As the clock ticks towards 01 April 2024, businesses across the nation are bracing themselves for the significant minimum wage increase set to come into effect. With no accompanying support from governments in these challenging times, the burden falls on the shoulders of businesses to adapt and plan effectively.


The Rise of Minimum Wage

As with every year, April 1st marks a pivotal moment as the minimum wage sees a substantial increase. Workers aged 21 and over will be entitled to the National Living Wage where currently it was workers aged 23 and over. While the intention behind such adjustments is to uplift low-wage workers and tackle income inequality, the reality for businesses is starkly different. For many, this hike presents a formidable challenge, with limited government assistance.

 

23 and over

21 to 22

18 to 20

Under 18

Apprentice

Current rate

£10.42

£10.18

£7.49

£5.28

£5.28

01 April 2024

£11.44

£8.60

£6.40

£6.40


For small and medium-sized businesses already grappling with rising costs, the wage increase poses a significant threat. Increased labour costs can directly translate into higher operational expenses, potentially squeezing already tight budgets.

The Importance of Planning

In these challenging times, proactive planning becomes paramount. Businesses must undertake a comprehensive assessment of their current financial standing, identifying areas where cost-saving measures can be implemented without compromising on quality. From optimising operational efficiencies to exploring alternative revenue streams, every avenue must be explored to mitigate the impact of the wage hike.

 

Conduct a thorough review of existing processes and workflows to identify inefficiencies. Planning is key more than ever and will help you weather the storm and emerge stronger on the other side.

Financial stability is crucial to any business. It is extremely important that you protect and enhance it. Cashflow of your business is vital. You need to be aware of how much money is coming in and how much money is going out of the business. You will need to have a plan in place to cover any shortfalls.

 

Governments are having their own challenges and not always there to help us in a crisis, we have to stand on our own two feet, to see ourselves through these challenging trading times.

 

To stay on top of cashflow, it is best to speak to your accountant about cashflow projections. We have also got examples of how to get the best of cashflow on our website, click here to find out more.

 

We have examples of cashflow and budgeting here.

 

So, what can be causes of cashflow issues?

 

The number one issue we see is when a supplier has increased their prices significantly. This is when you need to decide if there is something you can scale back on or is it time to start shopping around. Talking to your suppliers if you notice increases, we’ve all been facing this over the past 18 months.

 

Track and monitor your costs, by carrying out management accounts, comparing this year with last year, you can see instantly what has changed for you and your business.

 

Late payments from customers can lead to cashflow issues too. This can sometimes cause tension as you do not want to ruin relations. The following tips can help tackle these issues;

·        Ensuring your invoices are accurate and on time can help avoid late payments.

·        Giving gentle reminders as it approaches credit term limits.

·        Providing easy payment solutions such as bank transfer or a direct debit system

·        Check your customers credit score, giving too much credit without looking into your customer bill paying activities can lead to bad debts.

·        Discounts for early payment to improve the timing of when the cash will be paid in can help too.

 

We all dislike to pay tax, but it is a part of life. Tax planning helps to keep your business financially healthy. We must ensure we have the funds to cover the tax payments. This is why it is crucial to work with your accountant so that you know well ahead of time how much your tax bill is. Not paying the tax bill in full and on time can add to the cost. Penalties and interest will incur and can make this less manageable.

 

There are allowances and reliefs out there to bring the tax bill down. Getting this done correctly will ensure that you pay the lowest but accurate amount over to HMRC.

 

Set up a savings account, and slowly build up the cash towards any tax bill, you don’t get surprises when its time to pay the bill then. Any surplus in that account, could pay for something you want.

 

Businesses that plan ahead, traditionally do better than those that don’t plan and work in the dark.

Point 1

Always be aware of what you have in the bank Account

Point 2

Put together a short term cashflow 3 months and a longer term one 12 months

To put together the cashflow statement

Sales Income Put all you known sales turnover from your diary into the forecast Unknown your new sales turnover, use last years figures to guide you, in the absence of last year, use a realistic sales turnover.
Don’t forget VAT and keep it separate, as this money belong to the Inland Revenue
Other Income ie bank interest, dividend, insurance refunds.

Costs Cost of Sales this can be based on your average margin percentage

Overhead costs

Fixed and variable

Ie rent, heating, salaries, office costs
Bank loans and capital
The VAT return and Paye

Point 3

Update this daily or weekly, with actual figures, this will allow you to see in advance how your cash is being spent, and also if you need to fund the business. Or used for Capital expenditure and taking on staff. It’s a great predictor for being able to do operation things.

Point 4

If you see a dip in funds, make sure you know in plenty of time, as a six week window may not be able to be filled, whereas a 3 to 6 month window you can plan ahead, and build up cash funds to cover you over the slower time.

Point 5

Use other sources to save on cashflow Gain credit with suppliers Get your capital expenditure leased, or obtain a bank loan. This will also improve your credit score. You score goes up, when you are able to get credit.

Point 6

Keep this on track at all times, even when you are in a cash rich, situation. You might be wasting your money on low interest schemes. Look at saving in other areas.

Let it be used against bringing your tax bill down, investments in EIS schemes, Pension contributions.
Further investment that will give a better return. Capital expenditure. Website development.

There are approximately 5.6 million businesses in the UK, of which 98% are considered small to medium sized businesses. So, we small businesses are crucial to the UK economy, there is no denying this.

 

Whether you are a start-up and excited for the times ahead, or an establishment renewing your challenges, we all want to be successful with our business. In our latest blog, we talk about tips we think are vital to any business.

 

We all have a vision in mind, of where we’d like to see our business in the future. This vision needs to be translated on paper as your business plan. A business plan is a must for all business owners. This can help outside investors get an insight of your business, for if ever you need funding to grow your business.

 

Business Plan


A business plan should consist of;

·    Summary – What is your purpose, what is your vision?

·    Target market – Who are you likely to sell to

·    Competitors – What is your rivals weakness? Why are you different?

·    Staff – Do you need people to help run your business. What level of skill and pay is required?

·    Suppliers – Who will be your main supplier?

·    Marketing Plan – How will you advertise yourself to the world

·    Operations – Which is the best way to run your business.

·    Finance – How much money do you need? Determine the profitability of the business.

 

Business Structure

As well as a business plan, you will need to have a business structure. Sole trader, partnerships and limited companies all have their own pros and cons. Deciding which structure to choose is not always straightforward. If an asset is owned outright, then you would need to consider retaining personal ownership on incorporation. If you’re not sure which structure model you should go for, then here at Cross Accounting we can give tailored advice to you.

 

Year End

We cannot stress enough the importance of doing your year end as early as possible. Once completed, this will give you peace of mind as you will not have to worry, until next year. It will also give you more time to budget for your tax bill. You will not be in a rush to find the money for the tax bill and not kill your cashflow. Keep all receipts for your expenses, these will all help lower the tax bill. If you buy equipment or tools, mobile phone bills, petrol, these are all deductible. HMRC can conduct random spot checks, so it’s important to keep paperwork, recommended for 6 years.

 

Budgeting

Having budgets in place for your business can help you predict the near future. This allows you to have a spending plan, so you can make sure you have money for the things you need and the things that are important to you. You can see what is eating up your cash and avoid spending on unnecessary fees. Below is an example of a very simple budget.

 

 

Month 1 (Budget)

Month 1 (Actual)

Variance

Month 2 (Budget)

Month 2 (Actual)

Variance

Month 3 (Budget)

Month 3 (Actual)

Variance

Starting Cash

10,000

10,000

0

11,630

11,600

-30

 

 

 

Income

2,500

2,500

0

 

 

 

 

 

 

Total Income

2,600

2,600

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent

800

800

0

 

 

 

 

 

 

Mobile

50

55

5

 

 

 

 

 

 

Travel

20

50

30

 

 

 

 

 

 

Gas and Electricity

100

95

-5

 

 

 

 

 

 

Total Expense

970

1,000

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income - Expense

1630

1,600

-30

 

 

 

 

 

 

 

These tips will keep you motivated and more importantly give you an idea of where your finances lay, helping you to quickly identify if there are rainy days ahead.

If you need expert tailored advice, please do get in touch as we are always happy to help.

There is always new rates and thresholds that come in to place in the new financial year.

The National Minimum Wage rate has gone up, however, the personal threshold has stayed the same.

 

Personal Allowance

The personal allowance is the amount you can earn without having to pay any tax.

 

This financial year 2023-24 is £12,570

 

PAYE Tax Rate

Rate of Tax

Annual Earnings

Personal Allowance

0%

£0 - £12,570

Basic Rate

20%

£12,571 - £37,700

Higher Tax Rate

40%

£37,701 - £125,140

Additional Tax Rate

45%

£125,140+

 

National Insurance Rates

As an employee, you will pay Class 1 NI rates. If you earn above the primary threshold, then you will play Class 1 NI. The primary threshold for 2023-24 are £242 a week, or, £1,048 a month, or, £12,570 a year.

 

You will pay an additional 2% if you are in the upper earning limit. The upper earning limit are £967 a week, or, £4,189 a month, or, £50,270 a year

 

 

Class 1 National Insurance

National Insurance Category

Earnings above Primary Threshold

Balance of earning above Upper Earning Limit

Standard (A)

12%

2%

State Pension Age (C)

0%

0%

Under 21 (M)

12%

2%

 

As an employer, you will have to pay national insurance on your staff members. This includes if you are a sole director on payroll. The rate applies to earnings above the secondary threshold. The secondary threshold for 2023-24 are £175 a week, or, £758 a month, or, £9,100 a year.

 

Employer National Insurance

National Insurance Category

Earnings above Primary Threshold

Balance of earning above Upper Earning Limit

Standard (A)

13.8%

13.8%

State Pension Age (C)

13.8%

13.8%

Under 21 (M)

0%

13.8%

 

Employment Allowance

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount. For the year 2023-24 this is £5,000

National Minimum Wage

The National Minimum Wage is the minimum pay per hour all workers are entitled to by law. These rates apply from 1 April 2023

 

Category of Worker

Hourly Rate

Aged 23 and above

£10.42

Aged 21 – 22

£10.18

Aged 18 – 20

£7.49

Aged Under 18

£5.28

Apprentice

£5.28

 

SSP Statutory Sick Pay

Employees are entitled to SSP if they are off work for 3+ days. The same weekly Statutory Sick Pay rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

 

No. of Qualifying Days

1 Day to pay

2 Days to pay

3 Days to pay

4 Days to pay

5 Days to pay

6 Days to pay

7 Days to pay

7

£15.63

£31.26

£46.89

£62.52

£78.15

£93.78

£109.40

6

£18.24

£36.47

£54.70

£72.94

£91.17

£109.40

 

5

£21.88

£43.76

£65.64

£87.52

£109.40

 

 

4

£27.35

£54.70

£82.05

£109.40

 

 

 

3

£36.47

£72.94

£109.40

 

 

 

 

2

£54.70

£109.40

 

 

 

 

 

1

£109.40

 

 

 

 

 

 

 

If you want to ensure you are not breaking the payroll rules with NMW and SSP, message us to see how we can help.

 

If you do not understand the personal allowance threshold give us a call on our Cardiff or Bridgend office where the team will be happy to help. 

Coronavirus Pandemic - Road to UK's Recovery

As we try and get back some normality in our lives, and places start to open back up for business. We still need to remember that the fight is not over and need to abide by the rules set in place. Well done to all pushing through and staying motivated. Throughout lockdown we have updated you with what the government have announced and plan to do. There have been a lot of information announced, you can find all the latest below.

 

How has the Furlough scheme changed?


One of the many questions we get asked is, how has the furlough scheme changed? The Coronavirus Job Retention Scheme, furlough as its more commonly called is designed to help people who could not do their jobs because of the virus and prevent mass redundancies.

 

The scheme is to close in October and has had some criticism with the decision to close, but it has been backed by the Bank of England boss, which says workers should be helped to ''move forward'' and not kept in unproductive jobs.

 

From 01 August 2020 the government will pay 80% of wages up to a cap of £2,500. Employers will now have to pay employers National Insurance Contributions (NIC) and pension contributions. You can bring back employees to work shifts and then put back on furlough if needed. Remember any hours worked, the employee is entitled to 100% of their wage and this needs to come directly from the employer.

 

From 01 September 2020 the government will contribute 70% of wages up to a cap of £2,187.50. Employers will again pay employer National Insurance Contributions (NIC) and pension contributions just like for August. However, now employers will have to pay 10% of wages to make up the 80% total up to a cap of £2,500. Part time furlough is still available, but any hours worked by staff, employers will have to pay 100% of wage.

 

From 01 October 2020, 60% of wages will be contributed by the government up to a cap of £1,875. Employers will pay employer NICs and pension contributions and top up 20% of wages to make up 80% total up to a cap of £2,500 until when the scheme ends at the end of the month.

 

The aim of the tapering is to allow employers to ease employees back in to work at the same time as businesses productivity hopefully resumes.

 

How does the part time furlough work?

 

The part time furlough is designed to give you the chance to call an employee back in to work if there is a lot of work or put them back on furlough if the workload drops off. So, how does it work?

 

If you have a member of staff who works 8 hours a day, 5 days a week and your business is closed, you can furlough the member of staff and the government will cover a percentage of the wage, depending on the situation as mentioned above. If you want to trial opening your business for a couple of days a week, and you need the member of staff for 3 days a week, you will be liable to pay 100% of the wage for the 3 days worked, and the government will pay the percentage equivalent for the remaining 2 days not worked and on furlough. The rules mentioned above applies, regarding the percentage amount and NIC’s being paid by yourself.

 

The government has allowed the part time furlough to relieve some of the financial strain of keeping staff and prevent mass redundancies. For each furloughed member of staff still employed as of 31 January 2021, the government will give the employer a one-off £1,000 bonus

 

Kickstart Scheme

 

The chancellor also announced a new Kickstart Scheme worth to be in the region of £2 billion. The plan is to be launched to create hundreds of thousands of new, fully subsidised jobs for young people. If you claim Universal Credit and are aged between 16-24 and at risk of long-term unemployment will be eligible. Funding will be available for each six-month job placement and will cover 100% of the National Minimum Wage for 25 hours a week. Employers will be able to top this wage up if they please.

 

How to apply for this, still has not been fully revealed by the government. As it gets closer to the scheme being live, more information will be revealed and as always, as soon as we know, we will pass the information to you.

 

Help Out Eat Out


A little more positive news from the hospitality sector is for the month of August you can get 50% off your bill in participating restaurants with the other half covered by the government. This is capped at £10 per diner and excludes alcohol and is only valid for Monday – Wednesdays in August and can be used as many times as you like. The offer is for dine in only as the government encourages people to go out. To check which restaurants are participating click here and enter your post code to see who around you are participating.

 

Remember to support your independently owned food venues during these tough times and remember to practice social distancing. Stay motivated and stay safe as together we can end 2020 on a positive bang!

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