In this post we’ll explain how to do a VAT return in Wave Accounting.

What is this free Wave Accounting?

Wave provide good free online accounting software. It’s paid for by small adverts at the side of the screen that you’ll hardly notice. Wave Accounting is a Canadian company who have built free accounting software mainly for Canada and the USA. But it can also be used in the UK and you can certainly work out what should go onto a VAT return in Wave. AS explained below, on anything other than the normal VAT scheme, you will need to adjust what is shown on the VAT return in Wave.

Accounting for VAT in Wave

VAT is a sales tax and that’s what it’s called in Wave Accounting. You’ll first need to set up your VAT rates by going to Settings (cog button), Sales Taxes, then Add a Sales Tax. See the image below for the settings you’ll need for the standard UK VAT rate at the time of publishing this post.

You may also need to set up other rates for your VAT return in Wave such as zero rate (0%) and the EC Reverse Charge rate which is explained below. Once you’ve set up the rates of VAT in Wave, you can then start adding or claiming VAT in Wave as follows:

Sales invoice and Bill: once you add a line to a sales invoice or bill in Wave, simply select the appropriate VAT rate. Wave will work out the VAT for you based on the percentage entered.

Transactions: add or select the income or expense in Transactions, then click on show details. The Taxes box will appear so you can select the appropriate VAT rate as shown below.

Running a Report for your VAT Return in Wave

The report you’ll need to do your VAT Return in Wave is the Sales Tax report. Just select the start and end dates for the period that your VAT return needs to cover then click on Update. Any transactions on which a VAT rate has been selected will appear in the report. The report is separated into a section for each VAT rate.

The summary report shows the totals and the audit report shows every transaction. The Payable columns are for income and sales (excluding VAT) and VAT on income and sales. The Receivable columns are for expenses and bills (excluding VAT) and VAT on expenses and bills. Then the difference between the two VAT amounts is the net VAT payable or receivable.

Normal Accruals VAT Return in Wave

The normal accrual basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers are invoiced or the date you are billed. If you are on the normal accrual basis VAT scheme, you can use the VAT Return in Wave as it is.

Normal Cash VAT Return in Wave

The normal cash basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers pay you or the date you pay suppliers. If you are on the normal cash basis VAT scheme, you need to adjust your VAT Return in Wave. You’ll need the Aged Receivables and Aged Payables reports both at the start and the end date of the VAT period. You’ll need to add to your VAT return the amounts on the aged receivables and aged payables reports at the start of the period, and deduct the amounts at the end of the period. The VAT amounts go in boxes 1 and 4, and the net amounts go in boxes 6 and 7.

Flat Rate Accruals VAT Return in Wave

Currently, calculating flat rate VAT in Wave isn’t possible. But you can easily find the VAT inclusive income amount you need by running a Sales Tax Report and adding the Payable amounts for before tax (net) and tax (VAT). Don’t forget that all income needs to be included in the flat rate scheme calculation, so you may want to use a ‘Zero’ rate or a ‘No VAT’ rate on income where VAT isn’t charged so that it appears in the report. Once you have your total VAT-inclusive income, just apply your flat rate percentage to calculate the VAT payable.

Flat Rate Cash VAT Return in Wave

Use the same workings for sales as shown above in Normal Cash VAT Return in Wave. Then add the net and VAT amounts, then apply your flat rate percentage to calculate the VAT payable.

Submitting your VAT Return

Currently, you can’t submit your VAT Return in Wave. So just like some other leading software, you have to log into your HMRC account and enter the amounts manually. However, if Making Tax Digital (MTD) for VAT applies to your business, you will have to submit your VAT return using MTD Bridging Software.

We can do your VAT Return in Wave for you

Our Quarterly package from just £44 plus VAT per month includes VAT returns as well as Accounts, Tax Returns, Management Accounts and general support and advice. Contact us for more details.


Wave Online Accounting is free cloud accounting software that you can use to easily do your bookkeeping and invite your online accountant to log in and use your bookkeeping to do your accounts and tax returns. We have more pages about Wave Online Accounting here.

Wave Online Accounting still doesn’t have a credit note facility yet, but there is a workaround to post and allocate credit notes on Wave.

To post a credit note on Wave, you have to create a new invoice with negative amounts.

Then to allocate the credit note against the invoice, you need to create a positive income transaction and a negative income transaction in the bank account. Both amounts need to be for the total credit value, so that they offset each other in the bank account and don’t change the bank balance. Then you need to allocate the positive receipt against the invoice, and the negative receipt against the credit note.

That’s it!

CloudBook Online Accountants are Wave Online Accounting specialists. So if you need more help with Wave’s free online accounting software, come back to view our helpsheets, or sign up for one of our low-cost fixed fee accounts packages which includes support with Wave or other online accounting software throughout the year.

UK Bank Feeds and MTD

Wave accounting no longer supports UK bank feeds or Making Tax Digital (MTD) returns. For software that does support these things, try Pandle. We will help you with any online accounting software.


Wave Accounting Review – Free Online Accounting Software

CloudBook Online Accountants are Wave Accounting specialists. If you want to get the most out of free online accounting software, you need experts like us to assist you throughout the year. As well as this, we set you up on Wave Accounting and show you how to use it, all included in our low fixed accountancy fees.

This is our Wave Accounting Review. Wave provides free online accounting software, funded by some small adverts. As it is completely free online accounting software, you can just sign up and have a play with it here: Wave Accounting.

Wave Accounting Review

Our Wave Accounting Review

If you’re looking for the best free online accounting software, we recommend Wave Accounting. It’s ideal for small businesses with straightforward accounts who don’t want to pay a lot (or anything!) to make their bookkeeping easier, and potentially their accountants fees cheaper (like ours!). Wave Accounting or Wave Apps as they are now called are able to supply free online accounting software by showing small discreet advertising to the side of the screen. You probably won’t even notice it and if you do, it might even be useful!

Just because you don’t have to pay for Wave Accounting’s free online accounting software, it doesn’t mean you’re sacrificing quality. If anything, you may not have the quantity of features that other expensive, cheap or free online accounting software provides, but if you don’t need those additional features, why pay for them?!

What you get with Wave Accounting’s free online accounting software

That’s not to say Wave Accounting hasn’t got great features and we’re going to tell you about what you can get from the free online accounting software including the following:

  • Bank transaction feeds No longer provided in the UK/EU
  • Bank statement uploads
  • Automatic categorisation
  • Receipt & invoice reader
  • Document storage
  • Invoicing
  • Recurring invoices
  • Get paid by credit card
  • Reports
  • Handles VAT No longer complies with UK VAT (MTD)
  • Paypal integration

Banking & Paypal

Paypal and most bank accounts can be set up to feed transactions automatically (not in UK/EU) and securely into Wave Accounting’s free online accounting software. It saves you time entering anything or downloading and uploading statements. If your bank (or you) doesn’t support that, you should be able to download your bank statements from online banking in a common format (e.g. CSV), which can easily be uploaded into Wave Accounting in seconds. Saving you hours a year entering each transaction manually.

Wave Accounting doesn’t have a bank reconciliation facility as such. **See Update below** That’s because it’s designed to be led by your bank statement transactions, not by your cheque book or your income slips. Although it does allow you to verify each line, acting like a tick which could help you if you do still want to reconcile (i.e. tick off) the bank statements.

If you don’t have any of these facilities, you can always manually enter income and expenditure. It’s very easy, and still quicker than writing it in a cashbook, or on a spreadsheet.

**UPDATE** There is now a Wave Accounting bank reconciliation, and it works seamlessly in the transactions section. We think it’s a great addition to the software.

Receipt & Invoice Scanner and Storage

Another way Wave Accounting makes your life easier is with their free Receipts App. This is a really useful tool that you can download onto your mobile or tablet, so that you can take a photo of a receipt or invoice. It then reads the data on the document and uploads the data and the image into Wave Accounting’s free online accounting software. A great time saver!

However, following from above (regarding the lack of a bank reconciliation), this is probably best left for the transactions that don’t go through your main bank account. Instead we think this is great for recording cash income slips or expenses receipts, or costs and income that have gone through another bank account (e.g. personal).

We have found it to be inconsistent at times, for example picking up the change amount rather than the total amount. But it is getting better with regular updates. Also you get to review each one and if necessary correct any of the data before it hits your account. Overall we’re a big fan of the Receipts App provided by Wave Accounting’s free online accounting software!…

Invoicing & Bills

Ditch the wordprocesser and spreadsheet! Wave Accounting has a great invoicing module, producing professional looking invoices that can easily be downloaded as a PDF or emailed directly to your customer through the software. Using the second option you can register with Stripe to add a credit card payment option to you invoices (a small percentage fee is charged but only if your customer pays by credit card).

It’s so easy to use, you just enter everything or select options directly on the invoice, save, and then it’s in your accounts and ready to send. You can set an invoice to recur say every month. You can also copy a previously raised invoice and edit the details – another great time saver.

Each invoice has an option to raise a payment against it. Or this can be done from the bank transactions (recommended to avoid duplicating bank receipts). On the invoice summary page, at a glance you can see what is paid, due, overdue. Then you can resend the invoice if necessary to chase payment.

We have nothing negative to say about the invoicing provided by Wave Accounting’s free online accounting software. Although we recommend you check you’re happy with the look of the email that is sent to customers directly from the software before using it.

Bills (i.e. purchase invoices) are entered much the same way as sales invoices.

VAT

Wave Accounting handles VAT via its sales tax function, however, it does not comply with UK Making Tax Digital regulations. Set it up with the VAT rate and then remember to select VAT whenever you enter anything that affects your VAT return. It handles VAT on an invoice basis well, and you can use it for a cash basis, but it’s perhaps not as intuitive as other online accounting software. For the cash basis you will have to adjust for debtors and creditors on each VAT return. That’s where your accountant should be able to help, and we would include that in our quarterly reviews provided with our accounts packages.

Reporting

Essential reports are provided with the free online accounting software, which are usually enough for most small businesses including:

  • Profit & loss account
  • Aged debtors (i.e. receivables)
  • Aged creditors (i.e. payables)
  • Balance sheet
  • Transactions by customer/supplier/category
  • VAT summary and detailed
  • Balance sheet

Other Useful Bits

There is an Accounting module which lets you enter journals (other adjustments not via bank, sales or purchases), and add or edit categories for your transactions.

You can add as many collaborators as you wish (e.g. your accountant, your bookkeeper) who will be able to log in and either view or also edit your accounts.

Each Wave Accounting account comes with Personal free online accounting software, which is a separate set of records for your personal finances. This is really useful if you often mix business with personal transactions because you can easily transfer to one or the other. It also comes with a budgeting tool.

Summary

They say you don’t get anything for nothing, well they were wrong in this case! Wave Accounting’s free online accounting software has all of the essentials in a really easy to use format. It is worth considering for all small businesses and even the not so small with straightforward accounts. We’re happy to support any business that uses Wave Accounting. You could potentially save hundreds on accounting software and even more with accountants fees. CloudBook Accountants are Wave Accounting specialists. Use our Fixed Fees Calculator on this page to see for yourself how much you could save. Or contact us with any questions you have.

Wave Accounting Review

This was our Wave Accounting Review of its Free Online Accounting Software. Also, because it is completely free online accounting software, you can just sign up and have a play with it here: Wave Accounting.

CloudBook Online Accountants are Wave Accounting specialists. We help our clients set up on Wave Accounting and show them how to use it. This, as well as ongoing help with Wave Accounting is included in our low fixed accountancy fees.

Here we explain the 2023 Xero Price Increase. How much Xero’s Prices are increasing. Why Xero’s prices are increasing. Also, the alternatives to Xero. With CloudBook Online Accountants, you can choose whichever software suits you the best.

Xero Price Increase 2023

The Xero Price Increase

Here are the Xero Price increases over the past two years:

PackageStarterStandardPremium
2020 price pcm£10£24£30
2021 price pcm£12£26£33
2021 increase20%8%10%
2022 price pcm£14£28£36
2022 increase17%8%9%
2 Year increase40%17%20%
2023 price pcm£15£30£42
2023 increase7%7%17%
3 Year increase50%25%40%

Why are Xero’s Prices Increasing Again?

Xero state that they are continuing to invest in their platform to deliver more efficient tools, powerful insights and access to faster payments. The only noticeable change over the past year is that all of the reports have changed to allow you to edit them. They have now removed the old reports.

Has Xero improved?

In our opinion, Xero is certainly improving all of the time, however those changes are small. Where the changes are not small, they usually come at an extra cost, such as the Expenses or Projects add-ons. The core platform, in our opinion, has not improved enough over the past two years to justify up to a 50% increase in the Xero price over the past three years. Having said that, it is still the best online accounting software for small businesses. So if you can afford to continue using it, you should.

Alternatives to Xero Price Increase

Use CloudBook Online Accountants

With CloudBook Online Accountants, unlike other accountants, you can use whichever software you prefer. We don’t make you use Xero software, so you don’t have to pay their high prices. As well as that, you’ll probably save on accountancy fees too, with our low fixed monthly fees.

Downgrade Xero Plan

To avoid the price increase, could you downgrade your Xero plan? The Starter plan now has unlimited bank transactions and allows up to 20 sales invoices and 5 bills per month. Instead of using bills you could just attach them to the bank transaction. The Standard plan is only missing multi-currency which is only essential if you have foreign bank accounts. If you have few foreign currency transactions you could convert them manually.

Use Move My Books

Move My Books is a free service that helps you move your accounting data to Xero, QuickBooks or Sage Accounting. This could be useful if you are thinking of moving from Xero to QuickBooks or Sage.

Pandle

Pandle is unlimited and comes with multi-currency and bank feeds for £5pcm. We can get it for £2.50pcm. It’s relatively new, sometimes slow, and takes a while to get used to. However, it should cope with most things you use Xero for.

QuickBooks

QuickBooks is our next most popular software after Xero. It does most things that Xero can do and is quite easy to use. Their Self-Employed package is £10pcm, Simple is £14pcm, Essentials £24pcm, Plus is £34pcm.

FreeAgent

FreeAgent is geared towards small business and freelancers. Natwest, RBS and Mettle bank customers can get it for free. We can get it for our clients for £17.50pcm.

Kashflow

Kashflow is less popular than it used to be. However, if you have straightforward accounting transactions, it can work well for you. Starter is £10.50pcm, Business is £22pcm or with payroll is £29pcm.

QuickFile

Quickfile is used by a few of our clients. It’s less easy to use but it can be free if you have less than 1000 entries per year, otherwise it’s just £60pa. If you want automated bank feeds, that’s an extra £15pa.

MyT

MyT accounting is a new software with a built-in receipt reader using AI to categorise your costs automatically. The Standard subscription is £5pcm, Plus is £15pcm and Pro is £30pcm.

Sage Accounting

From our experience Sage have struggled to keep up with their online competition. As such, we still don’t have any clients using Sage at the time of writing but we’d be happy to help you use it. However, it’s not much cheaper than Xero. The Start price is £14pcm. Standard is £28pcm and Plus is £36pcm.

Spreadsheets

If you’re not VAT registered, you could use a spreadsheet (e.g. Excel, Google Sheets, Numbers) to do your accounting. While we prefer online accounting software, if your accounting transactions are straightforward, a tidy spreadsheet would be ok. All transactions need to be categorised. Read more on our bookkeeping using a spreadsheet page.

Our Own Software

We have our own free software which very basically allows you to list your sales and expenditure. It can also submit MTD VAT returns.

Other Online Accounting Software

There are many other online accounting software platforms available. We’ll consider doing your accounts etc using any online accounting software. Look out for ones that can link to UK bank accounts and are MTD compliant. Unfortunately, this excludes Wave accounting which is a free alternative if you don’t need those things.

Running a limited company can be daunting for new business owners. Especially if you’re moving your business from a sole trader to a limited company. You need to know about many more things, such as how to run a limited company? How do I take money from my company? What do I need to do to comply with company law? Do I need to register for PAYE and VAT? How much tax will I pay? Do still need to submit a personal tax return? We will guide you through all of the common questions in easy to understand language.

how to run a limited company
Photo by fauxels

What is a limited company?

Registered at Companies House

A company is a business which is a separate legal entity to its owners. Until registered at Companies House, a company does not exist. From that point, information about the company is publicly available at Companies House. This includes addresses, directors, shareholders, shares and accounts.

A separate entity

Being a separate legal entity is an important point to distinguish a company from a sole trader. A sole trader is an individual’s business, they are one and the same. The sole trader’s business and money is the individual’s business and money. An individual pays tax as and when their sole trade business makes a profit. However, a company’s money is its own money, not any individual’s. A company pays tax on its profit. An individual would only pay tax if they receive money from a company.

Shareholders

You set up a new limited company with an amount of money e.g. £100 that should always stay in the company. We call this money is share capital and it represents a number of shares at a cost per share, e.g. 100 £1 shares. The company effectively sells each share to an individual called a shareholder who then owns part of the company. In a small company there are usually only one or two shareholders, so they would own all or half of the shares. As a reward for the investment from shareholders the company pays profits to shareholders which is a dividend. Shareholders would usually also be directors who are responsible for running the company.

Directors

Every company must have at least one director. A director is a person responsible for running the company and must ensure it complies with company law. As a reward for the work they do, a director receives a salary.

What must a company do?

Open a bank account

As it’s a separate legal entity, a company must have its own bank account, in the company’s name (with Limited or Ltd). This is to ensure the money belonging to the company is kept separate from the director/shareholder’s money. Otherwise, all of the money received should be treated as received by the owner of the bank account. That person is then taxed as if they took all of the money from the company.

Accounting

Directors must ensure that there is an up to date record of all of the company’s financial transactions. They must also prepare accounts which show how much profit a company has made over a period. The accounts also need to show how much a company owns and owes at the end of a period. The accounts should be prepared on a regular basis and provided to shareholders, Companies House and HMRC annually. We recommend using online accounting to make this easier and some are free. With online accounting you can import bank transactions and send invoices on the go. However, you could also do the company bookkeeping using spreadsheets.

More on accounting using software and spreadsheets.

Companies House

As well as company accounts, there are other forms that must be sent to Companies House. A director must update the information held by Companies House about a company whenever anything changes. For example, if a director moves home they need to update their address though the home address is not on public record. Every year a director needs to confirm that the details at Companies House are correct using what’s called a Confirmation Statement. An annual fee is also payable to Companies House (currently £13).

HMRC

HM Revenue and Customs are responsible for collecting taxes from a company. This would at least be corporation tax, which is a tax on the profit a company makes. At least every 12 months a company must submit a corporation tax return to HMRC, together with accounts for that period. It could also be PAYE/NIC, CIS tax, VAT etc.

Register for tax

A company will need to register for other taxes as and when necessary. The directors are responsible for registering at the correct time and they must not wait to be told to do so. Companies are automatically registered for corporation tax, but not for PAYE, VAT, CIS etc. A company must register for PAYE if it pays wages to anyone. It takes several weeks to receive the PAYE reference numbers so plan ahead. VAT registration is compulsory from the time sales exceed £85,000 in any 12 month period (a monthly test). It may be worth voluntarily registering for VAT if customers are VAT registered. A company must register on the Construction Industry Scheme (CIS) if it is a contractor or hires subcontractors in the construction industry. This includes typical trades like electricians and plasterers as well as builders.

Comply with laws and regulations

Whatever the company does, it needs to comply with any laws and regulations that apply. For example, if it sells food, it must comply with the relevant laws and regulations about selling food, such as hygiene and labelling. If it employs anyone, it must comply with employment laws and regulations such as health and safety and pensions. Directors are responsible for ensuring that the company complies with all relevant laws and regulations.

How to take money from a company?

Expenses

If directors or employees spend their own money on business costs, they can claim this back from the company as expenses. As long as the costs were necessary for the director to perform their job, there are no tax implications for receiving expenses from the company.

Salary

Directors can only be paid by a company with a salary. A director can also be a shareholder, and as a shareholder they can also receive dividends (see below). If a company pays anyone wages of over £123 per week (2023-24), or pays anyone who has received other employment income or benefits in the same tax year, it must register with HMRC an an employer. If the company is registered as an employer, all wages must be reported to HMRC as and when they are paid, and at least monthly if none are paid. The recommended salary for a director-shareholder of a profitable company is £12,570 (2023-24). This salary is usually free from income tax and employee’s NIC. On the salary amount exceeding £9,100pa, it may cost the company Employer’s NIC at 13.8%. However, the company may save corporation tax on the whole salary at 19% or more.

More on a directors salary.

Dividends

A company can pay its shareholders with payments called dividends if it has sufficient profit reserves. Profit reserves are all the profits or losses a company has made since it was first registered, minus all of the dividends it has paid since it was first registered. The profit reserves amount can usually be found in the company’s accounts. Either at the bottom of the company’s profit & loss account or at the bottom of the balance sheet. It can also be called retained earnings and, confusingly, the profit & loss account.

Profit reserves

If you want to work out profit reserves, the taxable profit in one period is calculated as income, minus allowable expenses (including salaries). You need to deduct corporation tax from that taxable profit at between 19% (small profits) and 25% (large profits) to calculate the net profit. Then you deduct any dividend payments from the net profit to calculate the retained profit/earnings for that year. All of the retained profit/earnings for all of the years so far are added together to calculate the profit reserves.

Dividend tax

Unlike a salary, dividend payments don’t reduce corporation tax. They are paid from profits after tax. So effectively they have already been taxed at 19% or more. Individuals pay tax on dividends received in a tax year. The first £1,000 (reducing to £500 from 2024/25) of dividends are taxed at 0%. Dividends received in the basic rate band (total income up to £50,270) are taxed at 8.75%. The tax rate increases to 33.75% in the higher rate band. Then 39.35% in the additional rate band (on total income over £125,140).

More on Dividends

Loan

If a director-shareholder receives money from a company that is not expenses, salary, or a dividend, then it needs to be treated as a loan from the company. The loan goes into a directors loan account, where it is added to other loans taken. Or it is offset against money loaned to the company, or money owed to the director/shareholder such as unpaid expenses, unpaid salary, or unpaid dividends.

Interest

If the balance on the directors loan account exceeds £10,000 owed to the company, it must charge interest. The interest charge must be at the HMRC beneficial loan rates or more. Otherwise, the interest that should have been charged on the loan is taxed as a benefit in kind. Which means income tax is payable by the director/shareholder and NIC payable by the company.

Tax on directors loan accounts

At the end of the accounting year, the director/shareholder may owe money to the company. If so, the balance on their loan account must be repaid to the company within 9 months from the end of the accounting year. Otherwise, the remaining balance is taxed on the company at 33.75%. This tax is eventually refunded to the company after the year in which the loan is repaid. The loan account can be repaid in several ways or a combination of any of them. Money can be transferred from the director/shareholder to the company. A dividend can be declared but instead of paying that dividend it can be used to repay the loan account. Wages can be processed through the payroll but credited to the loan account instead of being paid. Or the director/shareholder can claim expenses but not be paid those expenses.

More on Directors Loan Accounts. And here. And here.

How much tax will I pay?

Corporation tax

A company pays tax on its taxable profits at between 19% and 25%. Its profits are its sales minus costs. Costs include salaries but but not dividends or loan payments. The accounting profits are adjusted for non-taxable things like the cost of using business equipment (depreciation), to get the taxable profits. If these profits are less than £50,000pa, and there are no other related companies, the profits are taxed at 19%. If they are over £250,000pa (no related companies), the tax is 25%. A profit between these levels is taxed at a rate between 19% and 25%. To calculate it work out 19% on £50,000, then 26.5% on the profit exceeding £50,000.

More on corporation tax rates.

PAYE/NIC

As an employer the company does not suffer PAYE or Employees NIC. However, it may have to deduct these taxes from the employee’s pay and pay it over to HMRC. An employer may also have to pay (and suffer!) Employers NIC. This applies to pay over £9,100pa and on any benefits in kind provided at 13.8%.

Employees (including directors) usually pay PAYE on salaries over £12,570pa. This will be at 20% on salaries within the basic rate band (total income up to £50,270). It increases to 40% on income in the higher rate band and 45% in the additional rate band (total income over £125,140).

Employees also pay NIC at 12% on salaries between £12,570 and £50,270. Then 2% on the salary above this level.

VAT

A business not registered for VAT does not need to add 20% VAT onto their sales. It also can’t claim any VAT back on costs, so VAT paid out on costs is just part of the cost, just like it is to most people.

VAT registered businesses don’t ‘suffer’ VAT. It’s not a cost or an income to them. However, they have to pay the VAT they have collected to HMRC. The company must pay to HMRC, the VAT received on sales to customers, minus the VAT paid on purchases from suppliers. The VAT payments and VAT returns are usually quarterly.

Dividends

See above for the tax on dividends.

Do I still need to submit a personal tax return?

All sole traders need to submit a personal tax return to report their profits and pay the tax on those profits. You may think that if you use a company, the company pays tax on the profit so you no longer need to submit a personal tax return. However, you must still submit a personal tax return if any of the following apply:

  • HMRC request a tax return. You can call HMRC to try to cancel their request if you think you don’t have anything to pay tax on. Otherwise, you will have to do one.
  • You haven’t paid tax on taxable income. For example dividends or interest above the tax-free allowances.
  • Your total income is over £100,000.

If you do need to submit a tax return for the first time, you will need to register for your tax reference (UTR). Search ‘register for self assessment tax return’ and follow the HMRC instructions.

Ready to run a limited company?

There are many things to consider if you want to run a limited company. Hopefully, this gives you a good introduction on the main considerations. Our clients can get further advice, all included in our fixed monthly fees.

Here we explain the 2022 Xero Price Increase. Click on this link for the 2023 Xero Price Increase. How much Xero’s Prices are increasing. Why Xero’s prices are increasing. Also, the alternatives to Xero. With CloudBook Online Accountants, you can choose whichever software suits you the best.

Xero Price Increase

The Xero Price Increase

Here are the Xero Price increases over the past two years:

PackageStarterStandardPremium
2020 price £pcm102430
2021 price £pcm122633
2021 increase20%8%10%
2022 price £pcm142836
2022 increase17%8%9%
2 Year increase40%17%20%

Why are Xero’s Prices Increasing Again?

Xero state that they are constantly enhancing and improving their product. That the pricing is in line with the value of Xero in the current market. It will help Xero to respond quickly with new tools and services that business might need. Also that it will improve Xero in the future.

Has Xero improved?

In our opinion, Xero is certainly improving all of the time, however those changes are small. Where the changes are not small, they usually come at an extra cost, such as the Expenses or Projects add-ons. The core platform, in our opinion, has not improved enough over the past two years to justify up to a 40% increase in the Xero price over the past two years. Having said that, it is still the best online accounting software for small businesses. So if you can afford to continue using it, you should.

Alternatives to Xero Price Increase

Use CloudBook Online Accountants

With CloudBook Online Accountants, unlike other accountants, you can use whichever software you prefer. We don’t make you use Xero software, so you don’t have to pay their high prices. As well as that, you’ll probably save on accountancy fees too, with our low fixed monthly fees.

Downgrade Xero Plan

To avoid the price increase, could you downgrade your Xero plan? The Starter plan now has unlimited bank transactions and allows up to 20 sales invoices and 5 bills per month. Instead of using bills you could just attach them to the bank transaction. The Standard plan is only missing multi-currency which is only essential if you have foreign bank accounts. If you have few foreign currency transactions you could convert them manually.

Pandle

Pandle is unlimited and comes with multi-currency and bank feeds for £5pcm. We can get it for £2.50pcm. It’s relatively new, sometimes slow, and takes a while to get used to. However, it should cope with most things you use Xero for.

QuickBooks

QuickBooks is our next most popular software after Xero. It does most things that Xero can do and is quite easy to use. Their Simple package is £12pcm, Essentials £22pcm, Plus is £32pcm.

FreeAgent

FreeAgent is geared towards small business and freelancers. Natwest and RBS customers can get it for free. We can get it for our clients for £17.50pcm.

Kashflow

Kashflow is less popular than it used to be. However, if you have straightforward accounting transactions, it can work well for you. Starter is £9pcm, Business is £18pcm or with payroll is £24pcm.

QuickFile

Quickfile is used by a few of our clients. It’s less easy to use but it can be free if you have less than 1000 entries per year, otherwise it’s just £45pa. If you want automated bank feeds, that’s an extra £15pa.

Spreadsheets

If you’re not VAT registered, you could use a spreadsheet (e.g. Excel, Google Sheets, Numbers) to do your accounting. While we prefer online accounting software, if your accounting transactions are straightforward, a tidy spreadsheet would be ok. All transactions need to be categorised.

Our Own Software

We have our own free software which very basically allows you to list your sales and expenditure. It can also submit MTD VAT returns.

Other Online Accounting Software

There are many other online accounting software platforms available. We’ll consider doing your accounts etc using any online accounting software. Look out for ones that can link to UK bank accounts and are MTD compliant. Unfortunately, this excludes Wave accounting which is a free alternative if you don’t need those things.

Online accounting software has revolutionised the way accountants provide accountancy services. Businesses should get a better and cheaper service from their accountant by using online accounting software. It makes it easier to do your accounts, both the bookkeeping and then converting the online bookkeeping records into accounts. Read about 10 of the many benefits of getting your accounts online below.

In fact, HMRC will soon make it mandatory to use online accounting software, by requiring quarterly submissions of data. Making Tax Digital is already here for VAT registered businesses. It will soon be required for Income Tax, then Corporation Tax. Don’t worry if you’re not yet using online accounting software. We can help you move onto any one of them that you choose. Such as the free Pandle or the easy to use Xero.

online accounting software

Still need convincing?…

10 benefits of using online accounting software. 1-3:

  • Do your accounts on the beach…
    Because online accounting software is in the cloud, it means you can log-in to do or view your accounts from anywhere, at anytime. At your customer’s site, in a pub, or even on the beach!
  • Let the software do all the hard work…
    Import your bank statement, or easily set up an authorised feed from your bank account or Paypal to the secure online accounting software.  All you need to do is tell it what each transaction is for. So you don’t need to manually enter anything, but if you choose to do it this way, the software can automatically check and compare your records with the bank statements. There are also free apps that will read images of receipts and invoices and enter the data onto the software for you!
  • Advice when you need it, not a year later…
    You can give us secure access to your online accounting software. So we can both look at your accounts and deal with any issues. In fact we’ll ask to look at your accounts regularly to see how you’re doing, and offer relevant timely advice.

More benefits of using online accounting software. 4-6:

  • We don’t want your records!….
    At your period end, we don’t need you to bring in your records. We’ll just log into your online accounting software and view what we need to produce your accounts etc. We’ll let you know if we do need anything e.g. a scanned bank statement. Of course if we do your bookkeeping, we will need some form of records.
  • FREE or low monthly charges…
    Wave Accounting Software is free, and we all love a bargain, but what’s the catch? Well you might notice some small discreet adverts, but they are tailored to your business, so they may even be useful. Others we also recommend charge a low monthly fee from between £5 and £19, so spreading the affordable cost over the year. Also, there are free trials and no tie in periods, so if you change your mind, no penalties.
  • Easy to use software…
    You don’t need to be wizz on computers, or an accountant, or even a bookkeeper to use online accounting software. The providers we recommend have designed their software to be so easy you shouldn’t need help with it. But just in case you do, they all offer free support, and being local we are never far away. We’ll also help you get going with it, for free.

Even more benefits of using online accounting software. 7-10:

  • Safer & securer than other records…
    Your accounts data is stored by the software providers on secured, monitored, and constantly backed up servers. Data security is a top priority, and some providers claim to be as secure as your online banking. Still not convinced? Ask yourself this: How secure are your paper records? – are they kept in a fireproof safe? Do you password protect and backup your spreadsheets? – are they encrypted when you email them? Do you backup your current software data daily? – is the backup stored securely offsite?
  • Instant reports for your business…
    Each of the online accounting software comes with a bundle of reports so you’re likely to find what you need. So at the click of a button you can view all sorts of things about your business such as what you owe, who owes you, how much profit you made.
  • Get off to the best start, not a false start…
    By logging into your accounts from anywhere, we can fix any errors there and then. Which means your reports are always accurate, and start off from the correct position. So there’s no need to wait for the year end adjustments from your accountant several months later, we will have already adjusted your online accounting software.
  • Not low, NO maintenance bookkeeping…
    There’s no need to start a new page, or a new cashbook. No rolling forward of spreadsheets from one year to the next. There are no software updates to buy and load, this is done automatically. And no messing about sending records to and from your accountant, or trying to get software backups to restore onto the accountants’ version. So you just login and go – easy!

How we can help you

We are online accounting software specialists. We’re committed to giving you a better service for less, by utilising all of the benefits of online accounting. Plus we’re not tied to any particular software provider such as Xero, SageOne, or Kashflow, so you’ll get honest independent advice on which is best for your business. If the free one, Wave Accounting, is all you need then why pay for something else?

All of our accounts clients get free help moving to online accounting software, and free help throughout the year. See our fees, or contact us by clicking the buttons below.


CloudBook Accountants are BeanBalance accountants. BeanBalance is free online accounting software that you can use to do your bookkeeping and more. Do you use BeanBalance and need an accountant to do your accounts and tax returns? CloudBook Accountants can use BeanBalance to do those for you.

Why do I need an accountant for BeanBalance?

Free online accounting software like BeanBalance and Wave are great at helping you do your bookkeeping. If you know what you’re doing you may even be able to use BeanBalance to do your VAT and Payroll. Otherwise, you will need an accountant to check your VAT and Payroll before submitting to HMRC. You will definitely, despite what BeanBalance suggest, need an accountant to produce the reports required that comply with the latest laws and regulations (e.g. accounts, tax returns). Then submit the necessary reports to HMRC and if applicable Companies House. CloudBook Accountants can use BeanBalance to do your bookkeeping, accounts, tax returns, payroll and VAT returns.

What does BeanBalance do for me if I still need an accountant?