Category: News

We’re currently helping a number of clients regarding setting up their own business. It’s important to get it right and there are a number of aspects to consider.

When a business starts up there are a number of different structures under which it can operate. Each has its own implications and their suitability depends on a number of factors. There isn’t a universal answer to what is the best form of legal or tax structure to use and there are advantages and disadvantages with each option. As always with a decision as important as this for your business, you should take professional advice from a qualified accountant before making a commitment.

The two most common trading vehicles are discussed below:

Sole Trader

A sole trader is a type of business entity that legally has no separate existence from its owner. The law makes no distinction between the business and the sole trader – they are one and the same.

If you start to trade as a sole trader, you should inform HM Revenue & Customs (HMRC) straight away and register for self assessment. The very latest you can register is by 5 October after the end of the tax year for which you need to file a tax return.

Advantages

• As a sole trader you will only need to prepare basic accounts and a self assessment tax return. Consequently the accountancy fees tend to be lower for a sole trader as there is reduced administrative burden.
• Many businesses are initially loss making. If you leave a job to become self-employed, and make a loss, you can offset that loss against your previous employment income. If you have other income such as savings interest, dividends, or rental income, then again, the sole trader losses can be set-off against these. This can result in a repayment of tax in the early period of trading. With a limited company, losses cannot be offset against your personal income.
• As a sole trader, you only need to submit information to HMRC. Your sales income, profits and tax affairs are private between you, your accountant and HMRC. Limited companies must file accounts with Companies House which are in the public domain for anyone to see, although the amount of financial information available is usually limited.

Disadvantages

• Because there is no legal separation between the individual and the business, a sole trader is liable for all the business debts and this can put at risk not only assets used in the business but also personal assets too.
• A sole trader business usually ceases on the owner’s retirement or death.
• Options for raising finance are more restricted for a sole trader.

Limited Company

Sole traders and partners can be held personally liable for all business debts but a limited company is a legal entity separate to its directors and shareholders. As a separate corporate body, a company can own property, incur debts, sue and be sued in its own right. Any business dealings are made on behalf of the company so the owners are normally liable only for the amount invested as shareholders. There must be at least one director to manage the business.

Advantages

• Limited liability status provides some protection for you as a director if the business is not successful. In simple terms if a company cannot afford to pay all its debts the directors will not normally be personally liable for them.
• Shares in a company can be created and transferred to divide the ownership subject to company law and the company’s constitution contained in a document called the Articles of Association. Careful consideration must always be given to the tax consequences of any share transfers.
• A company as a separate legal entity survives the retirement or death of its owners.
• A limited company can be perceived as having more credibility making it easier to raise finance. Financing options such as debentures and invoice discounting are available to companies which are not available to sole traders.
• A company can pay dividends to shareholders which can be advantageous in reducing the overall tax payable compared with income paid as salary which is subject to tax and both employee’s and employers National Insurance (NI).
• Limited companies are taxed on their profits at corporation tax rates (typically lower than personal income tax rates) and can offer tax advantages.
• Some business customers may feel more comfortable trading with a limited company rather than a sole trader. They may have a perception that a limited company will be a more established business, and therefore more reliable. The reality of course that creditability is more to do with how you market and present your business and ultimately how effective you are at meeting the needs of your customers.

Disadvantages

• Annual accounts are more complicated to prepare and specific details and disclosures need to be filed with the Registrar of Companies. This usually makes it necessary to use a qualified accountant to prepare accounts for the company.
• Information about the business will be in the public domain for anyone who is interested to see.
• Directors are treated as employees for any salary that they draw and so are subject to income tax and NI on their salary from the company. In addition, the company must also pay employer’s NI on the directors’ salaries.
• Shareholders and directors may have to personally guarantee contracts entered into with lenders or suppliers so personal liability can still arise.
• It can be more difficult and expensive to close or wind-up a company compared to a sole trader or partnership business.
• A company director is more at risk of civil or criminal proceedings or penalties which can arise for late filing of accounts or from breaches of insolvency rules such as those relating to wrongful of fraudulent trading.

Other things to consider:

• Depending on your trade or sector, you may need some form of statutory licence to run your business.
• You must have adequate insurance for the business. If you have employees, you must have employers’ liability insurance.
• Notify HMRC when you begin trading and use an accountant to help you keep your tax, NI and VAT affairs in order.
• You must ensure your premises comply with regulations. If your business is based at home, you need to consider whether your title deeds, mortgage or tenancy agreement places any restrictions on this.
• If part of your home is treated as non-residential there may be tax implications.

If you would like more information regarding setting up your own business, please get in touch, we’ll be delighted to hear from you.

It never fails to amaze me how so many small businesses fail to recognise the real importance of keeping accurate financial records. It is a legal requirement!!

You must update the information regularly – penalties have been introduced for not taking reasonable care with records and tax returns, so you need to keep accurate records. It also helps when obtaining finance and preparing tax returns.

Here’s my Top 10 Tips of how to make lighter work of the bookkeeping:

1. Make sure you obtain or provide an invoice or receipt for every business transaction. If you’re VAT registered, make sure it is a valid VAT invoice or receipt.

2. Get organised. Keep all of your invoices, receipts and bank statements in tidy order. It doesn’t have to be expensive! A simple filing system will do the job. We provide our clients with our own ‘File-It’ folder and there is a section for each type of document and this works very well. Simple.

3. Staple! Many till receipts, such as fuel receipts, are two-part and produce two pieces of paper. It’s a good idea to staple these together so that they don’t get lost. Keep delivery notes and the respective invoices together too.

4. Invest in bookkeeping software that suits the needs of your business. There are many options on the market so have a look around and select what is best for you. The size of your business, business type and whether VAT registered or not will have an impact on your purchase. Software isn’t necessarily expensive and there are some great options available.

5. Training. Make sure you have an idea of what you’re doing. If you’re using software, make sure you understand how to use it and process your bookkeeping entries correctly otherwise you will end up in a mess. Seek help from your accountant, especially when it comes to entering higher value items such as computers.

6. Post all your bookkeeping transactions on a regular basis – little and often is easier than catching up every 6 months and it will make life easier at the end of your financial year. You’ll always have an accurate financial picture of your business throughout the year too, rather than just at the end of the year.

7. When paying an invoice, make sure you make a note of how and when it was paid on the invoice including date, amount and cheque number if applicable. It is important that you can easily trace back how expenses have been paid. If paying by cheque, make sure you enter all the details of the payment onto the cheque book counterfoil too.

8. Keep a clear record of any transactions that cannot be wholly charged to the business because there is also an element of personal use too. Keep a note of this as you should be able to reclaim the business element.

9. Keep business and personal transactions separate. It is advisable to open a separate business account for the business. Many banks offer free business banking for small businesses and this is certainly worth looking into.

10. Reconcile your bank account to ensure all of your bank entries have also been recorded into the accounts.

11. Yes, I know this is No. 11 but it is very important. Make sure you keep your records for at least 6 years in case HMRC need to inspect them for any reason in the future.

As a business owner, keeping on top of the books may not necessarily be the best use of your time. If this is the case, you should ensure that you seek professional bookkeeping support. Keep your records in good order and filed neatly – the less work to be done by the bookeeper, the less money it will cost you!

Finally, HMRC offer some good advice on their website about record keeping and is most definitely worth reading.

Self assessment can be pretty daunting for the newly self employed or even for those who have been self employed for some time and have muddled through! Make sure you’re claiming for all expenses that can be offset against your trading income in order to minimise your tax bill.

Generally, you can claim for expenses incurred that are “wholly, necessarily and exclusively” for the purposes of your work. Even if they’re not incurred exclusively for the business because there is a mix of both personal and business use, you may be able to claim the business proportion – check with your accountant.

Here are some general guidelines:

1. Use of Home. You can claim £4 per week for the additional costs that are incurred by running your business from home. Alternatively, you can claim a proportion of the actual household expenses.

2. Mileage. You can claim 45p per mile (for the first 10,000 business miles) that you travel in your own car. Alternatively, you can claim capital allowances (a form of tax relief spread over a number of years) and a proportion of motor running costs including fuel, insurance, servicing and repairs in accordance with business usage.

3. Telephone. Many self employed individuals utilise their home telephone lines in their business. You can claim a proportion of the line rental and broadband costs in accordance with the level of business usage. Also, keep a note of the telephone calls made and you reclaim the calls as an expense too.

4. Year end accruals. At the end of the tax year, you may have received goods and services within your business that you haven’t actually paid for so they aren’t recorded in your accounts. Keep a record of these expenses as you will be able to charge these to your accounts for the year – this increases your expenditure and therefore reduces your tax liability.

5. Trading Losses. It is normal for new business to make losses in the early years of trading. These losses can be offset against future profits to reduce your tax liability. Other options are available for relieving losses so discuss these with your accountant to establish which is most effective for your personal circumstances.

6. Expenses. Many business owners don’t realise that they can reclaim all expenses that are incurred wholly for the business – these include advertising, accountants fees and office supplies. Business expenses incurred up to seven years prior to trading actually commencing can be claimed too if these expenses were solely for the future business purposes.

7. Capital expenditure. When you purchase expensive items such as tools, equipment, vans or computer equipment, although you cannot claim the purchase cost as an expense, you can obtain capital allowances which will reduce your tax liability. Capital allowances are a form of tax relief which are spread over a number of years.

8. National Insurance Contributions. You will be required to pay Class 2 National Insurance contributions of £2.95 per week when you’re self employed (2018/19) and if your profits are over £6,205. If you’ve been both self employed and employed for a period of time, check that you haven’t overpaid Class 1 national insurance contributions as you may be able to defer Class 4 contributions.

9. Avoid Penalties! Your annual accounts and self assessment tax return should be prepared in advance of the tax return filing deadline which is 31 January. Late returns and tax payments are subject to penalty fines and interest charges and should be avoided.

10. Seek professional advice. Take advantage of the skills of a qualified accountant, with their experience they may be able to find legitimate ways for you to pay less tax and save you money. You may find that the tax savings obtained outweigh the accountant fees. Also, you’ll avoid the risk of incorrectly calculating the tax due and missing the tax return filing deadline!

There are many advantages to operating a limited company but this trading vehicle may not necessarily suit all so make sure you’re aware of the responsibilities before taking the plunge! Be aware that accountancy costs will also be considerably more than a sole trader business.

There are a number of advantages of being self-employed, but you must also comply with various regulations including the tax law.

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 run your business as a sole-trader or as a partnership you are classed as being self-employed.

Tax Advantages

Cash-flow 

As a self-employed person 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 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 £200,000 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 start their own businesses.
• 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.
• Working and child tax credits – you may qualify for these while you run your own self-employed business. 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
You must register as a self-employed person with 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. You can register online:

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

You must register as self-employed even if you make a loss from your business. Every partner in a partnership business must register separately as a self-employed person. If you do not register with HMRC by 31 January 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 owe.

National Insurance
As a self-employed person you must 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
We can help you register with HMRC 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 you business grows we can discuss tax planning ideas with you to ensure your tax bills are kept as low as possible.

What is Bookkeeping?

Bookkeeping is the process that involves keeping proper financial records for your business transactions – otherwise known as one of the biggest headaches to business owners!

Who came up with the bright idea of bookkeeping?

Benedetto Cotrugli is the true inventor of double-entry bookkeeping, although the Italian monk Luca Pacioli is often credited for the invention.

Our all inclusive bookkeeping service was designed to take away all of the stresses faced by so many, for an affordable monthly fee! So although you may be cursing at Benedetto Cotrugli for his invention, you don’t need to worry with ours!

Traditionally the records of each business sale or purchase transaction would have been written into large books, called ledgers, which is where the term comes from. It’s still possible to keep paper records but it’s far easier and efficient to use bookkeeping software such as Xero.

All businesses need to maintain good bookkeeping records – it’s the law. This applies to limited companies, partnerships and sole traders. Proper financial record keeping will enable you to manage your business more effectively, not to mention the legal requirement to keep your business’ financial records for a minimum of 6 years.

Do I really need to keep bookkeeping records?

Yes! All businesses need to keep accurate records of their financial transactions. It is a legal requirement and keeping good financial records will also tell you a great deal about how your business is performing.

The good news is that with the use of todays’s technology, bookkeeping doesn’t have to be a chore!

By maintaining good bookkeeing records you should easily be able to determine the following:

• how much money you are making
• how much and where you are incurring your biggest costs
• whether your business is making a profit or a loss
• how much cash you have in the bank
• who owes you money, and if you owe any
• when you can pay your bills
• if you’re getting near the VAT threshold and need to register for VAT
• figures that will be included in your tax returns
• information you need to report to any investors or shareholders
• how efficiently you are running your business and whether you need to make any changes to improve its performance

If you’re experiencing any of the following, then your books aren’t doing what they should be and you will undoubtedly benefit from some bookkeeping support!

• you’ve lost track of what you’re spending and what you’re earning
• your receipts have been buried in the shoe box for so long you’ve forgotten what they’re for!
• your cash flow is suffering because you’re taking too much time to issue invoices
• you have no idea how much money is still outstanding from your customers
• you have a backlog of paperwork
• paperwork is taking up too much of your time
• you struggle getting the right figures for your tax return or VAT returns
• you just don’t like doing the paperwork and have better ways to spend your time

I don’t know where to start!

Feeling overwhelmed by maintaining the books is normal. Business owners who don’t have the time, the skills, the inclination or the right staff to ‘do the paperwork’ should consider appointing a professional bookkeeper. If your paperwork is in a mess and you don’t have a clear picture of your financial position, you should definitely get some help pretty quickly! Bookkeeping and accounting services are easy and practical to outsource if you don’t want the hassle yourself.

What our bookkeeping services does…

Your books should show details of all the money coming into and out of your business and split accordingly into sales revenue and expenditure.

Using cloud based software, we will record your sales invoices and receipts. Each transaction will be recorded with the date, amount, VAT (if applicable), the name of the supplier or customer. Purchases and expenses will be allocated to an expense category that helps to analyse the business costs such as rent, stock, insurance etc.

Managing the Bank Balance

Each month we check that the amount of money in your business bank account is correct and agrees to the transactions recorded in the accounts for the business. From the previous month’s bank balance, we will add all the sales income for the new month and deduct all of the payments that have been made. The total should then equal the amount in the business bank account. If the bank balance does not reconcile with the information in the accounts then we’ll work with you to work out where the error is and rectify it.

Our flexible bookkeeping service includes all of the following:

Maintaining your sales ledger(the goods/services you’ve sold)
– properly log each transaction
– create and send sales invoices and credit notes
– create and send customer statements
– chase unpaid invoices

Maintaining your purchase ledger (the goods/services that you’ve purchased)
– properly log each transaction
– record and file purchase invoices and credit notes
– record petty cash and employee expenses claims
– check supplier accounts and prepare payments at the appropriate time

Other aspects
– Reconcile your business bank account
– Prepare your Vat returns
– Prepare your management reporting and accounts (so you know how your business is performing)
– Prepare your annual business accounts
– Payroll services

The benefits of using a professional bookkeeping service:

– saves you time, enabling you focus on the core activities of the business
– help you avoid mistakes
– give you peace of mind knowing your paperwork is being done properly
– give you accurate and up to date information on your business performance
– speed up the completion of your VAT returns, annual accounts and tax returns
– help you avoid late filing penalties with HMRC and Companies House
– provide you with a reliable and confidential service

As well as the bookkeeping, we can also produce your annual business accounts and relevant tax returns to ensure that you meet all of the statutory deadlines and most importantly that all available tax reliefs are claimed and you pay only what is necessary!

This checklist is for general guidance only. It considers key issues involved in starting up a new business but please seek advice tailored to your own circumstances.

1. Check out what guidance and resources are available for new businesses.For example, https://www.gov.uk/business-support-helpline
2. Decide on the business structure – sole trader, partnership or limited company
3. Research a business name and make sure it’s available to use
4. Research your business idea – does anyone want your services? Check out the competition. What’s your USP?
5. Where are you going to operate your business from? Home or premises based and what are the costs?
6. Prepare a business plan – include the business objectives, strategies, it’s market and financial forecasts. Seek help with this if you’re unsure where to start.
7. How much money do you require to set up? Decide how you are going to finance your start-up business. Bank loan? Grants?
8. Write a marketing plan. How are you going to target your potential customers and win business?
9. Ask friends and family for help. Get independent feedback on your business plan as others can often see things that aren’t obvious to you.
10. Speak to others who have set up their own business and learn from their experiences. A business mentor can be invaluable!
11. Seek professional legal advice – do you need formal documents such as shareholder agreements, trademark registrations or terms and conditions for your customers? If you’re going to employee staff, make sure you’re up to speed on employment regulations such as national minimum wage, sick pay and holiday pay. Employees will also need an employment contract.
12. Seek professional accountancy advice – do you need advice on bookkeeping and tax? Do you need to register for VAT? You will also need to run a payroll if employing staff. Get some early tax planning advice as well!
13. Select and open a business bank account. Key things to consider are transaction and borrowing costs, facilities offered and the type of relationship you want from a bank.
14. Arrange the necessary insurances for your business such as public liability and business property.
15. Make sure you register with the necessary authorities which are relevant to your business and obtain the relevant licences.This may include data protection and professional or trade bodies.
16. Put your IT and business telephone line into place.
17. Organise your website and email address.
18. Order your business stationery such as business cards.
19. Start trading and enjoy!
20. Review your business plan regularly to make sure the business is meeting the initial aims and objectives.

The summer holidays often bring a few familiar challenges — juggling workloads, family time and maybe even the odd “I’m bored” from your teenager. If you run your own business, you might have wondered… Can I pay my child to help out during the summer break? If you run your own business, you might have wondered… Can I pay my child to help out during the summer break?

The short answer is yes — but only within specific rules.

Let’s break down exactly what you need to know if you’re thinking of employing your school-age child over the holidays — whether it’s for admin support, deliveries, cleaning the office, or helping with your socials.

What’s Allowed?

Children aged 13 and over can be employed part-time — including during school holidays — but not before they reach 13.

Your local council sets the detailed rules (and issues permits), but the general framework is governed by the Children and Young Persons Act 1933.

You must apply for a child employment permit from your council before they start work. No exceptions. This applies even if it’s your own child.

Summer Holiday Working Hours

There are strict limits on how many hours they can work, even during the school holidays:

Age 13-14 – Maximum hours per day (Mon-Sat) 5 hours. Maximum hours on a Sunday, 2 hours. Maximum weekly hours, 25 hours.

Age 15-16 – Maximum hours per day (Mon-Sat) 8 hours. Maximum hours on a Sunday, 2 hours. Maximum weekly hours, 35 hours.

Important: They must also have at least 2 full weeks off during the summer holidays – a rest period that must be uninterrupted.

What Work Can They Do?

Children must not be exposed to risk, and certain types of work are banned. These include:

• Commercial kitchens or food preparation in restaurants

• Industrial sites, construction, or warehouses

• Work involving chemicals, dangerous tools or machinery

• Collecting money or selling door-to-door

• Anything with adult content, gambling or alcohol

For most business owners, simple admin, stock checking, filing, packaging, content scheduling, or tidying workspaces can be appropriate — but you must carry out a risk assessment and be sure the environment is safe and age-appropriate.

Wages, Tax and Payroll

You’re allowed to pay your child a wage, but let’s get real: this isn’t a tax dodge, and HMRC will expect it to be reasonable, justifiable, and clearly documented.

• Children under 16 are not entitled to the National Minimum Wage, and usually don’t trigger PAYE or NIC obligations.

• Once they hit 16, they must be paid at least the NMW (£5.28/hour in 2025–26), and payroll, PAYE and NI rules apply.

• Regardless of age, they must be added to your payroll system and receive payslips.

• You cannot pay them cash-in-hand or fudge the hours. HMRC doesn’t care if you’re related — they want records.

Tax Tip: Wages paid to your child can be tax-deductible for your business if the work is real, the amount paid is commercially reasonable, and you keep records of hours worked and tasks completed.

Insurance, Risk, and Admin

Before they start:

• Apply for a work permit from your local council (you’ll need their school’s consent too).

• Complete a risk assessment.

• Check your employer’s liability insurance covers employees under 18.

• Make sure they’re properly supervised, trained and understand their tasks.

• Keep everything documented — hours, pay, tasks, permissions.

Can You Employ Your Own Child?

Yes — but it’s a red flag for HMRC if it’s not done by the book. You must treat them exactly as you would any other employee:

• No overpayment

• No made-up hours

• Clear duties

• Real supervision

• Proper records

That also means paying them through payroll, not in cash or gifts.

Golden rule: “Wholly and exclusively for the purposes of the business.” If HMRC sees it as personal, not business, they’ll disallow the expense.

Final Thoughts

Having your child help out during the summer holidays can be a brilliant way to teach them the value of work — and yes, reduce your tax bill if done properly. But this isn’t something to fudge.

Whether it’s your child or someone else’s, the rules around employing school-age children are strict for good reason — and the consequences for getting it wrong aren’t worth the shortcut.

Students must be paid at the appropriate minimum wage for their age which can be found on the Gov.uk website.

If you want to explore this properly — or need help setting it up correctly — get in touch. We’ll help you do it the right way, with no surprises down the line.