Posts tagged: tax

Paving the Road to Financial Security

financial safetyFor many people, financial security is something that always seems to be just out of reach. And while there is no doubt that it cannot be achieved overnight (unless you have a big lottery win) paving the road to financial security is something that you should be aiming for your entire life. Ultimately, it is all about getting into some good habits and making some savvy decisions. So, here a few financial points that you should consider whatever point of life you are at.

Recognize Yourself as Your Biggest Asset

Developing your skills, knowledge and experience will stand you in good stead when it comes to your financial future. You never know when you may need to call on these things that you have learned over the years. Rather than squirreling away that extra bit of money every month, you will be far better off treating yourself as an investment. So you could decide to complete a course or have some lessons in something instead.

Set Short-term Goals

Many people have long-term financial goals that they aim to achieve, but it is impossible to predict what twists and turns your life will take. Instead, you should choose some measurable and attainable short-term goals to focus your time on. As an example, you could aim to pay off your credit card debt. Make sure that you set a specific time limit on this, as you are much more likely to enjoy success if you do this rather than letting it drag on indefinitely.

Become Financially Literate

Saving money every month is obviously a good habit to get into, but it is not helping you to become financially literate. For example, have you done the necessary research that tells you that this account is giving you the best return on your investment? Are you aware of the other investment opportunities that are out there? People who keep up with the finer details of finances are much more likely to enjoy financial security in the future.

Keep an Eye on Your Lifestyle Costs

Making sure that you aren’t living beyond your means is one of the best habits you can get into during your life. The best way of doing this is by keeping a close eye on your expenses. Write out a list of your regular outgoings so you can decide whether or not there are any savings that can be made. As your living situation changes and your expenses adjust, it is important that you reassess and reapportion your expenses.

Don’t Borrow to Finance a Lifestyle

If you decide that you want to start a business, you may well find that you need to borrow some money to finance your venture. This is an example of a calculated financial risk. If you want to buy a new car, you shouldn’t be racking up credit card debt in order to do this as this will never stand you in good stead in the future. Not buying what you can’t afford is one of the most important financial lessons you can learn.

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The Top Three Ways To Invest Your Pension Fund

yearly investmentsSaving for our future is one of those things we all know we should be doing. However, whether we actually get around to it is another point entirely. It is so easy to just put off sorting out for another day. But when the time comes for you to retire, you will need to have some kind of plan in place for your next steps. Chances are you will have been putting money into a pension scheme in addition to the workplace pension you will be entitled to receive. But, what do you do if this isn’t enough to tide you over? With other financial issues looming over us as we approach retirement age, such as whether you have the best life insurance policy, our retirement funds should be the least of our worries. If you are thinking about investing your pension fund, don’t rush into it. We all want to enjoy our retirement, but make sure that whatever you are investing your money in is right for you.

Property investment

Real estate is quite literally hot property these days. If you’re looking to invest your pension somewhere, look no further than the real estate sector. The best way to go about this is by acquiring property through a real estate IRA. This way, you open yourself up to unique investment opportunities and you can be sure that you are putting your money into a secure asset. It also has the added benefit of being able to rise in value, which is perfect for if you are hoping to pass the property down generations. You also don’t need to be restricted to houses or apartments when investing with an IRA. You can also claim farmland or holiday resorts, or commercial property such as shopping malls.

Stocks and shares

The stock market might initially seem like a bit of a daunting minefield. But, it could be the perfect place for your pension to go if you have chosen to self-invest. In fact, in provides a great opportunity to protect against rising inflation and bring in higher returns than cash and bonds. You can go into ‘direct investment’ into the stock market via a stockbroker. This essentially means that you buy shares in a single company, which makes you what is known as a shareholder. If you want to minimise the risk associated with investing in stocks and shares, instead consider investing indirectly. This way you can invest your money in a number of different companies rather than just one.

Precious metals

This may appear unusual at first, but precious metal investment has soared in recent years. They are a hard investment, which means that they are also hedged against inflation. If you are looking to invest in precious metals, you will need to comply with the rules and regulations set up by your pension account. Gold, silver, palladium and platinum are all approved by IRA accounts. You will need to purchase the metals yourself through a dealership, and then keep them in an approved depository.

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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.


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.

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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!

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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.

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