Sage words

Nick Hixson, a long-standing collaborator, who has provided ideas and support as we have built LandmarkPD, sent me an inspiring article on the imperative to embrace advisory services. It is reproduced in full below. I particularly like the refence to ‘sticky clients’…

Enjoy the read.

Bob Edwards, Founder LandmarkPD – April 2022.

The advisory conundrum

Every accountant is aware there is fee pressure on compliance services. If it’s not bookkeepers trying to get a piece of the pie, then accounting software is stepping into the breach.

And be wary, this pressure on compliance income streams can only increase.

Gone are the days when most of our work can come from compliance services. But it is hard to move from what we have been doing all these years, which has been paying all the overheads and the salaries and providing us with a living, and then jump into advisory.

What is advisory work anyway?

We have been doing it all along except it has not been a major feature of our work. It has come from the conversations after we have done the compliance work or when the client rings up and asks a question.

Advisory does not have to be about additional learning on our part or having products that you have to train your team on and then try and sell. We all know how difficult it is for accountants to sell anyway. It is not in our nature. We are there to advise. There is a hint. Advisory cannot be that difficult if our raison d’etre is to advise.

A fundamental shift

What we need is a change of mindset. Our existing model is predicated on charging for every available minute because that is our product. Our time is what we sell.

Well, is it?

What we are selling is our expertise. If we stick with time as our measure, then cheaper market entrants will beat us. If we sell expertise, we can maintain our position as trusted advisors and be the first port of call for our clients.

To do that we may need to bin the timesheet or allow for non-productive time during the week – for everybody in our team.

How a hotel does it

We have just been away to Malta for a week. We stayed at a good hotel and the overwhelming impression we got from the hotel was not one of efficiency, cleanliness and a pleasant environment. These are now hygiene factors. We expect these in hotels. The overwhelming impression was that the staff in the hotel talked to us. Not just about what they were doing or what they were bringing us or what we wanted but engaged us in conversations. There was capacity built in, so that they could all spend a moment with us. That started with management and went down to the gardener. Everybody would stop and there was a short conversation.

What we need to do

We need to build capacity into our team so that they can have conversations with clients. We know that conversations lead to more work. They also lead to better relationships and less likely to be transactionally inclined and prompt clients to go for a cheaper alternative just because it is cheaper. If you allow your clients to only measure you on simple criteria, namely, cost and timeliness, then they will do so. And if their expectations are simply that you and every other accountant produces accounts on time, their only other measure is cost. You are giving them carte blanche to find somebody cheaper.

If you develop relationships that engage with what clients do, if you understand them better, or will do something for nothing occasionally just because you are nice people and you are helpful, then they are more likely to value you differently.

They will not be able to develop that measure of value with anybody else because they will be stuck to you. You want sticky clients.

Costs and benefits

There is a cost to this. There will be some non-productive time. Most of it will be at partner level. Partners are more likely to pick up the phone or meet a client just because, to find out how they are, but it’s no hardship for you to tell your team but they can ring the clients to simply talk to them; that they are not driven completely by their timesheet and they are not measured completely by that either.

There is a cost to not doing it too. The gradual erosion of your practice’s compliance work by cheaper entrants and higher staff turnover.

Team benefits

Pay rises and promotions should not be predicated on productivity. It is difficult enough to get good people, let alone keep them. We all know how expensive it is to get new people, and train them, only to see them leave after a brief time. We need to retain our team. Allowing them to function as they see fit in your and their best interests takes pressure off partners and gets the best out of your team. That is another win for you – they are more likely to stay if their job is rewarding and they can be rewarded for doing better, rather than for doing more.

You want your clients to be able to talk to you before they make financial decisions – that you do not have to pick up the pieces afterwards and then charge them for something which has already cost them dearly.

Making sure that they can speak to you and feel they will not be charged for every five minutes of your time will be a benefit to both of you.

Save time – why reinvent the resource wheel?

You can introduce simple tools that are cheap and quick to implement, by using the Landmark Fee Builder and Spotlight services. These tools allow you to capitalise on the conversations that you and your team have with clients. They can be mentioned during the conversation, so ensuring that you are seen by your clients as having answers to their concerns. It is not a sales pitch; you are solving their problem.

New work will come from this approach. It will be work that you are able to do, and it will be work that will be very much valued by your client and be willing to pay for and you will have made them stickier clients.

About the author of this post

Nick Hixson runs a full-service small practice on the South coast but specialises in management and leadership. His doctoral research was in small business decision making. He is an Associate of the Peter Drucker Society and co-edits the Global Drucker Forum blog. He is also Chair of the Advisory board of the World Institute for Action Learning.

Seek and solve

Professionals tend to see themselves as solvers. Life is a never ending to-do list. As soon as one task is completed another will present itself and in this process, something critical to our relationship with clients will be missed.

Off the clock

When time was the master in accountancy practices – remember timesheets (?) – there was an imperative to produce the required number of chargeable hours each day, after all, this created our fee notes each month.

With the advent of fixed fee billing, the monthly accounts became a better guide to profitability than wrangling about time ledger write-offs. But the process still demands attention to getting work done.

Accounts and tax returns

According to research we have undertaken, many smaller firms are still nailed to the compliance imperative. Knocking out accounts and tax returns are the order of the day.

Obviously, this activity does solve problems, but it only solves problems imposed by government, albeit under the guise of HMRC and Companies House.

Which begs the question, don’t your clients have other financial or business problems that they are not sharing with you?

Seeking

When was the last time you activity sat down, made a list of all your A and B clients and contacted them? In each case your opening gambit would be how are you? And get into the habit of repeating the process on a regular basis.

The time you invest in this process is like time spent panning for gold. Only its not nuggets you are looking for it’s problems.

The more problems you can uncover in this way will pave the way for you to discuss advice to solve these problems.

And the outcome you will achieve from the process, apart from increasing cross-sales, is a closer relationship with your clients. They will feel cared for and will begin to see that there is more to a relationship with your practice than keeping the authorities at bay.

Watch this space

Later this year, 1 August, our Fee Builder resources will be dedicated to this process, how to seek out and convert these conversations with key clients to sell additional advisory services.

Business exit support

The title, business exit support, infers that this is a service you would offer clients at the end of their business cycle when they are looking at options to sell, pass on or wind-up their business concerns.

But the best way to maximise returns for your clients is to plan a business exit strategy at the beginning of the business cycle and to monitor the process annually as the business develops.

Our April 2022, Fee Builder resource pack covers business exit planning and how you can turn this advice into a recurring fee for your practice. In the implementation notes on this issue we said:

When should we start?

As our clients are constantly thinking about issue, when and by how much could they sell their business, this is not a difficult conversation to start early on in their business development cycle. To give them a good chance of maximising value, they need to be producing steadily rising profits and robust balance sheets over a three to five-year period. So, the sooner we start, the sooner they can get to the point of deciding whether they want to sell or not and when. As always, we are giving them more choices. and it may be that the value they will get by selling their business, compared to the value that they are getting now from the profits they are earning, means that they will delay their eventual sale for a few more years which is to our benefit.

In which case it is a win-win for the accountant and the client.

Other items covered include

Other issues covered in our scope and implementation report include:

  • Starting the conversation with clients
  • Five steps to grow a business
  • About the prospective buyer
  • Engaging business sale professionals
  • Time scales
  • Tax planning

Are you interested in developing this service for your practice?

If you would like to access the Fee Builder resources that cover this topic, sign up for a subscription this month and nothing to pay for 30-days.

No long-term lock-ins and you can cancel your subscription at any time.

TAKE A LOOK>>

What does LandmarkPD offer?

If you provide the UK business community or other UK taxpayers advice on business development or tax related issues, you are one of the 20,000 plus accountancy firms presently operating throughout the UK.

Your day likely consists of a continuing fire-fight to deal with your Inbox, texts and other calls from clients, staff and government agencies.

Because of these demands on your time, marketing to existing clients – to cross-sell other relevant services – or drip-feeding relevant information to prospects will be side-lined or ignored completely.

Why re-invent the wheel

LandmarkPd was founded by Certified Accountant, Bob Edwards, who has extensive experience building and selling professional practices. The company aims to provide active support and resources to small and medium-sized firms who are keen to break free of the limitations that dependence on pure compliance activity can create.

If you want to develop the range of services offered by your practice and have met resistance from your clients when promoting advisory-led services, the low-cost, high-value resources LandmarkPD can provide may be the answer to free-up this conversation.

And there is no need for you to re-invent this particular wheel. LandmarkPD can provide you with all the copy (marketing campaign ideas, draft emails, updates, e-booklets and implementation instructions) you will need.

Evaluate our approach, new business offer for 2022-23

If you are keen to grow your practice, offer clients more services and importantly, overcome the resistance to buying advisory services, AND have the resources to tempt prospects to give your practice a try, take a look at our 2022-23 offer to UK professional firms.

FIND OUT MORE>>

Three key questions

If you answer YES to any of the following questions you will likely benefit from LandmarkPD’s ideas and resources? Do you want to:

  • Develop your practice
  • Promote advisory-led services
  • Overcome client resistance to advisory services

Many of the smaller firms we speak with admit that the majority, if not all, of their fees arise from the delivery of compliance services. They also admit that clients who pay for accounts and tax return preparation are more likely to seek a reduction in fees, as it may not be possible to deliver more value other than keeping businesses and tax payers the right side of HMRC and Companies House filing regulations.

How can we help?

There are three way we can help:

  • On-site Consultancy – to identify and support implementation of required practice development strategies.
  • Online support – quarterly calls to identify implementation of specific marketing campaigns.
  • Marketing resources – we supply a range of marketing resources to promote advisory services and other fee enhancement activities.

Like to find out more?

If you would like to discuss your practice development options with our founder, Bob Edwards, book a call in Bob’s diary >>.

Or take advantage of our new tax year offer to sample three of our fee development resources. Take a look>>

Open v closed questions

If you want to deal with a specific situation a closed question will get you from A to B in the shortest possible time. For example:

‘Are you happy for me to file your tax return?’ demands a YES/NO reply.

Whereas questions that will empower communication with a client need to be framed as open questions. ‘How are you? What’s been happening to you since we last met?’

Open questions invite open replies. They are the way to seek out problems that demand solutions.

Why is this an important distinction for advisers?

Advisers give advice. No surprises there… But, we deliver advice in two distinct ways:

  1. As an instruction, or
  2. In response to a request for help or assistance.

Whilst instructions can be useful, they might save a client paying too much tax or miss a filing deadline, a request for help – directly or indirectly – will open up the possibility that you can supply a solution. And these solutions, if successful, will be appreciated and carry a premium fee.

You are unlikely to uncover these problems if you restrict conversations with clients to instructions. And the more problems you can encourage clients to reveal, the more opportunities you will have to value bill for your specialist services, to solve problems.

Self-interest v empathy

A self-interested person is the polar opposite of someone who takes an interest in others. Cynically, you might say that peppering conversations with open questions is just a technique to satisfy a business goal, to win more opportunities to sell advisory services. True enough, but across the table the outcomes of your open conversations, if you succeed in helping clients solve their problems, will be a happy person and one that has a growing respect for you and your advice.

There are no downsides to developing and employing empathy, and the simplest way to do this is to ask open questions.

The exchanges will always result in win-win outcomes.

How are you coping with service delivery following the pandemic?

I’d like to know. I have a wealth of experience starting, developing and selling professional practices. If you find the ideas shared on this blog of interest, can I suggest we have a conversation?

You can book a slot in my diary here>>

I have a genuine respect for advisers, I have been at a common coal-face for more years than I care to remember. The recent disruption was, and continues to be, unprecedented. Which means there are a lot of folks out there facing real problems, which as we know, is fertile ground for advisers.

Look forward to speaking with you.

Bob Edwards – LandmarkPD, 4 March 2022 – bob@landmarkpd.co.uk – mobile 07879 8969073.

Stepping out…

Do you rely on referrals to grow your practice?

Are you sitting in your office waiting for someone to call?

Perhaps it’s time to step outside and tell the world at large that you are open for business and have the means to support business owners and high-income individuals with business development and tax planning strategies.

Imagine this

You are a market trader. Your stall is nicely laid out and you wait patiently for someone to come and talk to you.

The neighbouring stall is similarly laid out, but the stall holder is on her feet, exhorting passers-by with the range and usefulness of the services she offers. Who do you think is going to win more business?

Relevance for professional firms

Obviously, you are not going to stand outside your office regaling pedestrians, but you could target local businesses that you would like to work with, review their websites and send them an introductory email with targeted information on the advisory services you would like to discuss with them to develop their business or save them tax.

The problem is we prioritise service delivery rather than looking for opportunities to cross-sell advisory services to clients or win new business by distinguishing the services you offer from your competitors. We get stuck in the compliance rut, and as we are well aware, this will not allow us to build closer relationships with clients who want more from us than preparing annual accounts and tax returns.

Don’t have time to develop advisory services?

Bob Edwards, the founder of LandmarkPD, has spent over thirty years in professional practice and has specialised in ‘stepping out’ to meet the growing needs of his clients. He created LandmarkPD to offer the insights he has gained in practice to other practitioners and has been joined in this process by an expanding team of like-minded professionals and marketing specialists.

If you don’t have time to develop services that would ease your transition from price-challenged compliance to advisory-led services. Take a look at this website.

You have three low-cost, high value options

Fee Builder – subscribe to our weekly and monthly resources to develop specific advisory services – £55 per month

Spotlight Library – access to over 20 accessible fact sheets on development or tax planning issues. Can be rebranded for your practice. – Annual fee of £220

Book a 30-minute, no obligation call with Bob Edwards to discuss your options. – no charge…

Shatter the ‘advisory’ myth

It is the perceived wisdom of many practitioners that clients are not amenable to paying for advisory services and just want their accounts and tax returns sorting; with payroll, VAT and general bookkeeping thrown into the mix.

Which is why the majority of fee income for these practices relies almost solely on compliance services.

Read on to see why this point of view encourages a dangerous mind-set and is a glass ceiling that adventurous practices are shattering with great effect.

Why is reliance on compliance services a problem?

There are endless tales of firms that have lost clients to outfits that specialise in compliance activity and who are prepared to work for much lower rates. These are practices that lean on IT to process the numbers and the name of the game is to convert records into accounts and tax returns as quickly as possible. To sustain this business model, the minimum of client contact is necessary to bring the job in at a reasonable cost.

Compliance demands – to produce and file accounts and tax returns – is a grudge item for most business owners. In which case they are going to look for the cheapest price, in place of the best service when choosing someone to undertake the necessary work.

To break through this glass ceiling practitioners should set out to distinguish their services from these factory-farm compliance firms.

One step at a time

The introduction of advisory services will take time to introduce especially for firms that have built their practices on predominantly compliance services.

A first step might be to focus on creating advisory-led services. For example, consider a small limited company client who has always had their annual accounts, corporation tax computations and directors tax returns completed. A standard high dividend low salary approach has been in place for a number of years.

What if when you prepared their next accounts you used a simple, industry standard method to value the business? With the correct tool this could be done in a matter of minutes. Instead of posting/emailing accounts for approval, pick up the phone, advise client that you have added a business valuation this year and use the opportunity to set the seeds for business exit planning, estate planning or wealth management services.

Conversation is key

Advice is a big word when it is linked to real-world problems. If you can talk to your clients and get them to reveal their problems you can then offer solutions.

Advice is a solution in action.

And hey-presto, if your clients start to see that you can not only keep HMRC and Companies House off their back, but you can also help them start and grow a business, develop business exit strategies, help them with personal, business and other tax planning opportunities, then they can associate those service with real benefits; they can appreciate the value of your advice and be willing to pay for it.

Where to start?

Bob Edwards and his team at Landmark have converted his long experience in the profession into three service options that you can use to start your own transition from a compliance to an advisory-led compliance practice. There are no downsides to reaching up and breaking through this glass ceiling. Firms that have the tenacity to do this will reap the rewards in coming years.

Take a look at the range of services LandmarkPD offers practitioners here.

Like a call with Bob Edwards to discuss your options?

Book a slot in Bob’s diary here – as an incentive, and following your call, Bob will send you a copy of the business valuation spreadsheet mentioned above.

New year message

Bob Edwards, founder LandmarkPD, reflects on the continuing disruption during 2021 and the opportunities and challenges that could open-up for practitioners during 2022.

What a year

This time last year we were hopeful that with emerging vaccines and gathering immunity we would be witnessing the end – or a much reduced impact – of COVID-19 disruption.

Depending on your point of view, the completion of Brexit negotiations reset the rules for trading with the EU and there was a feeling, a hope, that the worst was behind us and we could look forward to a spring rebalancing to make up for the unprecedented disruption of 2020.

And then COVID-19 started to flex its adaptability muscles and the Delta and Omicron variants appeared.

Back to square one?

There is no long-term future for a virus that kills its’ hosts. Which is why the latest variant, Omicron, is interesting. It is the most transmissible version thus far, but it does seem to be kinder on its’ hosts; fewer intensive care beds seem to be required.

Scientists will no doubt be watchful for new variants in 2022 as the multi-talented virus seeks more efficient ways to plague humanity.

In which case, COVID-19 disruption may become the new normal, and a factor that we will all need to accommodate.

Time to create our own variant?

Many of us have relied in the past on the recurring income we can create by offering basic compliance solutions: preparing and filing accounts and tax returns.

Unfortunately, bookkeepers and bookkeeping software producers are stepping into this compliance market and offering less expensive solutions.

As business owners are likely to view their need to comply with government demands – to file accounts and returns – as something they have to do rather than something which is of value, a gradual shift of this business from the profession to less expensive alternatives is inevitable.

In our opinion, the only way practitioners can plug this leak in their annual GRF is to create new advisory-led compliance offerings. Services that make full use of your qualifications and experience to help clients visualise and make their business and personal financial goals. In this way you can distinguish your service offerings and that the value they provide is worth paying a premium price.

Keep an eye on Fee Builder 2022

LandmarkPD will continue to address this shift in emphasis – from compliance to advisory-led services – by providing subscribers with fee building resources during 2022.

Meantime, a very happy and healthy new year to all our customers, past and present.

Best regards, Bob Edwards and the LandmarkPD team. 3 January 2022.

The importance of footfall

From modelling that we have undertaken, without a doubt, the variable that has the most impact on profitability is footfall.

Footfall in this context is defined as the number of times a customer passes your threshold – in a defined period – to buy something from you.

From a practitioners point of view they are the occasions when services are delivered, and the way to achieve an increase in footfall is to engage in a serious program of cross-selling.

What limits cross-sales?

Accountants like hiding their abilities. They wait for clients to approach them with a request for advice. They don’t want to appear to be too pushy.

This attitude is odd because it assumes that clients, by some process of divination, are aware of solutions that a firm can provide when many can barely articulate the problems they are coping with, that they need to solve.

By simply asking clients short, open questions, “how are you?”, “how are you coping with cash flow?” etc, accountants could quickly identify issues to which they could find appropriate solutions, and then offer these solutions.

Clearly, you would need to convince your client that there is some value in the advice being proposed, and that your costs are more than outweighed by the financial benefits or the personal benefits (being able to sleep at nights).

Leverage and footfall

Often, advisers will be able to broadcast a cross-sales opportunity to more than one client. For example, they could offer to provide a formal business valuation as part of the annual accounts review. In this way cross-sales campaigns can leverage additional services to many clients.

Test this process

We will shortly be adding a Practice Road Map calculator to the LandmarkPD site. When this is up and running you will be able to enter your own practice data and see how any changes to your practice circumstances in the past year are likely to impact your bottom-line results in the coming year. The calculator offers a number of what-if variables – one of which is footfall.

You will be advised when this facility is uploaded.

Whose back are you watching?

Professional advisers have an obligation to keep their clients informed of changes in, or the application of, legislation; and by doing this they also reduce the risk of negligence claims.

The cry of “You never told me that…” are words that advisers never want to hear and most practices have organised regular updates to solve this problem.

Broad brooms

Unfortunately, the cost of monitoring all clients to figure out which updates they will benefit from would be a time consuming process and one that most clients would be unlikely to pay for…

Which means advisers are obliged to adopt a broad-broom approach and as a direct consequence, communications sent in this way may not be read.

Filtering for relevance

One way to approach this conundrum is to make sure that we read our updates, pick up on the major issues, and select the key clients and prospects that may be affected. In this way we can phone or send a personal email pointing out the relevance of legislative changes and an invitation to meet and discuss.

Win-win outcome

In this way we can aim for a win-win outcome. Clients feel cared for and informed and firms have an opportunity to cross-sell solutions that may otherwise appear at some future date as a significant problem.

The process may involve the investment of time, but the outcomes will surely be worth the effort?

How Landmark can help

Landmark’s Fee Builder service points in this direction. It provides resources and implementation strategies that focus on these issues, tax and business development matters that would benefit from the advice you could give to achieve a satisfactory outcome.

During the winter period 2021-22, we are offering free access to all our Fee Builder resources issued in this period.

TAKE A LOOK>>

Budget forecast Oct 2021

The budget presentation on 27 October will be the second budget for 2021.

The Chancellor has already disclosed an increase in NIC and dividend tax to fund the NHS, both increases from April 2022, the so-called Health & Social Care Levy.

And let’s not forget the increase in corporation tax from April 2023. For smaller companies with profits under £50,000 the 19% rate holds, but then rises to a main rate charge of 25% on profits over £250,000.

If, as is expected, the Chancellor continues to plug the message that he needs to repay borrowings, what are the other possible targets for tax increases?

Inheritance tax

This is a fairly soft option for the Chancellor as the tax only impacts high value estates. The present exemptions are already pegged so will we see an increase in the 40% rate?

Capital gains tax

At present it is possible to convert income into capital gains and pay a lower rate of tax. A simple measure to counter this would be to tax gains as if they were income.

Another possible revenue raising option would be to remove the base cost increase to market value when a person owning an asset subject to CGT, dies.

Pension contributions

There has been speculation for some time now that higher rate income tax relief will be withdrawn or reduced to a lower fixed percentage, on qualifying contributions into approved pension schemes.

Freezing tax allowances

If the Chancellor decides to extend the hiatus on increases in tax allowances or the higher rate or additional rate income tax bands for income tax purposes, fiscal drag will mean that revenue from affected taxes will increase. This could create a significant increase in revenues in coming years especially if inflation continues to rise.

Impact on tax planning

We will have to wait and see what the Chancellor presents on the 27th and then reformulate tax planning options based on his announcements.

Landmark is commissioning a Budget Tax Impact Statement that will address these planning options, particularly for the tax year 2022-23. We will be making a copy available from our shop on the 27th.

Alternatively, readers can secure their copy free of charge by taking up our winter offer to trial our Fee Builder service, no charge until 1 February 2022. We will be adding the Budget Impact Statement to our Fee Builder dashboard as soon as is possible after the 27th. It will be provided in a Word format so you can add your own branding or edit our copy. We will also be including an update you can send to your staff and guidance how to make best use of the Statement with clients and prospects.

Sign up for the offer now >>

This is a great offer

Is your firm interested in shifting from pure compliance towards advisory services, but hits a brick wall when you try and sell advisory to clients?

Maybe we can help. The key, we believe, is to transition by offering advisory-led compliance options.

Fee Builder – resources to help you promote advisory services

Subscribers to our Fee Builder service receive monthly resource packs to promote specific services to clients. On each topic, we provide: client updates, scope and implementation advice and updates for partners and staff.

Fee Builder resources for the next four months

October 2021 – MTD for ITSA

Advising on the new implementation deadline and supporting affected clients – still recording transactions manually or using basic spreadsheets – to adopt suitable accounting software.

Outcome: expansion of basic compliance to include the design and review of real-time data and the potential to sell benefits of periodic management accounts, forecasting etc .

November 2021 – Budget Impacts on Tax Planning for 2022-23

Providing an easy to read Budget Impact Statement to underline future planning opportunities and other business development options.

Outcome: a lead-in to promote the importance and benefits of periodic tax and business planning.

December 2021 – Let’s Celebrate Christmas and the New Year (will be made available from 15 November 2021)

We are all in need of a little Christmas cheer this year. Resources for this month will include a refresher on the tax perks that are available to celebrate the festive period with colleagues.

Outcome: lifting practice goodwill and creating new leads; our client update will include a “feel free to pass this update to your friends and business colleagues” footer.

January 2022 – Tax & Business Development Planner for 2022

A list of the strategies you may want to offer clients in 2022 to reduce their tax hit and help them create and support business plans for 2022.

Outcome: start the process of adding targeted, development advice as part of your existing, compliance activity.

Winter Offer – October 2021 to January 2022

We are offering ALL the above resources, free of charge, if you signup for our Fee Builder Plus subscription this month (October 2021).

  • No monthly fees unless you stay on as a subscriber from 1 February 2022.
  • You can cancel your subscription at any time, no long-term lock-ins.

Simply complete our online order form to secure your chance to sample our Fee Builder resources with no financial risk.

SECURE YOUR FREE ACCESS HERE

Boris’s Budget…

In typical flamboyant style the Prime Minister delivered his very own mini-budget this week when he launched the new tax on income, the Health and Social Care Levy. Breezing over a broken election promise, to avoid tax increases, he justified the need to reduce the take-home pay for most UK taxpayers by citing the demands on government expenditure due to the COVID outbreak.

The 1.25% increase in National Insurance, morphing into the new Levy from April 2023, will impact all wage earners paying Class 1 NIC and the self-employed paying Class 4 NIC.

Employers may avoid any increase in their Class 1 employer contributions as this would still be sheltered behind the £4,000 Employment Allowance, but they will have to stump up for the increase to Class 1A contributions based on BiKs provided to employees.

Health and Social Care Levy

This Levy is a modern day attempt at a hypothecated tax. The idea is that proceeds will be directed at the NHS and social care budgets.

Cynically, it is another “soft” target for future tax increases. It is likely that this week’s announcement would have created more turmoil if the Prime Minister had announce a 1.25% increase in basic rate Income Tax.

It will be interesting to see if the transfer to the new 1.25% Levy from April 2023, will result in a return to present day levels of Class 1 and Class 4 contributions – as set out in policy paper on this topic – or will some of the increase be left as a permanent increase in National Insurance rates?

More red tape

When the Levy is introduced this will require changes in payroll software as the Levy will be shown as a separate deduction on payslips.

The Levy, as is National Insurance, remains a tax still administered UK wide, no regional variations. However, the Treasury will need to dole out an appropriate amount to the regional governments to feed into local health and social care budgets.

Effects on individuals

According to HMRC, the levy will be paid by employed and self-employed individuals earning above the Primary Threshold and Lower Profits Limit (£9,568 in 2021-22 tax year). In 2022-23 tax year an individual earning the median basic rate taxpayer’s income of £24,100 would be expected to pay an additional £180; and an individual earning the median higher rate taxpayer’s income of £67,100 would be expected to pay an additional £715.

A number of self-employed traders may also be encouraged to consider incorporation and adopting a low salary high dividend strategy to avoid Class 4 NIC charges.

Interestingly, individuals in receipt of property income as well as pensions income will be unaffected as NIC and the Levy are not applied to these income sources.

When the Levy is introduced, April 2023, wage earners aged above their State Pension age will be subject to this new tax charge.

A further tax increase for individuals will also kick in from April 2022, when the 1.25% increase will be applied to dividend income tax rates.

Told your clients yet?

Landmark distributed an update on the 1.25% changes as part of its Fee Builder services. If you haven’t taken a look at Fee Builder, we are offering free access to our Fee Builder resources and alerts, over the winter months, until 1 February 2022. If you sign up this month, you will have access to our client alert on this topic, issued this week.

Take a look>>

Purposeful business planning

As a practitioner, I have many conversations with clients about the value of business planning.

Over the years I have concluded that unless the client can see the reason or value of the planning advice, then – obviously – they are much less inclined to pay for this service.

The sort of planning I am referring to here is budgeting and period reporting to map progress towards defined goals.

Purposeful planning

I like to think that when I approach clients regarding business planning services I start by setting out the purpose of the planning advice; rather than a cold description of what is involved.

For example, clients who are looking at their choices as the furlough scheme comes to an end this month should really be drilling down into their crystal balls and figuring out what level of business they can reasonably expect in the coming year, the operating costs involved, other investments required what they need to withdraw from the business to support their own lifestyles.

Added issues will include inflationary pressures, supply disruption and so on.

This data will reveal staffing levels required and point to action that clients need to take. Otherwise, clients will be making critical and emotive decisions by sticking a pin in their choices map.

And when the primary purpose is fulfilled

If clients buy into this process, and you assist with the necessary planning, it is then a simple step into periodic reviews to make sure the business stays on track or takes fast remedial action if targets are not met.

Advisory-led compliance buy-in

In this way you can expand the value of preparing annual compliance accounts (or quarterly MTD returns when fully implemented) into a service that clients will appreciate has more than a prepare and file objective.

This approach has a clear win-win outcome for your practice and your clients. As you start to demonstrate positive outcomes for the advice you offer – for example, a plan to deal with staffing levels as the furlough scheme ends this month – clients will be more willing to pay for the ongoing support you have offered and will see the benefits or value.

Try this out in September

You can purchase the resources Landmark have created to support clients as furlough support comes to an end. Rebrand and send our update to clients or prospects that you know will be struggling with this issue. Even if any uptake of your assistance in the form of new instructions does not arise, you will be promoting your practice as advisors who care.

You can purchase our Life after Furlough resources here.

In recognition that we are approaching the busy end of the tax cycle for 2020-21 you can try out Landmark’s Fee Builder Plus service, that offers these ideas and resources on a low-cost subscription basis, with no financial risk. Landmark has a free trail offer if you sign up this month. No fees payable until 1 February 2022 and you can cancel your subscription at any time.

Sign up to FIVE month trial offer here or find out more about Fee Builder here.