Tax and finance developments for 2020/21

Tax and finance developments for 2020/21 – how to alert your clients

As we head into a new year, it’s worth noting a number of changes to taxation legislation that are due to be implemented this year.

The 2020/21 tax year begins on April 6th, 2020, which is when changes to Inheritance Tax, Capital Gains Tax and more come into force.

National Insurance threshold

The Conservatives plan for NI, expected to be confirmed in the upcoming Budget, will raise the threshold from £8,632 currently to £9,500 in April 2020, which the party says represents a tax cut for 31m workers. The longer-term intention is to raise the threshold in line with the income tax personal allowance, currently at £12,500.

SMEs

At the 2018 Budget, the Chancellor announced that from April 2020 the amount of payable credit (14.5%) that a qualifying loss-making business can receive through R&D relief in any one year will be capped at three times their total PAYE and NICs liability for that year.

Companies will however be able to claim a full repayable tax credit where they have research & development (R&D) projects that start and have expenditure falling within the current tax year.

Capital Gains Tax

From April 6^th, any Capital Gains Tax (CGT) payable on property sales must be reported to HMRC within 30 days of the sale with an advance payment on the tax due at the same time.

Inheritance Tax

Changes to Inheritance Tax (IHT) thresholds are due to come into force in the 2020/21 tax year beginning April 6^th.

The Residence Nil Rate Band will be increased to £175,000, meaning taxpayers will be able to leave estates of up to £500,000 without being liable for inheritance taxes, in tandem with the existing IHT Nil Rate Band.

For estates over £2 million, this band is tapered at £1 for each £2 over the threshold – therefore the Residence Nil Rate Band won’t be available for estates over £2.35 million.

Other announcements

For non-resident UK companies, the UK property income currently under the Non-resident landlord’s scheme will move to the corporation tax regime from April 2020, rather than income tax at 20%.

Businesses should be preparing for a significant increase in the national minimum wage from April 2020. The Conservative Party have pledged to increase it in stages to £10.50 over five years (a 5% increase per year) – starting with an increase from £8.21 an hour to £8.72 from the start of April this year.

And finally – it’s worth remembering that the Conservative government recently announced it had shelved plans to drop the rate of corporation tax to 17% – therefore remaining at 19%. The cut was initially announced by former Chancellor Philip Hammond at Budget 2017; however, this decision has been made with the intention of generating a further £6bn to spend on priorities such as the NHS.

As their accountant and trusted tax advisor, it’s important that your clients are made aware of these changes so they can get in touch to schedule an appointment for any tax planning or support they may require.

How can you best alert clients to tax changes and developments for 2020/21?

An easy, effective way to send out tax changes and updates taking place from the 2020/21 tax year is by sending Push Notifications via your own branded App.

Push Notifications are five times more effective than email, and in this digital age they allow key information – such as tax changes and legislation updates, government policies, thresholds and other key issues affecting your client base – to be communicated to a group or specific set of users.

You can group your clients via your own Hub, meaning you can control the App with minimal hassle.  In there, you can split them into personal or business tax, or even message individual SME clients around changes regarding payable credit, for example.

You can also automate communications to clients – for example, MyFirmsApp delivers critical Budget content along with commentary to 1200 accounting firms in the UK – reaching more than a quarter of a million UK businesses and individuals on the home screens of their Smartphones and tablets. Other automated updates include legislation changes, topical announcements (Brexit / elections) and general tax updates – all complete on behalf of the accountant, saving time and money.

A new report produced by the research company, Forrester, into the changing preferences of financial services customers in Asia Pacific markets, reveals some valuable pointers for accounting firms operating anywhere in the world and looking to gain future competitive advantage.

The findings based on the views of 14,900 online adults in Australia, metro mainland China, metro India, Indonesia, Malaysia and Singapore make fascinating reading and will help accountants better understand their clients’ needs and successfully navigate the future.

Here are the top 12 takeaways:

• Digital financial services are mainstream and accelerating
• Consumers in these markets are some of the most advanced when it comes to digital engagement
• High levels of empowerment mean that customers prefer to interact with their financial services providers on digital channels over physical ones
• 73 per cent of consumers believe they should be able to accomplish any financial task on a mobile device and weave digital through the entire customer experience
• Human interaction is still valued to deliver help when needed but consumers expect world class experiences that are consistent across touch points
• 76% of consumers prefer digital channels for banking
• Consumers are more likely to engage with firms that priorities helping them improve their financial well being
• Many customers trust payment firms and technology giants such as Google and Apple over traditional financial services providers to help them better manage their finances
• The agent’s grasp on life insurance is weakening as digital engagement surges and becomes the preferred post sales engagement channel across Asia Pacific with the exception of Singapore and Malaysia
• Between 40% and 60% of customers prefer digital engagement channels but often find insurers’ digital services lacking in basic areas including the ability to view policies, premiums, savings totals and rates of return
• Customers expect agents to be digitally savvy and believe it is important that they are equipped to engage them through digital channels
• A poor digital experience is given for those considering switching to digital only insurers within the next 2 years

The Future

A new cast of characters is building financial trust with established retail banking and life insurance providers facing competition from non-traditional players, digital-only players, eCommerce and payment providers and technology giants, including Google, Apple, Amazon, Facebook and Samsung.

While banks are still the most trusted organisations, interestingly Google and Apple are not far behind in third and fourth place respectively. They are seen to be gaining market share by offering simple, convenient, and more personalized digital experiences.

This represents a real challenge for accountants in a region where consumers lead the demand for product and experience innovation  and prefer digital channels such as online on a computer, on a mobile website or on an App on devices such as tablets and smartphones

Industry Change Set to Accelerate

The pace of industry change is about to accelerate, and the stakes are rising. Empowered customers are increasing their expectations faster than leading organisations can respond.

The report recommends that financial institutions should:

• Become truly customer-led. Most financial institutions still struggle to truly understand and respond to their customers’ needs
• Become customer obsessed and drive the culture through the organisation
• Weave digital through a strong omnichannel experience and grow customer loyalty
• Transform IT to enable digital operational excellence and innovation. enable the digital operational excellence that underpins digital customer experiences
• Develop an ability to rapidly experiment with and test new technologies such as AI, blockchain, and automation to fuel tech-driven innovation
• Experimental Consumers will Redefine the Financial Services Eco System

‘The Pulse of Financial Services Customers in Asia Pacific’ report finds that digital consumers in this region are more willing to experiment with new services and operating models than ever before. They are also highly savvy and skilful at finding the best deals and believe that finding a better financial provider can only help improve their financial well-being.

Implications for Accountants

The report puts digital firmly at the centre of consumers’ needs and accounting firms that are looking for sustainable and long-term success will need to ensure their clients can accomplish any task relating to their finances on a mobile device. This can be achieved easily by utilising a mobile communications platform that delivers engagement with clients on their smartphones and tablets 24/7 and connects clients to a single centralised location so they can have instant access to any financial information or documents, wherever they are.

This is an important ‘must have’ and the accountancy profession can learn from the experiences of those in the insurance market that have embraced digital engagement channels but have not provided that all important holistic view of a client’s financial affairs. A telling number of customers – between 40% and 60% – say that they find the service lacking because they are unable to get a complete view of their policies, premiums, savings totals and rates of return.

The report concludes that the empowered customers that are typical of this region will dynamically deconstruct their personal financial services ecosystems and reassemble them with newer and better players. The race is on and accountants that want to gain that all important competitive advantage will need to ensure their own digital transformations are underway.

5 Mega Trends For 2020: Looking to the Future

As we welcome a new year and with it, new ideas to evolve and grow, it’s the perfect time to consider what has worked and what may need to change.

According to the Sage ‘Practice of Now’ report 2019, which took in the views of 3,000 accountants, this is exactly what those who took part have been doing. Almost half (49 per cent) say that they have reviewed their own business practices in the last year and are consciously considering how to future proof their firms to make sure they are ready not only for the next year but for the next decade.

Developing an understanding of the trends affecting the accounting profession is important when it comes to putting together a strategic plan and undoubtedly, everyone will have their own ideas about what is set to take major stage in 2020, here are our top five:

1. Digital Revolution

The increased digitisation of tax, mandated by governments worldwide, has in part contributed to a review of business practices. Legislation that requires businesses to take submit tax returns online is bringing about a sea change in the way accountants interact with their clients.

Practices are having to re-engineer for the digital age and this provides a unique opportunity to help clients navigate their own digital journeys. Giving them their first digital tools and showing them, for example, how to capture expenses on their smartphones and tablets will help position the accountant as more than just a technician and very much, as trusted advisers working at the heart of their clients’’ businesses.

We know that clients are demanding more from their accountants and they expect their advisors to digitally engage with them in the way that they want, need and expect. In a new report by Forrester into the changing preferences of financial consumers, a massive 73 per cent said they believe they should be able to accomplish any financial task on a mobile device and that digital should be ‘woven’ through the entire customer experience

Forward thinking accounting firms globally are responding by employing new technology and implementing a mobile communications platform that provides a central place for all things financial within the accountant’s own App.

All the different systems and apps can be integrated into a single platform and rather than wading through numerous ‘best of breed’ Apps on their mobile devices, clients can save time by accessing their accounts, finance and tax information and systems through the icon for a single App.

Having a bespoke App opens the door to ongoing communication with high value clients that increasingly expect their accountant to meet them where they spend most of their time: on their smartphones and tablets.

2. Cloud

By 2026, the global market for accounting software will have a value of 11.8 billion dollars according to U.S. Accounting Today.

The arrival of cloud computing or cloud accountancy has been hugely transformative in how accountants work on a day to day basis and communicate with their clients.

By allowing accountants to perform accounting tasks from any location as well as the ability to deliver financial information and reports through the cloud there is more time to engage with the client and focus on business strategy instead of getting burdened with detailed processes.

However, it is worth noting that while Cloud may become even more dominant in 2020, desktop and enterprise software will still be used extensively. When QuickBooks online reached 3.6 million subscribers worldwide at the end of 2018, it was revealed that 80% of those online subscribers are first time users for any kind of accounting software. This suggests that users aren’t migrating from desktop to the cloud; they’re starting online.

As we enter 2020, accountants are set to play a pivotal role in introducing businesses to the cloud and those that do will gain the opportunity to advance their roles as trusted, value-added advisors and data analysts.

3. Artificial intelligence

Artificial Intelligence is an exciting prospect for accountants as there is the potential to effectively add a ‘virtual’ member to the team that is available 24/7 to answer multiple questions and carry out simple tasks even when the office is closed.  This emerging technology will be used in the day-to-day running of firms allowing complex and repetitive tasks to be automated with AI, machine learning and robotics with extreme accuracy. According to global research by Sage in 2019, 58% of accountancy professionals are expecting to automate tasks using AI solutions within the next three years.

An entirely new generation of Apps can see, hear, speak, understand and interact with the world around them.  Being able to add a voice or text chat interface to create bots on mobile devices that can help with basic tasks is set to transform how accountants respond to customer requests and make them more productive.

4. Realtime Connections

In 2020, more accountants will be connecting with their clients in real-time and benefiting from greater security and transparency.  Recording transactions that used to take hours or days now take minutes or seconds and if a change is made by one party, everyone with access will be able to see this change as soon as it’s validated.

Employing digital tools such as mileage trackers provides an ideal first step towards engaging clients with digital technology and they keep the accountant and client connected. For example, the tracker will auto-detect a trip using a state-of-the art algorithm so the Accountant’s App on the client’s smartphone tracks in the background meaning there is less chasing for the client’s business mileage when completing the end of year tax return. Details of the trip can be sent to the accountant at the click of a button or as an email attachment, wherever there is an Internet connection.

5. Planet Friendly Approach

The climate is an incredibly hot topic at the moment and papermaking uses a tremendous amount of energy and natural resources. As we start the new year, there will be an expectation that everyone will need to help meet the steep targets being set and one way is to reduce the ‘paper footprint’.

Despite repeated calls to cut paper usage, we are being told that paper consumption is at an unsustainable level globally having increased year on year and quadrupled over the past 50 years. The burning of trees for energy for pulping is the single biggest source of emissions by the industry (40%) and responsible afforestation globally is essential to meeting new international climate targets.

A thorough review of paper usage will undoubtedly show up areas where a paperless approach can be adopted and reassuringly, new tools, developed specifically for the accountant, can help towards this goal. For example, the signing of tax documents and declarations with digital signatures that can be emailed between the firm and client are not only secure, they speed up approval processes and bring about a closer connection through the sharing of documents in real time. Another way of saving paper includes distributing content, including reminders about tax deadlines and newswires, digitally so that the message appears on the home screen on clients’ smartphones within the accountants’ own branded App.

Looking forward

During the last 20 years technology has accelerated at such a rate and has transformed the accounting profession. And this rate shows no sign of slowing.

Is the profession doing enough to keep up with changing technology? 85 per cent of accountants believe that the profession in their country needs to pick up the pace of technology adoption to remain competitive internationally, the Practice of Now report 2019 reveals.

When asked why firms are lagging, reasons stated include a lack of time and money to invest in digital transformation (13% and 38%, respectively), although 25% of firms state a lack of expertise is holding them back.

The new year brings with it new opportunities and digitisation is the key trend that will dominate the profession. Accounting firms that are looking for sustainable and long-term success will need to ensure their clients can accomplish any task relating to their finances on a mobile device. A relatively low level of Investment is all that’s required to implement a mobile communications platform that will enhance the client experience by delivering engagement on their smartphones and tablets 24/7.

The future is already here, and firms can no longer hold back if they want to remain competitive in the next year and decade – try the world’s leading App for Accountants today for free and explore the technology that is benefiting 1,200 + accountancy firms globally.

The increasing take-up of faster fixed and mobile data services is extending people’s choice over how, where and when they communicate with others, watch or listen to content services, seek information, shop and participate in the digital world.

For accountants, this makes it a particularly exciting time as emerging digital channels offer more choice in how they connect with their clients. These range from the use of social media platforms such as Facebook, LinkedIn, Twitter and WhatsApp for regular topical interactions to newer digital platforms that have been developed specifically for accountancy firms and allow accountants to engage directly on Smartphones and Tablets.

Social networking predominantly used to be a local activity that was carried out face-to-face but in the new digital era, new methods that utilise social media platforms can help to reinforce the firm’s branding and to increase connections with clients and prospects alike. Now, accountancy firms can more easily make their voice heard and far less likely to get lost in the noise of an always on world. Here are 7 ways social media can help future proof your firm’s communication strategy.

1.Post business content on Facebook

Facebook is the most widely used channel for business use and 93 per cent of those who took part in a recent study into the use of social media in business (State of Social 2019) said they were using it. Twitter follows in second place.

2.Use video content to gain interest

Image/video is considered by social media specialists as the most important aspect when creating and publishing a piece of content and makes it more likely to be viewed. Video content is fast gaining in popularity with significant numbers (36 percent) of businesses saying that they publish video content monthly with around one quarter (24 percent) publishing video content weekly.

3.Group targeting

Target groups with the most widely used social media platforms – Facebook, Twitter, LinkedIn, Instagram and WhatsApp. WhatsApp is moving away from being solely a personal social media channel  and is now used by  14.5 per cent of businesses for social media campaigns.

4.Integrate private messaging into social media activity

One-to-one messaging is set to rise as privacy becomes a more important issue. ‘Push notification’ messages fit the bill by delivering a more pro-active service that post millennials and the Z generation expect and they can be used to help communicate on a one-to-one basis, quickly and easily. They have the added advantage that they can be automated to individuals and groups, which almost immediately ‘ping’ onto the home screen of mobile devices. With a 93 percent open rate, these messages are almost always read – typically, within minutes of delivery. This functionality presents firms with the opportunity to automate the distribution of content, ranging from reminders about tax deadlines, to news on services and invites to webinars and they can be confident that they are being seen.

5.Don’t rule out paid for social media advertising

Paid for social media advertising is a relatively new area but it is one that those businesses that have tried it, are finding effective. In the State of Social Report mentioned above, almost a quarter of respondents said they see it as very effective and a third say it is effective.

6.Track that your messages are being read

One of the misconceptions of digital communications is that it is difficult to measure effectiveness. However, times are changing, and one important advantage is that is now possible to track and identify whether clients and prospects have received your messages. This gets around the growing challenge of clients reporting that they haven’t received emails because they have ended up in the junk folder

7.Include a ‘call to action’

One of the most important aspects of any social media campaign is to include a call to action or CTA. To assess the performance of social media campaigns, it is no longer enough to consider ‘likes’, ‘shares’ and ‘comments’ as an indicator of meaningful engagement. By always including a call to action or CTA, it is possible to assess the effectiveness by the number of those who respond.

The considered use of social media can help solve the communication challenge so many accounting firms now face. ‘Connected’ firms are gearing up for the future by adopting new techniques provided by a combination of social media and digital communication platforms to make their voices always heard where it matters: on clients’ and prospects’ Smartphones and Tablets.

To find out more about how to get your firm and brand on the home screen of clients’ and prospects’ devices and the first point of contact for them everywhere you go, why not try a free demo of the world’s leading App for Accountants – and see how over 1,200 firms globally are connecting and are already one step ahead.

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