Why should accountants take a collaborative approach to helping small businesses thrive?

It’s a no-brainer really. When an accountant uses their knowledge, skills and network to pro-actively help their clients, everybody wins! This is one of the values that Toni Hunter lives by.

Toni is a Chartered Accountant, a Fellow of the Association of Chartered Certified Accountants and has a Diploma in Charity Accounting. She is collaborative, approachable, and with a true understanding of what a difference good financial advice can make to business owners. Her knowledge is extensive, her credentials impeccable and her network, truly valuable.

In 2023, after 25 years in a multi-partner practice, Toni made the leap to starting her own business, Hunter FDS,  and has already exceeded all her expectations, largely due to a loyal network of people who value her skills and integrity.

Toni led this discussion and Q&A about accounting practices, strange accounting dates in the UK and what really matters to small business when it comes to understanding their finances.

Why does the UK tax year end on 5th April?

USA and most of EU use a calendar year for their tax system, so why do us history-loving Brits have a tax year end of 5th April?
Stand by for a history lesson!
The Gregorian Calendar wasn’t introduced in Britain until 1752, by which time the British calendar was 11 days off the rest of Europe. To stop this differential increasing as years passed, it was time to transition.
With the old British “Julian” Calendar, the tax year began on 25th March (the old New Year’s Day). The British Treasury decided that the tax year, which started on March 25 1752, would be of the usual length (365 days) to ensure that no tax revenue was lost, and therefore would end on 4th April (11 days later in the new calendar).
1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. So, the treasury moved the start of the UK tax year to 6th April and as sticklers for tradition, it has remained there ever since!

What does this mean for accountants and small businesses?

In March, we need to help our clients in several ways, e.g.

  • Ensure tax allowances are maximised in last payroll month, and all is in order for reporting year end to HMRC
  • Consider dividend levels based on the situation of the company and the personal circumstances of shareholders
  • 31st March is the favourite year end of small companies and the norm for anyone in the supply chain of government funds such as NHS and councils, due to their budgeting regime
  • Most sole-traders and partnerships report to 31st March or 5th April.
  • Capital allowance regime revolves around 31st March for companies, and 5th April for unincorporated businesses
  • Personal allowances to be used, such as ISAs, pension contributions and IHT mitigation strategies.

Also: January is very busy due to self-assessment deadline, December is very busy due to March year ends that need to be filed and September feels like “New Year” for many, as the schools return, and everyone refocuses after a break.

The discussions with members covered:

    • The benefits of reviewing finances quarterly and querying “value for money”
    • Comparisons of UK and other tax rules, eg. Latvia has 10% flat rate tax for freelancers.
    • The vagaries and complexity of VAT were considered, leading to question of who should register for VAT
    • Public Sector supply chains have different deadlines
    • The perils of moving house whilst running a small business!
    • Making quarterly plans to avoid pinch points / measure progress.
    • Asking if anyone had a different accounting year end to December or March.

A useful article that covers several other things that are worth checking before the end of each tax year:
LinkedIn Article: Reflect on what you can control before the end of the tax year  

Q&A Included

Q1. Principles of when to charge VAT.
Toni explained place of supply rules which led on to further questions about reverse charges and commented on hybrid of UK and EU laws make VAT the most complex of the 7 taxes.

Q2. You have grown your business very fast in nine short months. What’s the secret?
Toni’s reply: “As with many overnight successes, it was 20 years in the making! I resigned from my previous firm a year ago, and whilst it was a surprise to everyone, I had a clear understanding of my objectives and the importance of sticking to my values. I hope that they are clear from my branding and website.
I have been networking since 2001 and actively using LinkedIn since 2007. I have always been a giver of my time and empathetic networker and developed a “power circle” of 8 people who really know me, my values and my goals. I trust them with my clients and I believe the reverse is true.
When they found out I was going to start my own business, they quickly rallied, and a referral from a HR adviser in that circle became my first retainer in September and has created the backbone of my business, reducing worry about feeding my family and giving me the focus to build further alliances.”

Q3. Please help me understand what dividends are and why/when I should take them?
Toni explained that they are a return on the investment of buying shares in a company, not earnings, so do not carry an National Insurance Contribution charge, but in recent years are charged to income tax via a dividend tax, leading to this practice becoming less popular.
The “usual” policy is to take up to NIC threshold c£12,500 as salary and the rest as dividend. Consideration is needed regarding personal circumstances of whole family. Timing of dividends, especially if near the £50k total income figure could lead to paying higher rates of tax and lose child benefit. Consideration should be given to pension contributions and gift aid donations to help with timing.

If you have questions about managing the finance of your business or charity find Toni on LinkedIn and follow her company page for fun financial quizzes and useful business insights.

You can also get in touch with Toni at Hunter FDS