We’re always glad to have a meeting, without obligation, to see what we can do for you.
In the meantime though, you may have some questions:
New start ups
Decisions to be made:
- How do I trade?
- Should I be self-employed or trade through a limited company?
- Do I have to register for VAT?
- VAT Flat Rate Scheme
- VAT Is there any advantage of voluntarily registering for VAT before I have to?
- VAT – are there any disadvantages of being VAT registered?
- VAT – can I claim pre-registration expenses?
- Do I have to register for PAYE (Pay As You Earn)?
- How long do I need to keep my records for?
- What records must I keep?
- What expenses can I claim?
- How do I keep my books and records?
- How much tax do I have to pay?
- When do I have to pay my tax?
- Do I have to file a personal Tax Return?
- What is an audit?
- Do my accounts need to be audited?
- How are dividends taxed?
- Capital Gains Tax – how much do I have to pay?
- Do I have to pay inheritance tax?
How do I trade?
- Sole trader
- Limited liability partnership
- Limited company
- Public limited company
Should I be self-employed or trade through a limited company
There are many factors to consider:
Do I have to register for VAT?
The current VAT registration threshold is £81,000. This means that when your turnover is about to exceed this, then you must register for VAT. You can choose to register prior to your turnover reaching this.
When you are registered, you will have to report your VAT output and input on a quarterly basis to HM Revenue and Customs and pay over any liaibility, by the end of the following month to which the quarter relates.
e.g. your VAT Quarter is January, February and March, you will have to file an online VAT Return Form and make an online payment of any liability by the end of April.
VAT Flat Rate Scheme
Using standard VAT accounting, the VAT you pay to HM Revenue & Customs (HMRC) or claim back from them is the difference between the VAT you charge your customers and the VAT you pay on your purchases.
Using the Flat Rate Scheme you pay VAT as a fixed percentage of your VAT inclusive turnover. The actual percentage you use depends on your type of business.
The Flat Rate Scheme offers simplicity and in many cases tax saving.
Additional information can be found at: –
VAT Is there any advantage of voluntarily registering for VAT before I have to?
If your customers are VAT registered then it does not make any difference to them if you charge VAT, since they will recover this.
From a marketing perspective by not being VAT registered you are telling prospective clients that you are a small business – this may put them off using your services if they feel that you are inexperienced and/or would not be able to fulfil their order, due to lack of resources.
VAT – are there any disadvantages of being VAT registered?
Yes – you have to prepare VAT Returns on a quarterly basis and if you are unable to do it yourself, then you will have to pay a bookkeeper or accountant to get it done on a quarterly basis.
Also, if you do not need to be VAT registered because your turnover is below the threshold, then by being VAT registered you are forced to increase your prices, since you have to add VAT on top. If your customers are not VAT registered then your price increase may make you non-competitive and so you may loose the business.
By being VAT registered you can claim back VAT on your expenses incurred.
VAT – can I claim pre-registration expenses?
Yes – you can claim back VAT on any items of equipment and/or stock that are still in existence and use at the balance sheet date, which were purchased up to 4 years prior to registration and you can go back 6 months for services.
Do I have to register for PAYE (Pay As You Earn)?
if you are a sole trader or partnership and do NOT have any employees, then you do NOT have to register for PAYE.
In all other circumstances, including if you are a one man band limited company, then YES.
Once registered you would have to process your payroll on a monthly, fortnightly, weekly or yearly basis, whichever is appropriate. You would issue your employees with a payslip and pay them the net (after employees tax and national insurance). You would then have to pay the amount deducted from the employees, plus employers national insurance (currently 13.8% – which is calculated on gross salary) over to HM Revenue and Customs by 19th of the following month to which it relates.
At the end of the tax year ie 5th April, you will need to make a statutory declaration Employers Annual Return, summarising the total payments and deductions made to all employees during the year. You would also give each employee a P60 certificate, being their own individual summary.
How long do I need to keep my records for?
Seven years to be safe
What records must I keep?
Your basic records will normally include:
- a record of all your sales, with copies of any invoices you’ve issued
- a record of all your business purchases and expenses
- invoices for all your business purchases and expenses, unless they’re for very small amounts
- copies of business bank and credit card statements
- cheque book stubs and paying-in book
- till rolls or other form of electronic record of sales
- record of stock on hand at the year end
What expenses can I claim?
- If you are a limited company, then the expense must be incurred ‘wholly, exclusively and necessarily’ for business purposes.
- If you are self-employed, then the expense need only be incurred ‘wholly and exclusively’ for business purposes.
- Can I claim the cost of using my car?
Limited company – you may claim a mileage allowance – 45p for the first 10,000 miles and 25p per mile thereafter.Self-employed – yes you should keep record of all expenses and when you prepare your Tax Return you will need to disallow the percentage that relates to personal usage.
- Can I claim expenses for use of home as office?
Yes – in the event of an inquiry, you would need to be able to prove this cost, which normally equates to the additional costs incurred by running your business from home e.g additional light and heat, telephone, rent etc.
- Can I claim for business Entertainment expenses?
No – these are disallowable for tax purposes.
- What if an expense is used for business and personal usage?
As with motor expenses above, you would include all the expenses and disallow the personal usage element.
- Pre-trading expenses – can these be claimed?
How do I keep my books and records?
You can use accounting software such as Quickbooks, Excel (we can provide you with a template) or a manual cashbook.