Top 4 Tips for Your New Company
So, you’ve decided to open your own business, but have you prepared for your admin requirements? Here are my top tips for you to consider before you start trading:
- How will you keep track of your income and expenses?
There are various ways to track your income and expenses, but ideally you should consider an electronic way of recording your financial details, either by using a spreadsheet or a cloud-based software package. Particularly with the impending roll out of HMRC’s Making Tax Digital legislation over the next few years, any submissions to HMRC will need to be made electronically, so you might as well be prepared in advance to comply with the new legislation. (For more information on Making Tax Digital, click here: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital. I’d recommend you keep your income and expenses updated weekly, as every invoice and expense should be logged to make sure you pay the correct amount of tax. This will also help you to maximise your cashflow.
2. Will you employ staff and how will you pay them?
If you need to employ staff, you’ll need to pay them in accordance with HMRC’s regulations. If you have people working for you, they should either be self-employed and invoice you for their services or you should register as an employer with HMRC and run a payroll. A cloud-based software package will allow you to do this easily enough and it will make the relevant submissions to HMRC for you, but if you don’t want to run the payroll yourself, you can obtain payroll services from a payroll bureau, who will charge you a fee to process the payslips and submissions for you.
3. Should you be VAT registered?
Unless your new company will be likely to have a turnover of over £85,000, it is not a legal requirement for you to be VAT registered. However, it could be to your advantage to do so, especially if you have extensive set up costs, where the receipts/invoices show an amount of VAT paid that you can reclaim. You should remember, however, that if you want to claim VAT back, you’ll also need to charge VAT on all your sales, regardless of whether your client is VAT registered or not. You’ll pay to HMRC the amount of VAT received, less the VAT you are claiming back from your expenses, keeping the difference as extra income for your company. If you register for VAT, you’ll need to submit VAT returns quarterly. This can be completed via the HMRC website or cloud-based accounting software usually has a facility for submitting this directly from it. For further information on being VAT registered, click on this link. https://www.gov.uk/vat-businesses
4. Do you have a bank account to receive payments into?
If you have a limited company, it is a legal obligation for you to set up a business bank account to be paid into. However, if you’re self-employed , whilst it is recommended that you have a business account, it isn’t a legal requirement. You can use a personal account for your self-employment, but you should not use your own current account that you use for your personal bills and expenses. You should use a separate account, otherwise that birthday money that you banked will be classed as business income in the eyes of HMRC and taxed as such. Set up a separate account from the outset, keeping your business and personal finances separate.
Once you know the answers to the above questions, you can then put things in place from the outset of your business activities. If you decide to take the cloud-based accounting option, I’d recommend FreeAgent. https://www.freeagent.com/ Out of the software packages I’ve used, this is the most user-friendly, specifically aimed at those who are self-employed or who are contractors through their own limited company. As standard, you can send invoices, run payroll, complete VAT returns and Self Assessments directly from the software. If you don’t want to do your own admin, AVA Solutions can help you, either by compiling and updating spreadsheets for you, or updating your cloud-based accounting package on your behalf. Contact us today for a quote by emailing firstname.lastname@example.org