Category: Tax

Low-Cost Investments to Start Making Money From Home

investment for online businessOne of the most popular ways to secure financial freedom in this current generation is to establish multiple streams of income. It could be from multiple jobs, a personal business or even investments. With job security an ever-growing problem for people all over the world, it seems like the most secure living you can get these days is to invest in the internet and work from home. Not only does working from home bypass the minimum wage that is set in your country, you also guarantee a wide range of clientele and the ability to work with people all over the world.

But most home-based investments require a lot of money. Trading stocks, starting up a business or investing in a company takes a lot of cash to start, making it a difficult option for someone who’s climbing out of debt but still wants to secure a comfortable future financially. In order to give you a hand, here are a couple of low-cost investments to get you started with making money from home.

Low-Risk Investments

When investments are concerned, we often think about expensive high-risk purchases like stocks, foreign currencies and even property. However, among all of the investments that people can make in life, there are some low-risk ones that have a very small chance of making you bankrupt. For instance, you can learn how to trade penny stocks online as a way to practice stock trading and you could invest in land purchases instead of entire properties. There are many low-risk investment options available to you as long as you do your research and look at the stability of a market instead of the potential gains.

Penny shares are, as the name implies, very low in price, meaning you can trade them freely without much consequence. However, don’t expect to turn $10 into $1,000 in a single week, and don’t even expect to make money within the first week of getting started. It’s a gradual and slow process, but that’s the nature of low-risk investments.

For property investments, you typically have a lot of factors involved when developing a property to be sold such as the location, target audience and so on. However, when it comes to investing in land, not only is the price a lot lower because you’re factoring out the development costs, it also doesn’t have a defined use, making it a versatile purchase for your buyers.

Starting a Content-Focused Business

A business could mean anything from a YouTube channel to a small company. However, the cheaper options here are definitely content-focused, such as a video channel, news website or a blog. You can monetize most of your content with the help of advertising services, but if you’re feeling brave then you can always upgrade to affiliate programs or even offering a product.

For instance, if you have a popular blog about the history of candy, then you could compile all of your material and blogs into a book to be sold. Ebooks are a natural transition for blog owners due to the content being relatively similar. All you need to learn is how to publish your own eBook and then advertise it to your viewers, social media and so on.

Thumb Rules of Investing in Stocks

investment in stockMaking profits in the equity market is not based on your luck. With a disciplined and research-based investment approach, you may be able to earn high returns. In addition, using some basic thumb rules based on the experience of other successful investors will help you earn profits.

Here are five thumb rules for investing in stocks

1. Do not try to time the market

Predicting the tops and bottoms in the equity market consistently over several cycles is almost impossible for seasoned investors. In reality, most people who try to time the market lose money.

2. Take a disciplined investment approach

Historically, great bull runs have also had their moments of panic. The volatility in the equity market has resulted in people losing money even during bull runs. However, if you follow a disciplined investment approach with long-term goals, it is most likely that you may avoid losses.

3. Invest in a broader portfolio

It is recommended you invest in different stocks across various sectors. Furthermore, you must include several asset classes to reduce your risk exposure. The different types of instruments that may be included in your investment portfolio primarily depends on your risk appetite and financial goals.

4. Monitor your portfolio regularly

The stock market is not only affected by domestic happenings. International occurrences also affect the equity market today. Therefore, it is very important that you monitor the performance of your portfolio regularly and make modifications as required. In case you are unable to track your portfolio at periodic intervals due to lack of knowledge or time, taking the help of an experienced financial advisor is recommended.

5. Avoid leverage

To ensure you do not face financial difficulties, you must invest the money that you can afford to lose. It is vital that you do not take on debt for stock market investing. In case the stocks do not perform as expected, there is a huge risk of losing the borrowed money and repaying the same may have adverse results.

Stock market investing may be highly profitable. However, you must do your research and make informed decisions. Furthermore, you must never let your emotions control your decisions and be realistic in your expectations.

How to Keep Your New Business’s Finances Under Control

control your financesIf you are not able to keep your new business’s finances under control, then things can spiral pretty quickly. Businesses only succeed when they are financially secure, so here’s how to keep your money issues in order.

Budget

Budgeting is something that every business should do. If you are not budgeting for the year ahead, then you will face problems later on down the line. A strong budget will outline how much money you aim to bring into the company through revenue streams. And it will also outline how much you plan to spend. Then you obviously need to make sure that you make more money than you spend. Otherwise, you’ll make a loss, and that’s clearly not what you want. You can take advantage of loans and maximize loan budget in order to stretch your cash a little further if you really need to. This should all be prepared and planned out in advance though.

Organize Tax Documents from the Start

Nobody particularly enjoys paying taxes, but it has to be done. And failing to pay your business’s taxes is a criminal offence, so it’s not something that you can afford to ignore. Making sure that you pay the right amount of tax and meet all the relevant deadlines can be a challenge though. If you are not properly organized, then the whole task becomes so much harder than it really needs to be. So, you need to make sure that all your payroll documents, tax deductible expenses and other paperwork are kept in order. Then, when it comes to filling in your tax return, your life will be so much easier.

Consider Seasonal Cash Flow

Many businesses will see variable sales rates over the course of the year. This is pretty obvious for some companies. For example, a company that sells sunglasses will sell more in the summer than the winter. This is just common sense. But there can also be season cash flow variations for businesses operating in less obvious sectors too. You need to get to grips with your company’s sales cycles as quickly as possible. Once you know when your sales are at their highest and when they dip, you can organize your finances accordingly. If you don’t, you could be caught short when those sales dip.

Always Ask for Discounts

The amount of money you spend is one of the key financial considerations for your business. If you are spending more money than you need to be, that extra money will eat into your finances. Whereas, if you were to cut the amount of money that your business spent, there would be less pressure on your sales efforts. You can afford those sales dips if you are keeping your monthly expenditure as low as it possibly can be. One of the things that you should always do is ask for discounts. If you have suppliers that you are buying from in bulk, then you should be able to get some for of discount from them. This will certainly be possible if you can show them loyalty.

Selling Stock? Get Familiar with Capital Gains Tax

capital gains tax matterWhen you see the stock market in movies, it looks easy. It looks like nothing but fun and quick cash (and sometimes illegal substances). And, for sure, the real stock market can offer those things. But the films you’ve been watching often leave out the unsexy details. One of those unsexy details is capital gains tax.

Many people have heard the term capital gains tax. Many know what it is but don’t think it applies to stocks. Well, they do! Here’s a quick rundown of what you need to know about these taxes on your stock sales.

Capital gains tax: a quick explanation

A capital asset is something you own that you use outside of business. The money you’ve sunk into the initial price and subsequent costs are combined and called the basis. When you sell a capital asset, you either make a gain or a loss. If the price at which you sell the capital asset is more than the basis, then you’ve made a profit. And in the government’s book, that means you’ve made a taxable capital gain. The capital gain minus the basis is the total profit. That value is what is going to be taxed via a capital gains tax. When filing your taxes, you need to get yourself a Schedule D (form 1040).

So this applies to stocks?

Yes. Capital assets include land, vehicles, real estate and securities, among other things. Securities include bonds and stocks. If you own stock for personal investment purposes, then it’s a capital asset. The profit you make from the sale of a stock can be taxed by your national revenue agency. So if you want to work out the total money you’re going to pocket after an exchange, you need to calculate capital gains tax.

Are there different types of gains?

There are indeed. There are what we call long-term gains and short-term gains. Short-term gains are the taxable profits you made from the sale of stock you held for less than a year. They don’t benefit from any special tax rate. The value, minus the basis, is usually taxed depending on your income. Long-term gains are the taxable profits you made from the sale of a stock that you held for over a year. The tax rates on these are much cheaper. In fact, if your ordinary income tax is less than 15%, there’s a chance you’ll pay no capital gains tax at all.

Keeping a record

When it comes time to file your taxes, you need to have everything in order. You’re not going to be taxed for every single stock; that’s unreasonable and will hurt the IRS’s calculator fingers. What you need to do throughout the year is work with your stock broker to record all of your gains and losses. These should be arranged into short-term and long-term. Oddly enough, this is when you find out whether or not you actually made a short-term gain or loss in the long run. If all your short-term losses outweigh all your short-term gains, then you’ve made a short-term loss. Whatever the result, put the calculation on Schedule D when you’re filing your taxes.

A loss isn’t a total loss

Revenue agencies aren’t completely heartless. Keep a record of your losses. You can use these losses to offset any future capital gains tax you incur!

Running a business from home? How to minimise your tax liability

your tax liabilityA study by the FSB has reported that many UK small business owners are struggling to manage their accounts properly. On average, 12 working days are lost each year to the accounting process and the total cost to small businesses for tax administration is around £500 million a year.

Around 50 per cent of all small businesses spend around two to eight hours each month understanding, calculating and completing tax forms. On top of this, 11 per cent of businesses spend between two and six days every month on financial administration.

For small businesses, good tax management can make or break the company. Having a thorough understanding of the savings that can be made on income tax is vital for businesses, but this can be very time consuming. In addition to a personal allowance, which should be fully utilised to reduce a tax bill, companies can also make further tax reductions through various tax allowable expenses.

Tax allowable expenses

Capital allowances refer to the tax relief on certain items that are vital for business. Such items include cars, computers and machinery. There is a limit to how much each person can claim in a year, which is called the capital allowance or annual investment allowance. The current annual investment allowance is £250,000. Businesses cannot claim tax relief on the whole cost, but instead annual allowances are written down by claiming a percentage of the total cost each year following the initial purchase.

Tax deductions can be made against the cost of running a car for business. It is important to keep an accurate record of business car use, as private car use is not tax deductible. The easiest way to manage this is to just claim on the fuel used in travelling on business and use a business card to purchase the fuel. Total mileage is used to calculate the allowance, so also keep a record of how many miles are travelled on business, and how many for private use.

Record keeping

Good record keeping is vital for all businesses. Without proof of every purchase and sale a company cannot provide proof of their tax liability. Although self-assessment means that most of the time a small home based business will not need to provide documentary evidence, sometimes HMRC do carry out inspections on small businesses.

Companies should keep expenditure receipts, at least all that are included in the tax calculation. If driving allowance is being claimed fuel receipts are the best evidence that the car is being used for business.

Where to get information

The best source of advice is the HMRC website. Tax rules and allowances change often and privately run websites sometimes display out-of-date information. If you prefer to have printed information, leaflets and advice can be found at your local Citizens Advice Bureau. Many larger libraries also have a business section and stock leaflets and other information to assist small business owners.

Employing a qualified accountant or a tax specialist

Hiring a tax specialist can have many benefits although the main objective is to reduce the size of the tax liability. HMRC adjust the tax rules every year and it is very difficult for entrepreneurs to keep up to date with these changes while also devoting sufficient time to running the business. A good accountant is a wise investment and the savings made in taxation and other financial dealings might well recoup the professional fees payable.

Self-assessment tax returns

Sole traders who are trading under their own name can submit an annual self-assessment. This can be submitted online or in paper form. Online is easier and has a later deadline, so is the preferred option. For those with a simple business structure this is a quick and easy process. However, for more complex businesses professional assistance may still be required.

Umbrella companies

Due to the growing complexity of financial administration and taxation many small businesses and sole traders are using the services of umbrella companies to manage their finances. An umbrella company acts as a parent company for a sole trader or small business. This means that the umbrella company manages all the paperwork and files tax returns for their client. The client is paid a monthly salary via a PAYE system.

The biggest advantage for sole traders is that they can focus on their core business rather than wasting hours every week with administration. Savings are also made through improved tax avoidance. Umbrella companies are managed by skilled accountants and tax specialists who make every tax deduction that is possible for their clients.