Tag: #growingbusiness

How Much Does It Cost To Work From Home?

So, how much does it cost to work from home? The pandemic gave us a once-in-a-generation opportunity to change and reimagine the ways we work. Improved technology meant that working remotely had never been easier. And recent figures from the Office for National Statistics report that between 25 January to 5 February, around 40% of working adults had worked from home at some point in the past seven days. Throughout 2022, the percentage of working adults reporting having worked from home has varied between 25% and 40%. These figures clearly indicate that homeworking has been resilient to the pressures such as the end of the restrictions and the increases in the cost of living. So with no clear upward or downward trend in the figures, team4 looks at how much it does cost to work from home? We explore the tax relief for the self-employed as well as those who are employed.

It’s too easy to just think about the savings you are making

When working from home, it is easy to forget about how much it is actually costing you. It’s all too simple just to think about the savings you are making on travelling to and from work and not eating lunch out at restaurants or paying out for takeaways or drinks from coffee shops. Home working incurs electricity, Wi-Fi and other utility costs as well as broadband and telephone expenses.

What extras do you have to pay for?

  • Electricity to power computers (laptop and desktop)
  • Additional heating
  • Broadband
  • Telephone
  • Office furniture – chair, desk and stationery
  • Insurance
  • Rent and mortgage interest

Energy costs have been rising sharply

When considering the cost to work from home, you will need electricity to run your desktop computer and to charge a laptop. Your home will also need extra heating throughout the day, so it’s important to take into consideration that heating in the UK is extremely high at the moment. The Office for National Statistics reports that although electricity prices fell by 1% between March and April 2023, this has to be compared to a rise of 40.5% between the same two months a year ago. And although gas prices fell by 1% between March and April 2023, this was the first time gas prices had fallen since October 2020. Again, this can be compared with a 66.8% rise between the same two months a year ago.

Broadband, mobiles, office furniture and insurance

Other expenses you will need to consider are the cost of broadband and telephone charges. It’s a good idea to shop around for the best broadband package that will suit your requirements. It is estimated that in the UK, more than a third of broadband usage is used for working purposes. Well made office furniture and an ergonomically made office chair are essential expenses and don’t forget about insurance.

Claim tax relief for your job expenses

HMRC reports that you may be able to claim tax relief for the additional household costs you incur if you work at home for all or part of the week. It clearly states who and who cannot claim tax relief.

You can claim tax relief if you have to work from home, for example because:

 

  • Your job requires you to live far away from your office
  • Your employer does not have an office

 

You cannot claim tax relief if you choose to work from home. This includes if:

 

  • Your employment contract lets you work from home some or all of the time
  • Your work from home because of coronavirus (COVID-19)
  • Your employer has an office, but you cannot go there sometimes because it’s full

 

Tax relief may be claimed on business phone calls and gas and electricity for your work area.

How much can you claim?

HMRC states that you can either claim tax relief on:

  • £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
  • The exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills or contracts

You will get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).

What expenses can you claim when working from home as self employed?

  • Gas, electricity and water bills
  • Internet and telephone bills
  • Rent and mortgage interest costs
  • Council tax

Some of these running costs can be deducted as allowable business expenses when working out your taxable profit. You can claim for a percentage of your utility bills and you can also claim a proportion of your costs for rent and mortgage interest. You cannot claim for things you use privately. For more detailed information, refer to an earlier blog from team4, which is a guide to self-employed expenses.

How can team4 help you claim tax relief if you are working from home?

It was over three years ago that the pandemic transformed the way we work. Working from home certainly comes with its own financial burden, and we hope this article has explained the cost to work from home. If you are unsure what you can claim for, or you are looking to outsource your accounting operations, don’t hesitate to get in touch with team4. Call us on +44(0)1825 763378 or email info@team4bookkeeping.co.uk

Five Reasons To Outsource Your Accounting Operations

Why is it important to outsource your accounting operations? Every business irrespective of size needs to keep accurate and up-to-date records of every financial transaction. This includes sales, purchases, payments and receipts. Outsourced accounting is becoming more popular as it helps to reduce business overheads and you won’t need a dedicated office space. In team4’s latest article we look at five of the benefits of outsourcing your accounting operations by having a professional accounts department.

Reasons to outsource to a professional accounts department

  1. Expertise
  2. Better use of your time
  3. Reduced costs
  4. Scalable and flexible options
  5. Peace of mind

What is outsourcing?

“Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company’s own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office.”

Investopedia

  1. Expertise – make more effective decisions by knowing the financial situation of your company

It makes a lot of sense to outsource your accounting operations. Trained professionals will have the expertise and will understand how to apply the best practices to your business. You will know the current state of your company in real time. By knowing the margins on every client or job, keeping a healthy cash flow and knowing the productivity of your team, you will have an insight into what drives your bottom line results leading you to make more effective decisions. You will also remain compliant with current legislation, which is apt to change frequently. Buying or renting accounting software will become a thing of the past. Your expert outsourced accounting department will use the software best suited to your business.

  1. Spend time running your company – not doing the books

As your business grows, bookkeeping and accounting tasks will grow too. You may initially have been able to cope with these yourself, but not anymore. It’s far better to free up your valuable time, and let’s face it, time is the most precious resource you have, by doing something more productive and what you do best, running your company. You can spend your time developing and growing your business to increase revenue knowing you have a professional outsourced accounts department to take care of the additional financial implications. So, don’t let bookkeeping and accounting distract you from operational tasks.

  1. Reduced costs – save on payroll and productivity costs

Why not pay for the actual accounting itself? When you outsource your accounting operations, you won’t need to employ a member of staff on a full-time or part-time basis. You will save in payroll and productivity costs. You can determine the number of hours required each week and this way you are not employing someone and paying them for hours that are not required. The money savings can be quite considerable.

  1. Scale up or down depending on requirements

When you outsource your accounting operations, it will give you lots of flexibility. You will be able to scale up or down based on your requirements. This could range from a few hours to few days a week. You will have the flexibility to bring in the help and expertise you need during a time of growth. And you won’t be adding to your payroll. And if times become challenging, you may find you can ride out the storm by reducing your accounting costs and using their expert knowledge. You can also get the latest developments and technology without having to invest in it.

  1. Peace of mind

Ultimately, this is what you are looking for. By turning your bookkeeping and accounts over to experts will ensure you have confidence and trust in the accuracy and quality of the financial information of your company.

How can team4 help you to outsource your accounting operations?

Outsourcing your accounting operations will give you a cost-effective, affordable, efficient and valuable alternative to functions that have been carried out in-house. You will not only benefit from the cost and time savings but also have the peace of mind that your books and accounts are being looked after professionally so that you can focus on your business. Outsourcing can be a very effective solution when trying to survive in tough times although we know that outsourced bookkeeping and accounting is not the best solution for everyone. Bookkeepers know bookkeeping and by using team4, you will have a team of experts at your disposal. Call us on +44(0)1825 763378 or email info@team4bookkeeping.co.uk to find out more.

Eight Advantages Of A Limited Company

What are the advantages of a limited company? In our last article, we discussed the merits of setting up as a sole trader. This is certainly the most popular way of running a business when you start-up. However, once your company has been trading for a while and is growing, it may make more sense to set up as a private limited company. Setting up a limited company is fairly straightforward. However, it is important that you understand your legal situation regarding the financial arrangements you need to put in place and the other responsibilities that a limited company entails. In the latest article from team4, we look at the definition of a limited company, why you should set one up and the main advantages.

What is a limited company?

A limited company is a business structure that is a separate legal and financial entity from the person or people running it. The company has limited liability, which means if the company fails or is sued you are only liable for the face value of your share in the business. Beyond that your personal assets are protected.

Unbiased

A limited company is a company limited by shares or limited by guarantee.

Limited by shares are usually businesses that make a profit. This means the company:

  • Legally separate from the people who run it
  • Has separate finances from your personal ones
  • Has shares and shareholders
  • Can keep any profits it makes after paying tax

Limited by guarantee companies are usually ‘not for profit’. This means the company:

  • Is legally separate from the people who run it
  • Has separate finances from your personal ones
  • Has guarantors and a ‘guaranteed amount’
  • Invests profits it makes back into the company

GOV.UK

Private and Public limited companies

There are two types of limited companies in the UK. These are namely private and public. In general, private companies are smaller with a few shareholders, whereas public companies tend to be larger and have shares that can be bought and sold.

Key points about a limited company:

  • Separate entity
  • One or more directors
  • Own bank account
  • Can be bought or sold in the form of shares
  • Must be registered at Companies House
  • Limited liability

Benefits of setting up a business as a limited company

  1. In most cases, your overall tax burden as an owner or director will be lower than a sole trader. Limited companies pay corporation tax on their profits, the rate of which is currently between 19% and 25% dependent on the profit of the business.

 

  1. It is a separate legal entity. The ownership of assets, a business bank account, and any involvement with contracts etc. is company business and separate from the interest of the company shareholders.

 

  1. You will have limited liability. This means that your liability for any financial losses incurred by your business is limited. You will not be liable to pay any business debts personally.

 

  1. Often, it creates a stronger brand and a more professional image. You may find that larger companies you want to deal with are more inclined to deal with incorporated businesses rather than sole traders.

 

  1. As you have to register your company with Companies House, the company name is legally protected. Your name cannot be used by any other business. This is in comparison with a sole trader whereby a company could trade under the same name as you, with little you can do about it.

 

  1. You may find it easier to secure business finance.

 

  1. As a limited company, you can issue shares. You then can sell shares within your company or transfer ownership of shares. The shareholders agreement will outline your responsibilities and this will also describe how any conflicts arising can be addressed.

 

  1. It can also be easier to sell or transfer ownership of your company, should you want to sell it in the future. You can sell everything tied up in your business, such as equipment and clients, whereas with being a sole trader, many elements of your business are tied up to your specific identity.

The disadvantages of a limited company

To give a fair picture, it is also important to be aware of the disadvantages of a limited company. These can include more paperwork and compliance. You will need to file annual accounts and hold annual general meetings. These can not only be costly, but also time consuming. A limited company may potentially be more expensive to set up as you will need professional advice and assistance.

How can team4 help you with setting up a limited company?

The main benefits of setting up your business as a limited company include limited liability, tax advantages and increased credibility. In most cases, setting up a limited company isn’t expensive or difficult. If you feel that the advantages we have described in our latest article would suit your business or if you are considering outsourcing your accounts, please contact team4. Call team4 on 01825 763378 or email info@team4bookkeeping.co.uk

 

We are based in East Sussex and have clients nationwide. Please contact team4 to find out how we can help you.