Top Tips For...
During those early stages of a business, it may not be financially viable to outsource all your accountancy services. Make a list of what you require (for example, Payroll, book-keeping, self-assessment) and then decide which ones you could maintain in-house. A good accountant will help you set up internal systems and provide training should you wish to do some of the tasks yourself.
Many individuals who need to register, think they are excluded. The main culprits are:
- People who have hobbies selling goods on eBay or Facebook.
- Landlords who make a loss or rent out their family home.
- Individuals making only small amounts from self-employment (for example an employed hairdresser who does extra appointments in the evening).
HMRC will issue you a Unique Tax Reference (UTR) and set up a self-assessment account for you. You will need to give this number to your accountant, so they can register to be your agent and deal with HMRC on your behalf.
Speak to your accountant to devise a system for calculating tax throughout the year. A growing business is at high risk of increased tax liabilities each year. The last thing any business needs is an unexpected tax bill
SOLE TRADER BUSINESSES
If you keep on top of your record-keeping, it will be much easier and quicker to produce your year end accounts and tax return. Set aside time each week or month to update your records and keep all your paperwork and receipts in one place.
Go through your bank statements and highlight any transactions which you don’t have the necessary paperwork for. With more and more transactions being done online, it is much more common for small businesses to have missing invoices for online orders.
HMRC allow businesses to claim flat rate expenses to simplify their accounts.
The main three are:
- Mileage – claimed at 45p for the first 10,000 miles (reduced rate after).
- Laundry cleaning – different rates available depending on industry.
- Use of home as office – different rates depending on hours a month worked from home.
If you are planning to purchase large capital expenditure items, consider the timing of the purchase so they fall in the tax year which creates the biggest tax saving, or reduces your tax bill sooner.
Self-assessment returns are due to HMRC almost 10 months after the tax year finishes (31st January of the following tax year). Any remaining tax due is also payable on this date. If you file your return nice and early, you will know the tax balance outstanding way before the payment deadline. Doing an early submission is also likely to reduce the anxiety and stress that some clients experience when they leave it until later. You will also avoid a late filing penalty.
Record all expenditure – even if you are not sure if its allowable
If in doubt about what to claim the best option is to speak to your accountant. However, if this isn’t convenient, make sure you keep a record of anything you are unsure of. When you accountant goes through your accounts at the end of the year, they will remove anything that is not allowable. It’s best to record it and then have it removed than to miss allowable expenditure items.
If you are VAT registered, move onto a computerised accounting package
All VAT registered businesses will need to use computerised accounting from 2019 to comply with ‘Making Tax Digital’.
If you have an accountant, get them to contact HMRC on your behalf
Trying to call HMRC can be a frustrating and time-consuming process. It can be difficult to get through to the right department and waiting times can be long. Your accountant will have access to their Agent Dedicated Line which has short waiting times and staff who can deal with most self-assessment and PAYE queries for individuals.
Many of the top tips for Sole Traders are also relevant for Limited Companies. However, here are some more top tips which are specific to Limited Companies only.
Limited companies can have up to 19 deadlines within a 12-month period. Make sure you have a good system for managing these, so you don’t get into trouble with HMRC or Companies House. If you have an accountant, they will manage these deadlines for you.
You should work out the most tax efficient method for extracting money from your Limited company. The main options include salary, dividends and pension contributions and finding the right mix of each could have a huge impact on the tax payable. If you have an accountant, they will be able to do the calculations for you.
Try to limit the amount of personal transactions through your business account and vice versa – it keeps everything tidier and more straightforward ready for the year end accounts.
PAYROLL & Auto-Enrolment
Payroll legislation changes frequently, and it is important to keep on top of the rules, so your employees are treated fairly and you don’t get into trouble. HMRC publishes Employer Bulletins six times a year and we suggest registering for their email alert which will notify you when new bulletins are available.
Follow the link below to register https://public.govdelivery.com/accounts/UKHMRCED/subscriber/new?preferences=true#tab1
The law on workplace pensions has recently changed for all employers with at least one member of staff. Employers are now required to:
- Have an appropriate pension scheme.
- Assess their workforce monthly and arrange for some employees to be automatically enrolled in the pension scheme.
- Pay pension contributions into the scheme.
Read our Employers Guide to Pension Auto-Enrolment for more information.
Due to the complexities and ever-changing legislation regarding payroll and auto-enrolment, we would highly recommend you outsource this function. Getting an expert to handle your payroll administration is by far the safest and most cost-effective solution for most employers.
If you feel that you have the skills and knowledge to run your own payroll, then it is vital that you pick a good software provider which is HMRC approved. HMRC do provide their own, free software but it’s not user friendly and its function is limited to only the basics. Good software is available from £65 per year. Please contact us if you want some advice on choosing a good software package.