The introduction of Seed Enterprise Investment Scheme (SEIS) and its generous tax incentives to support investment into early stage companies to supplement the Enterprise Investment Scheme (EIS) aimed at more established companies
The improvements made to the Enterprise Management Incentive (EMI) share option scheme to allow participants to benefit from Entrepreneur’s Relief despite potentially not holding the shares for 12 months nor even holding more than 5% of the share capital
Improvements to the R&D tax credit incentive scheme that now boasts a 33.3% return for claimant SME companies
Introduction of the Patent Box at its beneficial 10% corporation tax rate – despite challenges from across the EU
Enhancements to Entrepreneur’s Relief that now allows entrepreneurs to benefit from a 10% CGT rate on the first £10m of lifetime gains
Reduction in the main corporation tax rate down to 20%
Plus video games tax relief and other reliefs for creative and digital companies
Taken together these measures keep the UK on track to meet George Osborne’s pledge to make it the most attractive place to do business in the G20.
It is worth noting that many of the above tax incentives were first introduced during Labour’s last bout in office; albeit in a more watered down form in most cases – although who’s to say that Labour might not have followed a similar path had they stayed in the office…? Truth is, we don’t know.
And herein lies the problem…
Labour do not appear to have shared much detail on their thinking and policies around these areas and, in particular, these specific tax incentives. The danger is that an incoming party wants to “shake things up” and “make their mark” which may threaten the stability and progress made around these important areas for UK entrepreneurs.