Delving into taxes when it concerns your business can always be a daunting time, and it is not always the most exciting part. However, it always needs to be dealt with at some point. To help you get started, we have gathered a few little tips to guide you on your way.

In this day and age, dealing with taxes can be complex. And whether your business is just starting out, or has been around for a few years, it can always be tricky to establish what is available to you, what you are entitled to, and your financial affairs. Before we get started if you are looking for some in-depth tax-saving tips from online accountants, then have a look at our range of free resources from special tax reports, tax calculators, and tax helpsheets. We can even email these directly to you (promise we won’t spam you).

1. Meet Deadlines and Stay Organised

One of the first and most important tips we can give you is to always meet your deadlines. Organisation is essential to any workplace. Any delayed filing with Companies House paperwork (confirmation statement), HMRC, FCA, and other regulatory accounts, can result in fines and other consequences. For a business, this can have devastating impacts as can affect your credit rating and banking commitments.

There are many documents you need to keep organised when you are running a business and keeping organised will reduce any hassle. It is also a great idea to map out future dates you need to be aware of. For instance:

Furthermore, make sure you always keep a copy of your documents, such as invoices and receipts in a safe place. According to HMRC, these business records need to be kept for six years, so keep them secure and protected. Also, records and receipts are needed from HMRC to expense claims or input VAT amounts, so make sure your business keeps proper supporting records.

2. Claim Anything You Are Entitled To

Make sure you claim anything you are entitled to such as ‘Capital Allowances’ to help with your business rates. Our friendly group of online accountants can talk you through this. Capital allowances can be claimed against taxable profit, meaning you can receive a reduction in capital expenditure such as business equipment. For example, there are:

AIA is available for British businesses, and is a form of tax relief designated for the purchase of business equipment. AIA applies to businesses of any size, and allows an immediate deduction against profits for capital expenditure up to a certain limit. Most businesses can claim on a portion of expenditure to most types of plant and machinery (except cars).

ECAs encourage business to invest in efficient and environmentally friendly equipment. This scheme allows you to claim 100% first-year allowances such as tax relief in efficient technologies. This will not only reduce investment costs, but your environmental impact. All in all, this will improve your cash flow and the time it takes to pay back your investment. However keep in mind, this can only be claimed for new plant and machinery, not second-hand or used.

Make sure you do some research to find out exactly what you are entitled to. There are multiple options out there that will benefit you and your business, to which you are 100% entitled to.

3. Working From Home?

If you are working from home, or a self-employed business owner you may be able to claim tax relief for:

Furthermore, you can claim a fixed nominal sum of £6 a week with no evidence of your extra costs. There can be many generous tax savings for those of you who work from home. So make sure you research and are aware of them.

4. Be Aware of Illegal Dividends

Dividends are payments for shareholders, directors, or investors for buying the company’s shares or stocks. Any company can pay dividends from retained profits after paying corporation tax and have met all liabilities. However, be aware of illegal dividends, or ‘Ultra Vires’. This can occur after declaring expenses based on bank balance rather than profits, yet dividends should only be paid from profits. Unfortunately, this is not unusual and can result in an overpayment and is costly to sort out at a later date.

5. Talk To Us

Of course there is a lot of information out there which is time consuming, as well as being tricky to navigate. Here at CloudBook Online Accountants, we want to make your life easier. We will work with you from the start to the very end of the year and will assist and support you every step of the way. Whether you are a UK based sole trader, small or medium business owner or property investor. We will help get your finances on track and help you stay organised with an easily reachable, friendly and qualified online accountant.

So, we hope you have discovered some new information about tax and your business. Get in contact with us if you have any questions, or are interested in any services from our online accountants.

This helpsheet gives you an outline of what you need to do when going self employed, and what it really means. There are a number of advantages of going self employed, but you must also comply with various regulations including the tax law and you must register as self employed with HMRC.

Form of Your Business

When you decide to work for yourself you need to choose which form your business will take. The most common forms of business are:

  • Sole-trader – you run the business on your own, usually under your own name;
  • Partnership – you and one or more other people jointly run the business;
  • Limited liability partnership – a special type of partnership that gives you and the other business owners more protection from creditors;
  • Limited company – an organisation that you own and control, which carries out the business on your behalf.

If you start your business as a sole-trader or as a partnership you are legally going self employed.

When you choose to start your business as a limited company you will normally be a director and an employee of that company. You will be employed rather than self-employed, but in practice you will work for your own business.

It is important to understand the difference between being employed by your own company, and being self-employed, as it will affect the tax you pay, and the regulations you have to comply with. This helpsheet deals only with the advantages and regulations of being self-employed.

Tax Advantages Of Going Self Employed

Cash-flow

Once you register as self employed you only have to pay income tax twice a year on 31 January and 31 July. This means you can hang on to your money for longer than an employee who has tax deducted under PAYE from every pay packet.

You must make sure you have the money ready to pay the tax when it is due as you will be charged interest on any tax paid late.

If you work in the construction industry you may have tax deducted from each of your sales invoices by the contractor you work for, under the Construction Industry Scheme (CIS). You may be able to reclaim some of the CIS deductions each year when you submit your tax return.

Expenses to Claim

  • The cost of any goods or services you use fully for your business (sometimes even if you paid for them before going self employed) can be deducted from your sales revenue for tax purposes. Where an item is used partially for your business and partly for private purposes, such as your private car or home, you can claim the business proportion of the costs against your business profits. However, you must be able to justify the business proportion with evidence such as the miles driven, or space used by the business.
  • Capital allowances – if you purchase an item that is expected to last several years, such as a van, you can claim a special deduction known as a capital allowance. The first £250,000 you spend on equipment each year qualifies for 100% capital allowances in the year of purchase. This does not include cars.
  • Loan interest – if you take out a business loan the interest paid on that loan can be deducted from your sales revenue. The loan must be taken out to fund your business, rather than a personal loan or credit card borrowings.

Government Support

  • Government funding – if you live in an area in the UK that has been designated as a regeneration area you may qualify for a government funded programme to help people going self employed or starting their own company.
  • Charitable support is also available from the Prince’s Trust throughout Britain for those aged 18 to 30 who wish to start their own business.
  • Self-employed credit – if you have been registered as unemployed for at least six months you may qualify for a self-employed credit of £50 per week if you start your own business. Ask at your local Jobcentre Plus office for more details.
  • Working and child tax credits – You may qualify for these after going self employed. Your tax credit award is based on your family’s joint income including your self-employed profits, but it will also be determined by the number of hours worked by the adults in the family, and the number of children aged under 16.

Your Tax Obligations

Tell the Taxman

When you start your own business you must register as self employed with the Taxman (HMRC). It is best to do this as soon as possible after you start to charge your customers for the goods you sell or for the services you provide. There are a few ways to register as self employed…

You must register as self employed even if you make a loss from your business. Every partner in a partnership business must register as self employed separately. If you do not register with the Taxman by 5th October following the end of the tax year in which you started your business you may be charged a penalty of up to 100% of the tax and national insurance you do not pay as a result of the failure to notify.

National Insurance

If you’re going self-employed you will need to pay two types of national insurance contributions (NICs) known as class 2 and class 4.

Tax Returns

You must complete a self-assessment tax return every year to report the income and expenses from your self employed business and any other income you have to the Tax Office.

Register for VAT

When your sales for 12 months reach the compulsory VAT threshold, you must register for VAT within 30 days.

How We Can Help You

If you’re thinking of going self employed or already have done, it’s never too soon or late to talk to us. We can help you register as self employed with the Tax Office for tax, national insurance and VAT. We can show you how to keep accurate records for your business and complete tax and VAT returns. As your business grows we can discuss tax planning ideas with you to ensure your tax bills are kept as low as possible.

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