Accountancy questions answered: Winchester & Hampshire

The best way is a free 30-minute consultation. There's no pressure and no obligation. We'll ask about your business, where you're at, and what you need. If we're a good fit, great. If not, we'll tell you honestly and point you in the right direction. Book your free call here.

We handle the entire switching process for you. Once you've signed up, we contact your previous accountant directly to request your historical records and complete Professional Clearance. It's a standard process and we deal with it so you don't have to. Most clients are fully set up within a couple of weeks.

As early as possible, ideally before you incorporate or start trading. Getting the right structure, VAT registration and accounting systems in place from day one is far easier than unpicking mistakes later. That said, it's never too late. We work with businesses at all stages, from brand new start-ups to established companies with £10m turnover.

We're based in Winchester but work with clients across the UK. Most of our work is done remotely through Xero, email and video calls, so location is no barrier. For clients who prefer face-to-face meetings, we're happy to accommodate that locally.

All packages include a Xero subscription (our recommended software), statutory accounts, corporation tax, director's payroll and ongoing support. The Core and Complete packages add quarterly VAT returns, team payroll, management accounts and more. Full details are on our Services page. We also offer sector-specific packages for hospitality and construction businesses.

Our packages are fixed monthly fees. You won't get a surprise bill, and we don't charge by the hour for quick phone calls. The price we agree at the start is the price you pay. If your business grows and your needs change, we'll have a conversation about adjusting the package. We always give you plenty of notice before any changes.

Yes. Every package includes payroll: director's payroll (1 employee) on Lite, up to 5 employees on Core, and larger teams & complex payrolls on Complete. We handle PAYE calculations, RTI submissions to HMRC, pension auto-enrolment and payslips. You approve the payroll and make the payments, and we handle everything else.

No. We set it up for you and show you the basics. Xero is genuinely easy to use, and most clients only need to do a few simple tasks like coding transactions or sending invoices. We handle the complex accounting side. If you ever get stuck, just ask. That's what we're here for.

Yes. All Lumi packages include your Xero subscription at no extra cost. We're Xero Certified Advisors, so we set it up correctly for your business from day one and manage it on your behalf.

Xero is our recommended software: it gives both us and you the best real-time visibility over your finances, and is included in all packages at no extra cost. That said, we're happy to assist on other software if you'd prefer to stay with what you have. If you do switch to Xero, we'll handle the migration and make the transition as smooth as possible.

Making Tax Digital (MTD) is HMRC's programme to digitise the UK tax system. MTD for VAT is already mandatory for all VAT-registered businesses. MTD for Income Tax has applied since April 2026 for sole traders and landlords with qualifying income over £50,000, extending to over £30,000 from April 2027 and over £20,000 from April 2028. Two points catch people out: "qualifying income" means your gross turnover from self-employment plus gross property income — not your profit, and not your total income — and HMRC tests it against your return from two years earlier, so April 2026 mandation is based on your 2024/25 figures. No date has been set for partnerships. All Lumi packages are MTD-compliant and we handle the digital submissions for you.

Bottom line: The VAT registration threshold for 2026/27 is £90,000 of taxable turnover in any rolling 12-month period — and once you exceed it, you must notify HMRC within 30 days of the end of the month in which you crossed it.

The £90,000 threshold is frozen, and the test is rolling, not tied to your accounting year or the tax year: at the end of every month you look back over the previous 12 months' taxable turnover. Cross £90,000 in the year to, say, 31 October 2026, and you must register by 30 November, with VAT applying from 1 December. There is also a forward-looking test: if you expect taxable turnover to exceed £90,000 in the next 30 days alone (a large contract, a viral product), you must register immediately.

"Taxable turnover" means all standard, reduced and zero-rated sales — so a zero-rated-heavy e-commerce business can be over the threshold while charging little VAT — but excludes exempt income and genuinely voluntary tips. Because the threshold is frozen while prices rise, ordinary inflation now pushes businesses over it: a café taking £1,750 a week is already there.

Registration is not always to be feared or delayed: voluntary registration can make sense before the threshold where your customers are VAT-registered businesses or your inputs carry significant reclaimable VAT. The deregistration threshold, for completeness, is £88,000.

The Lumi approach: Xero tracks every client's rolling 12-month turnover continuously, and we flag you well before £90,000 so registration is a planned decision — including whether the Flat Rate Scheme or voluntary registration suits you — rather than a deadline scramble. See our VAT services. Fact-checked and reviewed by Chris Sullivan, ACA.

Bottom line: For most directors in 2026/27 the optimal structure remains a salary of £12,570 (the personal allowance) topped up with dividends — but the Autumn Budget's two-point dividend tax rise, to 10.75% at basic rate and 35.75% at higher rate from 6 April 2026, has narrowed dividends' advantage and makes this the year to re-run your numbers.

A £12,570 salary uses your full personal allowance, costs you no income tax or employee NIC, secures a qualifying year for your State Pension, and is deductible against corporation tax (19% small profits rate, up to 26.5% effective in the marginal band). The company pays 15% employer's NIC on salary above the £5,000 secondary threshold — roughly £1,135 on a £12,570 salary — but the £10,500 Employment Allowance wipes this out entirely for companies with more than one person on payroll. Sole directors with no other employees cannot claim it, yet the corporation tax relief on the salary and NIC generally still outweighs the NIC cost, keeping £12,570 the default answer.

Above the salary, dividends remain more efficient than bonus for extracting profit, but less comfortably than before: the first £500 is covered by the dividend allowance, then 10.75% to £50,270 of total income, 35.75% to £125,140, and 39.35% beyond. With income tax thresholds frozen until 2031, fiscal drag pulls more of each year's drawings into the higher band without any rate change at all.

The rising cost of dividends strengthens the third lever: employer pension contributions, which are corporation-tax-deductible, free of all NIC, and untouched by the dividend rate rises. The genuinely optimal 2026/27 answer is usually a blend of all three, set against your profit level, other income and cash needs — not a ratio copied from a blog.

The Lumi approach: We model salary, dividends and pension against your actual profits at the new 2026/27 rates each year — not recycled from the last one — and set your remuneration structure before you draw, not after. Fact-checked and reviewed by Chris Sullivan, ACA.

As a sole trader, you and your business are legally the same entity, so you're personally liable for any debts. As a limited company, the business is a separate legal entity with limited liability. Limited companies are often more tax-efficient than operating as a sole trader, though the right answer depends on your individual situation: income level, expenses, growth plans and personal circumstances all play a part. We'll work through the numbers with you and help you weigh up the pros and cons for your specific situation.

We review your allowable expenses, salary/dividend structure, pension contributions, capital allowances and timing of income and expenditure, all legally and within HMRC guidelines. We don't wait until year-end to think about your tax position. We review it throughout the year so there are no nasty surprises in January.

Bottom line: You will face no penalty for missing the 7 August 2026 deadline, because HMRC is not issuing penalty points for late quarterly updates during this first year of MTD for Income Tax — but you should still submit the update now, as the grace period ends with the 2026/27 tax year.

The 7 August 2026 deadline covered your first quarterly update — income and expenses for 6 April to 5 July 2026 (or 1 April to 30 June if you elected calendar quarters). HMRC has confirmed a one-year easement: no penalty points will be issued for late quarterly updates during 2026/27. The remaining deadlines this year fall on 7 November 2026, 7 February 2027 and 7 May 2027, and the update itself takes minutes once your records are digital.

From the second year, the points-based penalty system applies in full. Each late quarterly update earns one penalty point; when you accumulate four points, HMRC charges a fixed £200 penalty — and every further late submission while you sit at the threshold triggers another £200. Points expire only after a sustained period of on-time compliance, so a chaotic first quarter can shadow you for years.

Be aware that the easement covers quarterly updates only. Your tax payment deadlines have not changed, and the separate late-payment penalty regime — which now charges 3% of tax unpaid at day 15, another 3% at day 30, and 10% per annum thereafter — applies regardless. The 31 January final declaration deadline also still carries its own penalties.

The Lumi approach: We file every client's quarterly updates directly from Xero on a standing calendar, so no Lumi client enters year two carrying penalty points. Fact-checked and reviewed by Chris Sullivan, ACA.

Bottom line: Yes — MTD for Income Tax is triggered by your combined gross income from self-employment and property, so a Winchester landlord with £30,000 of rent and £25,000 of sole trader turnover has £55,000 of qualifying income and is already within the rules.

"Qualifying income" is the total gross income — turnover and rents before any expenses are deducted — from all your self-employment and property sources added together. This catches many people by surprise: neither activity needs to exceed the threshold on its own. HMRC assesses the £50,000 test against your 2024/25 self assessment return, which is why mandation letters began arriving before April 2026.

Two nuances matter for Hampshire landlords. First, jointly owned property: broadly, only your share of the income counts toward your qualifying income. Second, being within MTD does not create new tax — it changes how you report: digital records in MTD-compatible software, four quarterly updates a year, and a final declaration by 31 January replacing the traditional return.

If your combined qualifying income was under £50,000 in 2024/25, you are not yet mandated — but note that the threshold drops to £30,000 from April 2027 and £20,000 from April 2028.

The Lumi approach: We run the qualifying income calculation across all your sources, confirm your mandation date with HMRC, and set up Xero so quarterly updates become a by-product of bookkeeping you were doing anyway. Fact-checked and reviewed by Chris Sullivan, ACA.

Bottom line: You join MTD for Income Tax from 6 April 2027 — Phase 1 (qualifying income over £50,000) began in April 2026, and Phase 2 extends the rules to those earning over £30,000 from April 2027, based on your 2025/26 tax return.

The rollout is deliberately staged. Sole traders and landlords with qualifying income over £50,000 (per their 2024/25 return) were mandated from 6 April 2026 and are filing quarterly updates now. If your qualifying income is over £30,000 on your 2025/26 return — the one due by 31 January 2027 — you must keep digital records and file quarterly from 6 April 2027. A third phase brings in those over £20,000 from 6 April 2028.

That gives you roughly seven months, not years, to prepare. The businesses finding MTD easy in 2026 are the ones that moved to digital record-keeping a full tax year early: they tested their software, fixed their habits, and treated their first mandatory quarter as routine rather than novel.

There is also a genuine upside to voluntary early adoption: quarterly figures mean you see your emerging tax bill in-year instead of discovering it the following January, which transforms cash flow planning for a seasonal Winchester business.

The Lumi approach: We migrate Phase 2 clients onto Xero well before April 2027 and run a practice quarter with them, so their first real deadline is their fourth rehearsal, not their first attempt. Fact-checked and reviewed by Chris Sullivan, ACA.

Bottom line: Genuinely voluntary tips are outside the scope of VAT and do not count towards the £90,000 registration threshold, but compulsory service charges are part of your taxable turnover and count in full.

The VAT treatment follows the customer's freedom to choose. A tip freely given — cash on the table, or a card prompt the customer can decline or vary — is outside the scope of VAT entirely. A mandatory service charge (for example, "a 12.5% service charge will be added to tables of six or more") is consideration for the meal, standard-rated at 20%, and counts toward your rolling 12-month turnover for the £90,000 threshold. A discretionary service charge printed on the bill sits with the voluntary tips provided the customer has a genuine option not to pay it. For a busy cathedral-quarter restaurant, reclassifying a mandatory charge as genuinely discretionary can materially delay VAT registration — or reduce output VAT already due.

The employment side changed too. Under the Employment (Allocation of Tips) Act 2023, in force since October 2024, 100% of tips and service charges must be passed to workers, allocated fairly, by the end of the month after they were received, with a written policy and records kept.

National Insurance is where a tronc scheme earns its keep: tips distributed through an independent tronc — run by a troncmaster who is not a director, with the employer having no say in who gets what — are completely free of both employer's (15%) and employee's NIC, though income tax is still collected through the tronc payroll. On a meaningful tips pot, that exemption is worth thousands a year to staff and business alike.

The Lumi approach: We review your billing wording, tronc independence and allocation policy together, so your tips are compliant with the Tips Act, NIC-efficient and correctly excluded from your VAT turnover. See our hospitality accountancy services. Fact-checked and reviewed by Chris Sullivan, ACA.

Bottom line: As a UK seller shipping from UK stock, your EU consumer sales are zero-rated exports handled through IOSS (for consignments up to €150) rather than OSS — Union OSS only becomes relevant if you hold stock inside the EU — and the practical challenge is reconciling it all, which is exactly what the Shopify → A2X → Xero stack solves.

Post-Brexit, a UK business is a "non-Union" seller, and the EU's €10,000 micro-business threshold does not apply to you — the correct treatment applies from your first EU sale. Orders shipped from the UK to EU consumers are zero-rated UK exports; the question is who pays the import VAT. With an Import One Stop Shop (IOSS) registration — made via an EU intermediary — you charge the customer their local VAT rate at Shopify checkout on consignments up to €150 and remit it through a single monthly IOSS return, giving customers a no-surprises delivery. Without IOSS, the carrier collects VAT (plus handling fees) from your customer at the door, which is where one-star reviews come from.

Union OSS enters the picture only when you hold inventory inside the EU — a 3PL in the Netherlands, Amazon FBA in Germany — because local stock creates local supplies; those distance sales are then reported through a single quarterly OSS return. And throughout, your UK position still matters: gross UK taxable sales count toward the £90,000 registration threshold, and where a marketplace is the deemed supplier, the marketplace accounts for the VAT rather than you.

The compliance risk in all of this is rarely conceptual — it is reconciliation. Shopify payouts arrive net of fees, refunds and multiple currencies, and a VAT return built from bank deposits will be wrong.

The Lumi approach: We configure A2X to split every Shopify payout into UK-VATable sales, zero-rated exports, IOSS-collected VAT and fees before it reaches Xero, so every return traces to a bank deposit and jurisdiction-level figures are always audit-ready. See our e-commerce accountancy services. Fact-checked and reviewed by Chris Sullivan, ACA.

We aim to respond to all emails within 1 business day. On the Complete package, you also get unlimited phone support — so if you need a quick answer, just call. We won't ghost you when deadlines are looming.

Yes. You'll always deal directly with a qualified ICAEW Chartered Accountant — our founder. Every client receives consistent, personal attention from someone who genuinely knows their business. We believe that's fundamental to good accountancy.

Yes. Lumi Accountancy is a Registered Member Firm of the ICAEW (Institute of Chartered Accountants in England and Wales), Membership no. C011009337. We're also Xero Certified Advisors and Making Tax Digital ready. You can verify our ICAEW membership on the ICAEW's public register.

All packages are billed monthly by direct debit. There are no large upfront fees and no annual invoices to budget for. It's just a simple, predictable monthly payment that covers everything in your package.