Frequently Asked Questions

If you’re a sole trader, it means you are self-employed and running your business as an individual.  

In legal terms, a sole trader and their business are counted as one and the same, which means you are personally responsible for every aspect of your business, including debt.

However, being a sole trader also means you can keep all of the profits your business makes (once you’ve paid the right tax, of course!)

Registering as a sole trader is as simple as informing HMRC that you are self-employed, and that you will pay tax through Self Assessment.

You can use this link to register for Self Assessment.

A limited company has a legal structure that separates the business from its owner(s).  

So, if you own a limited company, you are not personally liable for its debts, or any legal action taken against it.  Your responsibility is ‘limited’, usually to the value of the shares you hold, or the amount of money you invested into the business.

There are different types of limited company, so before setting one up, you should research your options carefully.

If you’d like some personalised advice about setting up a limited company, you can arrange a complimentary, half-hour Discovery Call with me here.

You can use this link to set up your limited company with HMRC online, step by step.

You can also register by post to Companies House.  Download the forms here.

If you register your limited company online, the process can be completed within 24 hours.  Postal registrations can take between 8-10 days.  

The main difference is that a sole trader ‘is’ their business, which they run as an individual.  A limited company is a separate entity from its owner(s). 

Read my related blog post: Sole Trader or Limited Company?

This is one of the most common questions new business owners ask.

Unfortunately, there is no easy, ‘one size fits all’ answer. 

The right structure for you depends on a range of factors, including the type of business you are setting up, your future growth plans, and how you want to manage your finances.

If you’d like some personalised advice about which business structure to choose, you can arrange a complimentary, half-hour Discovery Call with me here.

Read my related blog post: Sole Trader or Limited Company?

A cashflow forecast is a simple plan to show how much money a business expects to both receive and pay out, over a defined period of time.

An effective cashflow forecast takes account of sales activity, income, and expenses.  Business owners can use their forecast to help them answer key financial questions, such as whether they can afford to recruit a member of staff, or rent a new workspace.

Management accounts are a set of financial reports that provide an overview of business performance. Typically, they include details about turnover, overheads, profits, cashflow information, and expenditure.

There is no legal requirement for companies to produce management accounts, but they can provide clear financial insights that help business owners make informed decisions.

A business plan is a written document that helps you clarify your business idea, by setting out its goals and objectives, identifying potential issues, and explaining how you will measure your progress over time.

Your business plan doesn’t need to be lengthy or complicated, but writing one can help you secure a loan or investment, as well as helping you find the right external support.

Although HMRC requires business owners to separate their business and personal transactions, if you’re a sole trader then there is no legal requirement to open a separate bank account for your business. However, I would always recommend that you do.

As limited companies are separate entities from their owner(s), you will need to open a business bank account to manage its finances.

Start setting a simple budget for your business by examining your sources of income, then taking a look at your costs, both fixed and variable (a variable cost is a regular payment with a fluctuating amount, such as travel costs.)   

Don’t forget to include one-off payments, such as training courses or technical equipment.

Read my related blog post: Why You Need A Survival Budget.

The deadlines for paying your tax bill are usually 31st January for tax owed for the previous year and your first payment on account, and 31st July for your second payment on account.

Your tax return deadline is 12 months after the end of the accounting period it covers, while your corporation tax deadline is usually 9 months and one day after the end of the accounting period.

There are penalties for late filing, so make sure your calendar is up-to-date – or alternatively, ask an accountant to prepare and file your returns on your behalf.

Making Tax Digital (MTD) is a government initiative that intends to make it easier for businesses to calculate and pay the right amount of tax, by moving the process online.

I’ve written a short blog post about how MTD may affect your business – read it here.

Read my related blog post: Making Tax Digital May Be About To Affect You.

IR35 is complex tax legislation designed to make sure that on-payroll and off-payroll workers are taxed fairly, so that a contractor pays the same tax and National Insurance as an employee would.

If your company uses the services of freelancers and contractors, or you are one yourself, IR35 rules could apply to you.  If you’d like to discuss IR35 further, you can arrange a complimentary, half-hour Discovery Call.

Currently, you must register for VAT once your VAT taxable turnover (which is the total value of everything you sell that is not exempt from VAT) exceeds £85,000 in a rolling 12-month period.

You can register your business for VAT with HMRC here.

You can register your business for VAT voluntarily at any time, whether or not your business meets the required VAT threshold (currently £85,000).

Once you’ve registered your business for VAT, you’ll need to choose a scheme that tells HMRC how much VAT you’ve charged, and how much VAT you’ve paid.

The standard VAT accounting method will usually apply, but there are other schemes that include cash accounting, annual accounting, and flat rate, that may be more appropriate for your business.

If you’d like some personalised advice about which VAT scheme to choose, you can arrange a complimentary, half-hour Discovery Call with me here.

Each VAT scheme is designed to help simplify the VAT process for small businesses in different ways.

The best one for your business will therefore depend on a number of factors, including turnover and business structure.

If you’d like some personalised advice about which VAT scheme to choose, you can arrange a complimentary, half-hour Discovery Call with me here.

You won’t generally need to register as an employer if your employee(s) earn below the Lower Earnings Limit of £120 per week.

Otherwise, you must register as an employer with HMRC and operate a payroll scheme. You can begin this process here.

If you’d like some personalised advice about how and when to register as an employer, you can arrange a complimentary, half-hour Discovery Call with me here.

Most businesses that employ workers will need to operate an auto enrolment pension scheme, which is a government initiative that helps people save for their retirement.

Current eligible workers for auto enrolment are aged between 22 and state pension age, who earn at least £10,000 per year.

For up-to-date guidance, visit The Pensions Regulator or contact your accountant.

Salary and dividends are different ways for company directors to pay themselves from their company’s income.  

Taking a salary involves a regular payment via the company payroll, while a dividend is a share of the company’s profits.

There are advantages and disadvantages to both.  Taking a salary offers a level of ongoing financial security, since payments are made whether or not the company makes a profit.  However, dividends are usually more tax-efficient.

If you’d like some personalised advice about how best to pay yourself, you can arrange a complimentary, half-hour Discovery Call with me here.

Switching accountants is an easier process than many people think.

You will need to write a termination letter to your current accountant, then formally register with your new one (they will send you a form to complete for this) to authorise them to deal with HMRC on your behalf.  

This step can also be managed via HMRC’s online authorisation service

Your new accountant will then write to your previous one, to request a transfer of the information required to manage your accounts.

Read my related blog post: Is changing your accountant difficult?

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