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THINGS TO CONSIDER WHEN STARTING A BUSINESS, HAVE I WRITTEN A BUSINESS PLAN?
Bells Accountants can provide you with a template document, or come in and see us for some guidance if you have more specific requirements.
THINGS TO CONSIDER WHEN STARTING A BUSINESS, DO I NEED FINANCE?
Bells Accountants can put you in touch with specialists who can help you access finance or grants from many sources. We can also help put together the applications for the various bodies.
THINGS TO CONSIDER WHEN STARTING A BUSINESS, SHOULD I HAVE A SEPARATE BUSINESS BANK ACCOUNT?
Yes. For limited companies it is a legal requirement to have a business bank account, for sole traders it is optional but we would always recommend separating your business and personal expenditure.
THINGS TO CONSIDER WHEN STARTING A BUSINESS, WHAT BUSINESS STRUCTURE SHOULD I USE?
There are various options including Sole Trader, Partnership, Limited Company, Community Interest Company or Limited Liability Partnership. Bells will look at your individual circumstances and advise on the pros and cons of each option for you.
WHAT DOES IT MEAN TO BE SELF-EMPLOYED?
When you are self-employed it effectively means that you are receiving income from a business or trade that is not taxed at source by an employer or agency. This money therefore needs to be declared to HMRC as part of a self-assessment tax return. Bells can help you to register for self-employment, provide guidance as to what expenses you can claim tax deductions for and complete your tax return for you each year.
BEING SELF-EMPLOYED, HOW DOES THE “TAX YEAR” WORK?
The tax year runs from the 6th April to 5th April each year.
WHAT ARE THE DEADLINES FOR ME IF I’M SELF-EMPLOYED?
Your tax return is due by 31st January following the end of each tax year.
BEING SELF-EMPLOYED, WHAT CAN I CLAIM FOR?
The expenses you can claim for are very specific to each trade, for example, a consultant cannot claim for all the same things a plumber can claim for although there will be some things that can be claimed for by both such as travel and telephone bills. Bells Accountants can provide some general guidance in the form of a leaflet or a bespoke list. Fill out our contact us form for more information.
BEING SELF-EMPLOYED, HOW DO I PAY MY NATIONAL INSURANCE CONTRIBUTIONS?
This is paid annually as part of your self-assessment tax return.
WHY BECOME A LIMITED COMPANY?
The main advantage to trading as a limited company is that companies pay a fixed rate of corporation tax. As a sole trader, you are subject to the normal income tax rates and class 4 national insurance on profits.
ARE THERE ANY DISADVANTAGES TO BEING A LIMITED COMPANY?
Accountancy fees are higher for limited companies as there is a lot more administration required but if we make a recommendation that you should incorporate (go limited!) we will always demonstrate to you exactly how much tax you will save and go through the pros and cons in full so that you can make an informed decision.
WHAT ARE THE DEADLINES FOR LIMITED COMPANIES?
Companies have their own financial year end given by companies house, this is usually twelve months after they initially set up. They then have 9 months from their financial year end to file their abbreviated accounts with companies house and 12 months to file their corporation tax return and accounts with HMRC.
WHAT CAN I CLAIM FOR AS A LIMITED COMPANY?
The expenses you can claim for are very specific to each trade, for example, a consultant cannot claim for all the same things a plumber can claim for although there will be some things that can be claimed for by both such as travel and telephone bills. Bells can provide some general guidance in the form of a leaflet or a bespoke list. Fill out our contact us form for more information.
HOW DOES VAT WORK?
Standard VAT works by adding up all the VAT you have charged on your sales, deducting all the VAT you have paid out to your suppliers and handing over the difference to HMRC. This information is usually reported to HMRC on a quarterly basis via completing a VAT return. There are different schemes available such as the flat rate scheme which can help to save you money but speak to us about the different options and we will help you decide what’s best for your business.
DO I HAVE TO REGISTER FOR VAT?
The current compulsory threshold for VAT registration is £85,000.00 which means if your turnover in the last 12 months is over this figure or it is likely to go over in the next twelve months you will need to think about registering your business for VAT. We can advise you on the whole process and help you to decide which VAT scheme to go on to save you the most money. It may even be worth you registering for VAT voluntarily as for some businesses this means they can claim back considerable amounts of VAT they have paid out or even make additional profits from charging VAT to their customers and paying it over at a lower rate.
ARE THERE ANY VAT EXEMPTIONS?
There are some exemptions available for some trades but you need to be very careful not to misunderstand the guidance available from HMRC as there are hefty penalties for those who get it wrong despite this area being a minefield of information:
DO I HAVE TO HAVE A PAYROLL SCHEME?
If you are paying any individuals to assist you with your business and they meet HMRC’s guidance for what is deemed “employment” rather than “self-employment” then you will need to administer a payroll scheme to ensure they are being taxed appropriately. If you fail to do this you can be held responsible for the tax and national insurance that you should have deducted from them and passed over to HMRC. We can advise you on whether you require a payroll scheme and also run it for you in full right through to providing payslips for your staff and even physically making the BACS payments into their accounts on pay day. If you are a one man band limited company you may still benefit from setting up a payroll scheme to take advantage of the tax free personal allowance you can pay yourself. We can look at your individual circumstances and advise you on the best course of action.
IF I NEED SOMEONE TO WORK FOR ME ARE THERE ANY ALTERNATIVE WAYS TO PAY THEM OTHER THAN PAYE?
You may be eligible to pay some of your team on a self-employed basis which means they will be responsible for their own tax and NI. We can help you decide if any of your team meet the criteria and ensure that you meet your responsibilities as a business owner.
WHERE IS THERE INFORMATION AVAILABLE TO HELP ME?
There is a lot of information available to help you on HMRC’s website:
We will always be very happy to help you translate any of the technical jargon you find or direct you towards the right section.
DO I NEED AN ACCOUNTANT OR A BOOKKEEPER?
It is not a legal requirement for an accountant or bookkeeper to file any of your statutory documents but when considering doing it yourself we would ask you to consider the following:
- Recognise your strengths and focus on what makes you money
- Understand that the limitations to your knowledge will cost you money in both the lost value of your time and in actual tax paid
- Remember that accountancy fees are tax deductible
HOW CAN I MAKE THE MOST OF MY ACCOUNTANT
If you are not happy with your current accountant it is very easy to switch to us here at Bells Accountants but whether you use us or another accountant please bear in mind the following:
- Utilise free consultations – almost all accountants will offer an initial chat free.
- Get a second opinion if you are unsure about any advice you have been given or feel there might be more ways you can save tax.
- Find a provider that you can talk to and KEEP TALKING!! We want to know about what is happening in your business and it helps us advise you better – for example if you are buying a van or new computer equipment there will be a better/worse time and way to do this in order to make the most of the tax relief available.
- It is very easy to change accountant if necessary – we do all the work and the handover is done between the two accountants.
- Prepare for meetings – make sure you have all your questions written down so you don’t forget something.
- Organise your paperwork – submit everything in good order so nothing is missed and you pay less fees.
- Ask for a fixed pay monthly agreement so there are no unexpected bills – with us all advice is included!
- Brief properly on questions and ask for further explanation if necessary – there is no shame in asking us to explain again if you are uncertain as ultimately you are responsible for your accounts and tax.
- Ask us for help with your bookkeeping, don’t waste time doing it yourself we can help and leave you free to focus on making more money.
- If you need more work ask us if we have any clients we can recommend you to. We are always very busy with deadlines etc but we will always find time to make some introductions to other clients of ours who we think could utilise your services as we want to help your business grow and be a success.
- Ask us for recommendations if you need to! We work closely with many other professions including solicitors, HR advisors, financial advisors, mortgage brokers, experts in business funding, estate agents, debt collectors etc. and can recommend good people to help you.
HOW BUSINESS OWNERS CAN PAY LESS TAX?
Tax is complicated and of course you need to consult with your accountant in order to understand exactly what you can claim for and how to structure your business in the most tax efficient way for you. However, we have tried to collate some common tips that you may not have considered. please ensure you seek proper advice before implementing any of our suggestions though…
If you are a sole trader or a partnership and especially if you pay higher rates of income tax, you may wish to consider setting up a limited company as corporation tax is currently set at a much lower rate!
If you are looking to buy a company car, consider an electric or eco-friendly vehicle as there are lots of tax incentives for these!
If you are looking to purchase a new asset for the business, computer equipment, a van etc. Think about whether it is best to do this via a lease or a HP depending on your business circumstances and also consider the timing of this purchase carefully as there will be a better and worse time in terms of how quickly you will get the tax relief you are owed – just before your financial year end is normally the best time!
Don’t forget to claim for expenses you are incurring personally if they are for business purposes, for example, use of home as office allowance, ongoing training courses, mobile phone bills, mileage in your personal vehicle. Sometimes business owners forget to claim for things they don’t have receipts for but these are still valid costs!
Review how you draw your money out of your business, if you are a sole trader you and your business are the same entity but if you are a limited company director, in order to properly make use of your personal allowance you need to pay yourself the best combination of salary and dividends and this will change every year so needs to be updated in line with the annual budgets.
Consider investing into a pension, there is lots of tax relief available for contributions to a pension scheme and we can introduce you to a financial advisor who can advise and help you with this.
Last but not least, host a party!! Costs of up to £150 per head to pay for an annual staff do (such as a Christmas party) can be tax free for the employees and tax deductible for the company. This can be a way of rewarding staff in a tax efficient manner, and building goodwill across your workforce.