FAQs
Business Structure & Setup
The choice depends on your specific situation including income level, risk profile, and growth plans. Limited companies offer more personal protection but have increased admin. Most new business start as sole traders and grow into limited companies when they're ready, however if you are ambitious and growth is high on your priority list there can be lots of advantages to being limited. Tax savings alone is not a reason to become a limited company - they are more than offset by increased admin costs. If you aren’t sure book a SWING BY SESSION and lets have a quick chat.
Yes, generally if you earn more than £1,000 from self-employment in a tax year, you need to register with HMRC as self-employed, even if you also have a full-time job. Use this link to check whether you need to register;
You must register for VAT when your taxable turnover exceeds £90,000 in a 12-month period (updated April 2024). You can also register voluntarily if it benefits your business. Turnover is the amount of money your customers pay you before you pay for ANYTHING.
A director runs the company and has legal responsibilities, while a shareholder owns part of the company. In small businesses, often the same person is both.
Financial Basics
At minimum: all income records (invoices, sales), expense receipts, bank statements, VAT records (if registered), and PAYE records (if you have employees). Keep everything for at least 6 years.
Yes! How much depends on whether you are a sole trader or an employee/director of a limited company.
Profit is your income minus expenses over a period of time. Your Cash flow is the actual money moving in and out of your business. You can be profitable on paper but still have cash flow problems. Jungle style: Think of revenue as all the bananas you collect (your total sales). But that's not what you get to keep! Profit is what's left after paying for your climbing gear and tree rental (your costs). And cash flow? That's making sure you have enough bananas when you need them, not just when they're being harvested!
Open a dedicated business bank account, even as a sole trader. Pay yourself a regular amount from business to personal account rather than using business account for personal expenses.
Tax Concerns
This will vary depending on your industry, profit level and structure however SOMETHING is better than nothing and I recommend 15% - 25% of revenue. So every £1 you take in put 15p - 20p in a separate TAX POT!!! Just think how amazing it will be to not be crying into you tea about your tax bill at the end of the year? Secondly did you know you can actually pay your tax early and they will pay you interest on it? So if you are someone who knows the temptation may be too much to bear seeing that money sitting there then pay it over straight away. Out of sight, out of mind.
Self Assessment deadline is January 31st each year for the previous tax year ending April 5th. Corporation tax for limited companies is due 9 months and 1 day after your company's year-end.
You'll usually face immediate penalties followed by daily interest charges and potential additional penalties the longer it remains outstanding. However, and I cannot stress this enough, DO NOT IGNORE IT. If you are having trouble paying or submitting then speak to HMRC. Call them, they are people and a lot less scary than you think. Extensions can sometimes be negotiated and time to pay arrangements set up.
If your mileage, travel, coffee meetings are related to business (and not personal catch ups) then you can probably claim them. How much and whether they reduce the tax you pay will depend on your business structure. I tell my clients - if its business related, record it and tell me about it. I can then explain why or why not it will reduce your tax. That is what I am here for!
Pricing & Growth
Calculate your hourly rate by including direct costs, overheads, desired profit, AND time spent on unpaid admin. Many new businesses significantly undercharge because they only consider their "doing" time. Its also important to take into account VAT, especially if you are a business who is selling to customers rather than other businesses. We have a great VAT calculator included in our downloads. Check it out here.
The easiest way (and I will be honest the way I choose to do it) is to set up pots or spaces in your bank accounts. Every time a client or customer pays you put a small percentage 1% to 2% away in a PROFIT pot. Over time increase the percentage. If you can run your business without touching this money then you KNOW you are profitable (that includes paying yourself remember) 😉
Consider outsourcing when: 1) The task takes you away from income-generating work, 2) Someone else can do it better/faster, 3) It causes you significant stress, or 4) It's preventing business growth.
Common Worries
Stay calm! Most routine inquiries are simply requests for more information. Keep good records, respond promptly, and consider having an accountant represent you. Worried about the cost - did you know that the FEDERATION OF SMALL BUSINESSES (FSB) https://www.fsb.org.uk/ is a low cost membership and includes tax investigation protection at no extra cost. Well worth being a member for.
It's never too late to get organised. Start now by separating personal and business expenses, collecting available receipts, and getting professional help to reconstruct your accounts if needed.
Remember that most businesses start exactly where you are now. Focus on your expertise and gradually build your business knowledge. This feeling is so common it has a name: imposter syndrome!
Accounting Terms Simplified
Bookkeeping is recording day-to-day transactions. Accounting is analysing those records to create reports, financial statements, and strategic advice.
Matching your recorded transactions against your bank statements to ensure everything is accounted for correctly. Think of it as a financial cross-check.
Business costs you can deduct from your income before calculating tax. There are a whole load of complicated rules which your accountant can help with but broadly they must be "wholly and exclusively" for business purposes.
An invoice is a request for payment that you send to customers. A receipt is proof of payment that you receive when you buy something.
Growth & Next Steps
This really depends on your budget and your plans for the future. The right accountant is not just going to tick those compliance boxes but really help you understand those numbers and build growth strategies. Saying that when you are starting out it is normally a BIG expense. Fundamentally if you are a limited company - you need an accountant. If you are a sole trader and need to keep costs down consider doing some additional training for the day to day. My sister company www.cash-clarity.co.uk has loads of affordable help. Most importantly start putting some money away for that future accountant.
Find someone who: speaks your language (not just accounting jargon), understands your industry, offers the services you need, is proactive with advice, and someone you feel comfortable asking "silly" questions. It can be a true partnership.
This will vary accountant by accountant but for me - I want to know about your business goals so they can advise strategically, not just for compliance as well as high level information on how much revenue/expenses you have, what industry you are working in and how you hope I can help you?
What our clients say...
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