Newsletter - Practical implications of inflation & more
Inflation is now running at nearly 10% per annum. As it is not expected to relent for more than a year, it's important to review your pricing. Justifications for price increases include rising energy and fuel costs, raw material costs, delivery costs, employment costs and so on. Think about how these costs impact you and build your justification in a reasonable way.
Your customers are aware of these issues. Prepare a letter or email explaining the reasons behind your price rise, setting out a timeline for the changes and offering to discuss any issues your customers may have. Then implement.
You may lose some business at the periphery but better that than working hard and losing money.
NATIONAL INSURANCE INCREASE
The chancellor announced in the Spring Statement that the NI primary threshold (the trigger for employee NI) was rising to £12,570 on 6th July 2022. This means that it is tax efficient to increase director’s salaries (assuming there are no benefits in kind) to a total of £11,908 for the 2022/23 tax year.
For those companies who are eligible for employment allowance, or have unused employment allowance in the tax year, the incremental employers NI (payable above the NI secondary threshold of £758 per month) will be relieved.
For those who do not there is still a small benefit.
PERSONAL MILEAGE CLAIMS
Despite the increased price of fuel HMRC has not increased the personal mileage reclaim rate above the current 45p per mile for the first 10,000 miles and 25p thereafter.
This means that use of personal cars for work has become less financially viable for you and your employees. Unfortunately you cannot offer to pay your employees at a rate above 45p per mile as they will be taxed heavily on those amounts.
Our advice is restrict unnecessary travel, and await further instructions from HMRC
MAKING QUARTER END EASIER
The last month of each quarter tends to be more stressful with a lot more financial input required from you than the other 2 months. Implementing these small regular actions could make your quarter end significantly easier:
• Allocate an hour each Friday to keep your bookkeeping up to date
• Use Hubdoc to photograph receipts as soon as they're received
• Organise with us to receive a monthly Bank Reconciliation document showing what's outstanding