TIPS FOR NEW BUSINESS START-UPS
Whilst entering the world of being your own boss is extremely exciting, Your Tax Shop would like to take this opportunity to introduce you to the regulations that running your own business may bring so that your transition is as smooth as possible, and you can concentrate on growing your new business venture.
Your Tax Shop understands that whatever the size or structure of your business, the idea of dealing with Company Accounts and Tax Returns can all seem daunting and overwhelming at first.
Here’s a few of our tips that you may want to consider:
When do I have to register with HMRC?
Your Tax Shop can confirm that you’ll need to register with HMRC as soon as you start to trade or operate your business. We understand that it may not be the first thing on your to-do-list, however, the best approach is to register with HMRC sooner rather than later to avoid any unexpected overdue deadlines.
You can do this yourself online at https://www.gov.uk/log-in-register-hmrc-online-services/register. Alternatively, if you’re struggling to understand the set-up process, do not hesitate to get in touch with one of Your Tax Shop’s friendly staff, who would be more than happy to help!
Should I set up as a Sole Trader or Limited Company?
Your Tax Shop advises that the simplest of structures is a sole trader. There is no formality to setting up as a sole trader as there is no distinction between you and your business. Other than registering with HMRC, you basically just get started. Your Tax Shop can inform you that the maintenance and costs of running a business as a sole trader tends to be less than that of a limited company.
A limited company is classed as a separate entity in the eyes of the law, meaning that it is very important to keep the financial affairs of the business completely separate from your own finances. Your Tax Shop understands that you would therefore also be required to set up a business bank account. The ownership of a limited company is set out by the way shares are allocated to shareholders. The shareholder(s) appoint director(s) to run the business on their behalf. Directors have legal obligations in which they must keep the accounting records and file Company Accounts on time to Companies House.
Your Tax Shop often finds the shareholder and director to be the same person, as is often the case in a ‘one-man band’ business.
What taxes will I be expected to pay?
Your Tax Shop can confirm that tax is calculated and paid based on the profits (income less allowable costs) from your business. The business structure that you operate under (Sole Trader or Limited Company, as mentioned above) will determine the tax that is due.
In the past, Your Tax Shop has understood the attraction of a limited company to be enhanced due to lower taxes on profits. With the introduction of Dividend Tax and the recent reduced Dividend Allowance, this advantage is now less favoured for may unless you are making larger profits. Due to this, if you are unsure of what your profitability may be, then Your Tax Shop advises that operating as a Sole Trader may be your preferred route initially.
What’s the deadline for filing my Company Accounts and/or Tax Returns?
Alongside the day-to-day running of your business, Your Tax Shop cannot stress enough how important it is to keep on top of your filing deadlines and responsibilities. Generally, HMRC and Companies House, for limited companies, will write to you about your deadlines. Due to this, it is important that you have told the authorities about any changes of address.
If you’re self-employed as a Sole Trader, Your Tax Shop can verify that you will need to file a self-assessment by the 31st January following the end of the tax year (5th April). The tax is also due by this deadline therefore we advise for you to plan ahead and get your tax calculated well before the deadline, so you know exactly how much to pay in advance.
For Limited Companies, the Company Accounts will generally be due at Companies House 9 months after the year-end, or 9 months after the date of registration of the company, if in the first year of trading. The Corporation Tax then must be paid to HMRC within 9 months and 1 day after the end of the year.
Your Tax Shop also advise that if you are a director of a Limited Company, you are required to file a self-assessment, to declare any additional income or dividends taken from the Limited Company and you may end up having to pay additional tax.
Your Tax Shop, based in Ashton-under-Lyne, is renowned for stepping away from the typical accountancy stereotypes of being daunting and boring, by introducing new, innovative ways of caring for our clients and offering them simple, easy-to-understand business advice. We take great delight in offering an exceptional level of client care and are always on hand to help as your business flourishes and grows!
Want some further information on this topic? Contact us today on 0161 339 5689 or book an appointment!