One in four UK firms fear for their survival

Almost a quarter of UK business leaders are worried that their company may not survive this financial year due to the cost of living crisis.

A survey conducted by Nucleus Commercial Finance has found that 23% of UK business leaders fear their company will not survive the financial year due to the current cost of living crisis. The majority of business owners polled (72%) say that the current cost of living crisis is a cause for concern for the survival or growth of their business. The high cost of fuel is at the top of the list of concerns, followed by the rising cost of energy. Cash flow, employee retention and higher transportation costs are the other biggest business worries at this time.

The majority of business leaders are also concerned that the current crisis will not just affect their business directly, with higher supply costs, but indirectly too. In fact, 68% of those in senior management roles expect to lose customers, as they believe that people will not be able to afford their products or services anymore.

Also this week, the latest Quarterly Economic Survey from the British Chambers of Commerce (BCC) has found that pressures on business are reaching new heights. Measures for inflation are at the highest levels on record, with 65% of firms expecting to raise prices and no sign that this is levelling off. More than four in five firms (82%) cite inflation as a growing concern for their business, also an historical high.

The BCC surveyed 5,700 businesses for its Quarterly Economic Survey for Q2 2022. The findings show that:

  • 54% of firms expect an increase in turnover over the next 12 months - down from 63% in Q1 2022 and the lowest figure since Q4 2020;
  • 43% of firms are predicting an increase in profitability, down from 50% in Q1 2022;
  • 65% of firms now expect their prices to rise in the next three months, up from 62% in Q1, a record high and a 23-percentage-point rise on a year ago.
  • When firms were asked which factors were driving price rises, 67% cited utility bills, 66% labour costs, 56% fuel and 53% raw materials.

Responding to the findings, David Bharier, BCC head of research, said: "This quarter's survey results clearly point to a weakening economic outlook amid unprecedented cost pressures and falling business confidence … Inflation remains by far and away the top concern, with our survey measures going beyond anything we've seen before in the history of the data."

BCC director general Shevaun Haviland said: "The red lights on our economic dashboard are starting to flash. Nearly every single indicator has seen a deterioration since our last survey in March. Business confidence has taken a significant hit and fears over inflation and cost pressures are at new record highs.

"But it is not too late for the government to take action to help businesses through these challenging times and put the economy on a more stable footing. A cut in VAT on energy bills to 5%, and other steps to relieve the tax burden on firms to encourage investment are crucial."

Written by Rachel Miller.

Freelancer confidence rises in spite of challenges

A new poll has found that self-employed workers are less stressed and more confident about their own prospects as they anticipate a significant rise in day rates over the next 12 months.

Despite record levels of inflation and fears of an impending recession, new research from the Association of Independent Professionals and the Self Employed (IPSE) has revealed that freelancers’ confidence in their own businesses, in the next three months, has risen significantly, from -11.0 in Q4 2021 to 2.2 in Q1 2022. The growth in confidence represents a return to positive figures for the first time since Q2 2021.

The IPSE Confidence Index surveys IPSE and PeoplePerHour members on the state of the UK’s self-employed sector, tracking confidence in their own freelance businesses, the UK economy and other key economic indicators such as average day rates, quarterly earnings and business debt.

In Q1 2022, the index found that freelancers expect their day rates to increase by an average of 13.5% over the next 12 months. This represents a significant increase from Q4 2021, where self-employed workers anticipated an increase of just 3.6%. 

The index has also found that freelancers are increasingly satisfied with their work, job-related stress has fallen to its lowest levels since Q3 2019 and job satisfaction has improved.

However, confidence in the economy remains low. The findings show that freelancers’ confidence in the UK economy for the next three months has increased only slightly from -23.7 in Q4 2021 to -23.1 this quarter.

In fact, the state of the UK economy is the most detrimental factor (64.7%) on freelancers’ business performance, largely because of the cost of the living crisis driven by rising inflation, the war in Ukraine, Brexit and rising energy and goods prices as well as heightened fears of an economic recession. The other main factors impacting freelancers last quarter were government tax policy (62.1%) and regulations relating to hiring freelancers (59.2%).

Derek Cribb, ceo of IPSE, said: “After a mixture of pandemic uncertainty and post COVID-19 inflation, life for freelancers is finally starting to look up. Work is returning, confidence in their own business is growing and stress is falling rapidly. In other words, the dynamism and energy of the self-employed sector is finally beginning to rear its head once more. 

“However, freelancer confidence should not be taken for granted. The cost-of-living crisis is still wrecking the UK economy and the government needs to ensure that self-employed workers aren’t pulled back into the abyss.”

Concerningly, the report also found that the majority of freelancers (86%) now expect their input costs to increase over the next 12 months - up from 81% in Q4 2021. It also found that 39% of freelancers are now incurring business debt (up from 38% in Q4 2021), with 16% incurring debt via credit cards issued in the name of their self-employed business.

Written by Rachel Miller.

We all love to receive gifts, but as the saying goes, giving is as good as receiving. That’s never truer than in the business world. Whether it’s to express gratitude to loyal customers or simply to wish your employees a happy holiday, a gift keeps your company in the forefront of their mind and boosts feelings of loyalty and affection. The question is, how do these important gestures play out in terms of tax – and how can you offer something meaningful without blowing your budget? Read on to find out!

Gifts for employees – what are the rules?

Offering employees a seasonal gift – or simply a present to welcome them to the company – is never in vain. But when the gift comes with a tax bill attached to it, the thoughtful gesture may not be quite so well received! Don’t worry though; in terms of taxation, the rules on gifts made to your employees are quite straightforward – as long as they fall within the limitations classed as ‘trivial benefits’.

Simply put, you can give your employees an unlimited number of gifts providing:

  • they are not cash or cash vouchers (gift vouchers which can’t be exchanged for cash are acceptable here)
  • they don’t form a part of their contract (employees don’t ‘earn’ them directly)
  • they’re not given as a reward (this means the gift can’t technically be used as an incentive to achieve a particular feat as part of their job)
  • they cost less than £50

Gifts that cost less than £50

Now you're familiar with the limitations on employee gifts, you might be wondering what gift could meet all of these criteria. The £50 limit means you need to be creative and thoughtful, but don’t worry just yet. There are plenty of practical, considerate gifts that are exempt from tax – and with a little creativity, can look much more expensive than they really are.

Buying in bulk often works out cheaper, so if you wanted something to give out to all your employees, you could consider purchasing a stash of engraved pens online. They look elegant and stylish, they avoid the minefield of taste preferences and allergies that come with food and drink gifts, and they can be fully customised. What’s more, they’re practical, too, meaning they’re more likely to be used. 

Gifts for clients

Things are slightly different when it comes to gifts for customers and clients. Again, there is a £50 limitation, but client gifts are not allowed to be alcohol, tobacco or food (or vouchers which can be exchanged for such things). What’s more, while employers can offer an unlimited number of gifts to their employees, when it comes to client gifts, there is a limit of £50 per tax year. That means even more creativity is required, to stay within the budget!

In addition, the gift must carry a conspicuous advertisement for your company – otherwise it risks being classified by HMRC as an entertainment expense. That’s why branded merchandise featuring your company’s logo works well as a tax-deductible gift that meets the criteria. What’s more, they are a great way of boosting brand awareness, but still fulfil all the goals of offering your valued customers a token gift.

Gifts that don’t offer an advertisement for your brand are more of a grey area. And, to make matters worse, if your gift costs just over £50 – let’s say you buy a customer a ticket to a show and it costs £55 – the whole cost of the gift is now taxable, not just the £5 that was over the £50 limit!

The world of business gifts can seem daunting, especially when it comes to making sure you’re within the rules dictated by HMRC. However, with a little bit of thought and creativity, you can stick within the rules and still show gratitude to your employees and clients – and reap the rewards afterwards!

Copyright 2022. Featured post made possible by The Finance Time UK.

Poll finds many small firms think MTD does not apply to them

A new HMRC study has found that while awareness of Making Tax Digital is fairly high among VAT-registered firms, there is widespread confusion about specific requirements and many businesses don't think the rules apply to them.

Under Making Tax Digital (MTD), from April 2022 all VAT-registered businesses, including those with an annual taxable turnover below the £85,000 VAT threshold, are required to keep business records digitally and use Making Tax Digital compatible software to submit their VAT returns.

However, government research, conducted by independent research agency Yonder on behalf of HMRC, has found that many small business owners are still not aware of their responsibilities. The researchers concluded that while general awareness of MTD was high, many small businesses "were not yet fully engaging with the requirements of Making Tax Digital".

Businesses were contacted at random, drawn from an HMRC database of VAT-registered businesses trading below the VAT threshold, who have only this year been required to comply with MTD VAT rules. The findings show that although 93% of businesses polled said they were aware of MTD VAT, over one-quarter incorrectly believed that MTD VAT did not apply to their business.

As recently as January 2022, researchers discovered that it was still not clear to many businesses exactly how Making Tax Digital would affect them. Despite the fact that all businesses polled would be required to use MTD compatible software in 2022, the findings show that many did not think the rules applied to them:

  • 36% said MTD would affect their business;
  • 29% said they were already compliant;
  • However, 28% said MTD would not affect their business;
  • And 7% did not know if they were affected or not.

While many businesses had started taking steps to comply at the time of the survey, a worrying number had yet to invest in the correct software. When asked what they had done to prepare:

  • 54% of small firms polled said they had researched MTD software;
  • 48% had started keeping digital records;
  • 46% had discussed the changes with their accountant and/or bookkeeper;
  • 21% had had a conversation with a software provider;
  • 18% had introduced training for staff;
  • However, only 17% had purchased a new accounting software package.

Understanding of the specific requirements of Making Tax Digital was even lower than general awareness. Only 51% of businesses aware of Making Tax Digital were able to recollect at least one correct requirement, 12% provided only incorrect responses and a further 37% could not think of any requirements at all (either correctly or incorrectly). Researchers contacted businesses in two waves (in June 2021 and again in December 2021/January 2022) and yet the position did not notably change despite an HMRC communication campaign.

The findings also show that the digital record-keeping processes of businesses remained consistent across the two waves of research, with 75% using digital methods as their main method for record keeping in wave two compared to 72% in wave one. In wave two, 20% of businesses were still using paper as their main method, a slight decrease from wave one (24%). The results also showed that businesses using paper methods were less likely to understand the requirements of Making Tax Digital.

Written by Rachel Miller.

As the going gets tough, shoppers rally around small firms

A poll of small firms in the UK has found that there is widespread evidence that consumers are showing more support for independent shops and businesses as UK trading conditions worsen.

Over half (52%) of small businesses say customers are choosing to shop small to support them during what have become very challenging trading conditions, brought about by cost and supply chain pressures. That's the finding of new research from American Express, released to coincide with its summer Shop Small campaign that helps support the UK's local and independent businesses.

The research, conducted by Opinium on behalf of American Express, found that more than half (55%) of small businesses have reported seeing a rise in new customers purchasing from their business over the past six months.

When it comes to the future, two-thirds (66%) of small business respondents said they are expecting sales to grow over the next year, with over one-third (35%) saying they are optimistic about prospects for their business.

Dan Edelman, vice president and general manager UK Merchant Services at American Express, said: "After the many challenges of the last few years, it's heartening see that customer support for the nation's valuable small businesses remains strong. We're proud to champion these businesses, which is why we're encouraging our cardmembers to show their appreciation by shopping locally with the return of Shop Small this month, available at more locations than ever before."

First launched ten years' ago, Shop Small helps independent businesses attract customers through their doors. Between 20-26 June, American Express cardmembers will receive a £5 statement credit when they spend £15 or more at participating small businesses across the UK. This offer can be used up to five times, once per participating small business location. The total number of participating locations this summer has risen by 19% since December 2021.

American Express is also the founder and principal supporter of Small Business Saturday, which celebrates its 10th anniversary this year on 3 December.

Michelle Ovens, director of Small Business Saturday UK, said: "Such optimism shown towards small businesses is fantastic to see, especially as we navigate through a challenging time when they need our support more than ever. Choosing to back campaigns such as Shop Small and Small Business Saturday is an excellent way to get behind our nation's independents and give them the recognition they deserve."

Written by Rachel Miller.

A stop-loss order is a trade management order used to manage your trades by defining and limiting risk. It instructs your broker to close out the trade once the market moves against you by a specified amount.

If you trade forex on spot trading platforms, you can set stop losses at specific price points at which the trade would be closed out on your behalf. This helps you create an exit plan that your broker would activate once your trade order moves to a price point that would invalidate it.

Here's an example. If you buy the Australian dollar/Japanese yen currency pair at a price of 87.20 and place a stop-loss order at 87.00, your stop-loss order will execute when the price reaches 87.00, thereby preventing further losses. If the price never drops as low as 87.00, your stop-loss order won't execute.

Why should you use stop-loss orders?

1 To manage your risk

Stop loss is the most helpful tool for managing your risk while trading. Once you have decided what percentage of your account you wish to risk, calculate your lot size based on the price point to be used as your stop loss.

You can also use these orders to put a limit on potential losses from the trade. 

For example, a forex trader might enter an order to buy EUR/USD at 1.1500, with a stop-loss order placed at 1.1485. This limits your risk on the trade to 15 pips. Now that you know how many pips you're risking, you can calculate your lot size accordingly. 

If you use 1 standard lot with a 15 pip stop loss, you will lose $150 if the trade goes against you.

If you use a 0.2 standard lot with a 15 pip stop loss, you will lose $30 if the trade goes against you.

2 Stop loss protects your account

Protecting your account ensures that in times of high volatility, your capital won't be lost in volatile spikes. Stop losses help to preserve your capital and avoid irreparable losses even when you're not watching your trades. 

Where do you place a stop-loss order when buying?

Establish a trading plan by defining how you will enter trades, how you will control risk, and how you will exit profitable trades.

If you're buying a currency pair, you would be required to place the stop-loss order below the current market price. The exact price point depends on your trading style and strategy.

Many traders (especially trend traders) prefer to place these orders below a swing low. This is a good option since the higher lows of an uptrend are less likely to get violated.

A stop-loss order should not be placed at a random price level. The ideal placement allows for some fluctuation but gets you out of your position if the price turns against you. 

Where do you place a stop-loss order when selling?

If you're selling a currency pair, you would be required to place the stop-loss order above the current market price. The exact placement depends on your trading style or strategy. If you're trading strategies like support and resistance, then your invalidation point would be below or above the key levels you're considering. You can decide to place stop losses at these invalidation points.

If you're trading with a trend trading strategy, your points of invalidation would be swing highs or lower highs that are formed in line with the trend.

Swing traders who have larger targets and hold trades for longer are likely to use stop losses with higher amounts of pips. You want to give the market some wiggle room for fluctuation while still protecting yourself from loss. 

What is trailing stop loss?

As the name suggests, a trailing stop order moves as the price moves in favour of the trade. A regular stop loss stays in place and only gets activated when the market trades against you. This essentially allows traders to automatically lock in more gains while keeping the relative stop level in place.

While trading the forex market, make sure you use stop-loss orders to manage your trades and limit your risk exposure.

Copyright 2022. Featured post made possible by TMI

New push for faster SME payments as costs soar

The Small Business Commissioner has joined an alliance of 16 leading UK business groups in a drive for faster payments to support small firms as the cost of doing business bites​.

Good Business Pays is spearheading an alliance to stop slow payments from harming small businesses. The initiative has the backing of Small Business Commissioner Liz Barclay and leaders from the UK's biggest business groups including the Federation of Small Businesses (FSB), the Institute of Directors (IoD), the CBI and the British Chambers of Commerce (BCC).

The Wait Off campaign is backed by 16 business groups in all - representing over half a million SMEs - and it aims to provide a united front against poor payment practices. The campaign is also backed by a number of UK businesses that support faster payments to small businesses.

The Wait Off campaign is calling on small businesses to sign up and add their own voices to the movement. Small business leaders can do so by texting paydontdelay to 60095 and sharing their thoughts and experiences of slow payment.

The latest data from the FSB suggests that slow and unfair payment practices are threatening the future of almost half a million UK small businesses. Terry Corby, chair of Good Business Pays, said: "Slow and late payments have been a problem ignored by many businesses for a long time, but with so many small businesses struggling with rising costs and inflation, it has never been more important to ensure cash flows smoothly and quickly throughout the supply chain."

A study commissioned by Good Business Pays and carried out by the Centre for Economics and Business Research (CEBR), estimates that if small business invoices were paid on the day they were submitted, their revenues would increase by £40bn to £60bn per year.

"No business should have to suffer because of payment delays," said Corby. "We're delighted that Britain's leading business groups are taking this issue seriously and helping to drive the culture change we need to see by supporting the campaign. I strongly encourage small business leaders to sign up to the campaign to share their own experiences of poor payment practices."

Liz Barclay, Small Business CommissionerUK Small Business Commissioner Liz Barclay (pictured) said "I'm beyond delighted that small business organisations are so incensed about slow payments that they've got together to bring the problem to the top of the agenda. Waiting to be paid is a major cause of small business failure and of mental health problems. Together we can change the poor payment culture that's been harming business and the economy for decades."

FSB national chair Martin McTague said: "We … need the business community and the public's help, to get large corporate brands paying promptly as part of accepted, normal business practice. CEOs are often unaware the company they lead are poor payers, which is why we are also seeking the new Audit Reform Bill to secure a whole Board approach to pay their supply chain promptly - by empowering their Audit Committees to oversee payments to suppliers."

The industry-wide initiative will combine a mix of digital advertising, social media, PR and lobbying of key stakeholders, including the government, to focus on the most important drivers in changing behaviour towards payments across UK businesses.

Written by Rachel Miller.

Untapped tech adoption could boost UK economy by £232 billion annually

A new survey reveals that if small businesses unlocked the full benefits of tech it would add an extra £232 billion to the UK economy

Sage, the leader in accounting, financial, HR, and payroll technology for small and medium-sized businesses (SMBs), has launched its new Digital Britain: How Small Businesses are turning the tide on tech report revealing how small and medium businesses (SMBs) are at a critical tech tipping point, representing a significant opportunity to boost the UK’s economy.

Report highlights:

  • Use of technology by small and medium businesses (SMBs) contributes £216 billion to the UK economy; but if SMBs unlock the full benefits of technology, this could add an extra £232 billion, boosting the value of tech use to the UK economy by almost double to £448 billion annually
  • 92% of businesses see technology as critical to their survival, but worry about lack of capital, knowing where to invest and not having the right policy framework to enable economic growth
  • Accessing and understanding commercial data represents the most significant opportunity to drive business performance; but only a quarter have adopted technology to collect and analyse this data,
  • Southeast and Northeast identified as national leaders, with Sunderland Central leading the way out of ten surveyed constituencies; top sectors nationwide include Healthcare, Hospitality and Construction

Sage commissioned the study of 5,000 SMBs across the country to understand the level of digitalisation and how it is boosting UK economic growth. SMBs are an integral part of the UK’s economy, representing 61% of UK jobs and 52% of UK turnover.

The research shows SMBs are using technology to cut costs (62%) and better compete for hard-pressed customers (68%). 92% of SMBs now depend on technology for business survival but concerns around costs, skills and knowledge are holding them back from going further and faster.  

With the right policy framework, Sage’s new report reveals the huge potential for SMBs to create a high-growth digital economy, which could unlock an extra £232 billion for the economy annually.

Sage is calling on big tech companies and government to adopt a pro-tech, pro-enterprise approach and deliver improved financial incentives to encourage greater investment in productivity-enhancing technologies, more data sharing so SMBs can innovate and adequate futureproofing of digital infrastructure.

Steve Hare, ceo, Sage, commented: “Over the past two years, businesses have demonstrated incredible resilience against a backdrop of huge uncertainty. We know there’s been a significant shift in the adoption of technology, with 91% of SMB telling us it was vital in the creation of their business.

“Digitalisation amongst SMBs represents a significant opportunity for the UK in terms of economic contribution, job creation and the upskilling of the workforce, which cannot be overlooked. But we need to help businesses take full advantage of the strength of technology; to do this, the government must prioritise the incentives needed to encourage further investment.”

Research findings:

The top barriers for investment are cost and awareness

  • Cost: 41% are concerned about adopting new tech due to cash flow pressure and 24% are unsure of the return on investment
  • Awareness: 34% stated they are unaware which solution is right for them
  • Training: almost a third (30%) say that training staff on new processes and breaking habits are also a barrier

SMBs must prioritise investment in digital tools to successfully mitigate against macroeconomic challenges

  • The threat of a recession, continued inflation and increased costs are [significantly] impacting SMBs
  • Over 9 in 10 businesses (92%) state that technology is important to their survival and growth, and 88% say that it is key to business resilience

Data is an important area of untapped potential 

  • Technology that generates data (websites, social media, accountancy, and HR software) have been widely adopted by small and medium sized business – and continue to see high levels of investment
  • However, only 24% of SMBs have adopted tech to collect and use data, such as data analytics software
  • Five sectors with the lowest adoption of data analytics technology are beauty and wellbeing, retail, creative industries, hospitality, and education

The pandemic prompted a fundamental perception shift across SMBs regarding digital technology

  • 92% say that digital tools have been vital to their survival through the pandemic 
  • Of businesses founded in the past two years, 91% credited their creation to new and innovative technologies
  • 8 in 10 SMBs say that technology is important to achieving their business goals. This is reflective of every sector and region in the UK
  • Over 75% of businesses stated that online reputation information, such as online reviews and ratings (‘Blue Tick Tech’) is important to them

Effective action by government and policy makers could unlock an additional £232 billion in gross value add via digitalisation to the economy

  • Sage and Strand Partners worked with Oxford Analytica to undertake an economic modelling study to determine the value of tech to the UK economy; this took in to account the extent to which tech enables increased sales and services to customers, reduced costs and operating expenses and internal efficiencies 
  • These all represent key inputs into Gross Value Added (GVA), a leading measure of the size of the economy which is used to determine GDP.

Calls to Government:

Based on the Digital Britain findings, Sage has three asks of the government and other big technology companies to help deliver a robust and dynamic digital landscape:

  1. Financial Incentives: access to tax incentives and reforming Help to Grow: Digital to scale digital adoption and boost productivity. This includes:
    1. Expanding the range of technologies Help to Grow: Digital covers to include a wider range of solutions
    2. Allowing SMBs to deduct 200% of their expenditure on newly adopted productivity-enhancing technology from their tax bill
    3. Stopping the progression of the Online Sales Tax in any form
  1. Data: encourage more public sector data sharing to provide useful insights for SMEs. This includes:
    1. Developing a clear plan for opening government and public sector data sets that will enable real-time insights to empower SMBs
    2. Establishing a consistent set of industry standards to enable a more trusted, efficient, and innovative data-sharing culture across business, third parties and government
    3. Creating an AI framework that will enable all businesses to use data more freely for research purposes
  1. Infrastructure: acting upon and endorsing Mobile UK’s call to fund Digital Champions for local authorities to help coordinate and prioritise digital connectivity.

Story submitted by Sarah Hunt of Team Lewis.

If you're a business owner, then you know that managing your finances can be a daunting task. One of the many challenges of running a business is figuring out how to accept payments from your customers. There are many ways to do this, but one of the most popular methods is account-to-account payments.

This article will explain what account-to-account payments are and how they work. We'll also provide some tips on using them successfully in your business!

Types of account-to-account payments

There are two main types of account-to-account payments: direct deposit and wire transfer. Direct deposit is when your customers' funds are transferred from their bank account directly into yours. This is the most common type of account-to-account payment, as it is easy to set up and usually has low fees. Wire transfer is when your customers' funds are transferred from their bank account to yours through a third-party service, such as Western Union. Wire transfers can be more expensive than direct deposits, but they may be necessary for doing business internationally.

How to accept account-to-account payments

There are two main ways to accept account-to-account payments: a merchant account or a payment gateway. Merchant accounts are provided by banks and allow you to process credit and debit card payments.

Payment gateways are third-party services that connect your website to your customers' bank accounts. They typically have lower fees than merchant accounts, but they may not be available in all countries.

Accept account-to-account payment rails

If you're looking for a simple way to accept account-to-account payments, you should consider using Rails. Rails is an open-source platform that allows you to process payments efficiently.

It's also very secure, so you can ensure that your customers' information is safe. All you need is a merchant account or a payment gateway to get started. You can then install the Rails gem and begin processing payments!

Use a payment processor

If you don't want to use Rails, you can use a payment processor. Payment processors are third-party services that allow you to accept payments without setting up a merchant account or a payment gateway. They typically have lower fees than merchant accounts, but they may not be available in all countries.

There are many different payment processors to choose from, so it's essential to do your research and find one that's right for you. Some popular options include Stripe, Braintree, Paypal and exactly.

Conclusion

Account-to-account payments are a great way to accept payments from your customers. They're easy to set up and usually have meagre fees. You can use a merchant account or a payment gateway to accept payments or use a payment processor if you don't want to set up either of those. Whichever method you choose, do your research and find one that's right for you! Thanks for reading!

Copyright 2022. Guest post

Six in ten start-ups plan to do their own accounts

A new survey has found that 61% of start-up business owners say they won't use the services of an accountant to file tax returns in a bid to save money.

The poll of 962 new business owners conducted by Business4Beginners has found that as few as 28% say they plan to employ an accountant to handle their tax returns. Six in ten (61%) say they will do their own accounts and 9% are still undecided.

The findings suggest that the cost of doing business is having a significant impact on would-be entrepreneurs who are seeking to minimise their running costs. However, they run the risk of making incorrect submissions and potentially overpaying on tax.

Paul Bryant, founder of Business4Beginners, said: "I understand that businesses are desperately looking at ways to cut costs, especially while trying to get an idea off the ground. However, they should think carefully before opting against hiring an accountant.

"A good accountant won't just submit your tax returns for you. They will advise on the various tax-saving measures that are available to small businesses and can often end up saving you money. And that's not to mention the time and effort they save business owners from trying to do it themselves. That alone can be the difference between the success and failure of a business."

The poll also asked business owners about their priorities when choosing accounting software - apps that most businesses now need to use under the government's Making Tax Digital initiative. The results show that ease of use is by far the most important consideration, cited by 58%. Just 35% said that price was the most important factor when choosing accounting apps. The range of features is important to just 7%.

Bryant said: "We see a lot of accounting software push their list of impressive features, yet our research suggests this may put many people off if they perceive the software to be harder to use as a result."

The poll findings also suggest that the availability of accounting software combined with a growing understanding of bookkeeping thanks to online resources could be driving the shift away from accountants. Even so, it's estimated that one in five businesses fail every year - most often because of cash flow problems.

Written by Rachel Miller.

What does the * mean?

If a link has a * this means it is an affiliate link. To find out more, see our FAQs.