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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!

We’ve appointed new clients recently who had no idea of the legal requirements when paying dividends.

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.

Your responsibilities as Director…

The tax man may be more generous than you think! If you’re a sole trader, partnership or limited company you can claim a tax allowance known as a capital allowance.

When you buy items of equipment and tools for your business, typically items that will be utilised over a period of time, you cannot claim them as a business expense in your accounts. However, you may be able to claim capital allowances. These items are usually regarded as business assets and may include computer equipment, machinery, furniture and even vans and cars. There are various forms of capital allowances and the rates available will vary depending on the specific items of expenditure and dates of purchase.

Your business accounts will typically only cover a 12 month period and assets of the business will be used for a longer period so they need to be treated differently. The tax man allows you claim ‘capital allowances’ for these items which allows you to deduct a proportion of the cost from your taxable profits and reduce your tax bill. Adjustments for personal use of any asset is usually required.

The most useful capital allowance for small businesses is the ‘Annual Investment Allowance’ (AIA) which enables most businesses to claim 100% of the cost of assets against tax, up to an annual limit of expenditure of £200,000. This limit will be reduced to £25,000 from April 2012 so it’s wise to plan ahead carefully when considering new investment. Cars are excluded from the AIA.

Having just saved a new client a significant amount of tax utilising capital allowances not previously claimed, it is important that these allowances are considered and utilised wherever possible. Always consult your accountant for professional advice.

As a company owner you can choose how to extract the profits from your company, and by making the right choices you can minimise the tax and NI paid by you and the company.

The Taxman would like you to take all the profits in the form of a salary and possibly a bonus, as these carry the highest National Insurance charges and ensure the tax is deducted under PAYE before you get your hands on the net income. It is good practice to pay yourself at least a small salary that is covered by your personal allowance (£11,850 for 2018/19) as this makes the best use of your tax free allowances. However, the maximum salary you can take so that neither you nor the company pay NICs is £8,424 in 2018/19, as the threshold for NICs is lower than the tax free threshold. You will still receive NI contribution credits without actually paying NI.

Most company owners extract any further amount they need in the form of dividends. You can receive £2,000 of dividends tax free in 2018/19. Any dividends over £2,000 will be taxed at the following rates:

• Dividends falling within the basic tax rate – 7.5% (£34,500)
• Dividends falling with the higher tax rate – 32.5% (over £46,350 from April 2018)
• Dividends falling with the additional rate of tax – 38.1% (income over £150,000 meaning restrictions on your personal allowance)

NI is not paid on dividends.

You can also charge a rent for assets you own which the company uses (although this could affect the availability of entrepreneurs’ relief on a sale of that asset). These assets could be real property (land) or intellectual property (e.g. patents). If you lend funds to the company it can pay you a commercial rate of interest on that loan. These profit extraction methods are free of NI charges.

We can discuss other methods of extracting profits, perhaps using your family members. Please contact us for specific advice in your own circumstances.

There is a myth that every legitimate business is required to be VAT registered. This is not the case.

 

Your business (as a sole-trader, partnership or company) does not have to become VAT registered until the total sales for 12 consecutive months exceeds £85,000. However, this total does apply to all the businesses you run and you can’t artificially divide your businesses to avoid registering for VAT.

 

Once your business is VAT registered you must charge VAT at the appropriate rate (normally 20%) on your sales. You also have to submit regular VAT returns, either quarterly or monthly, which means you need to keep your records of sales and purchases up to date.

 

If this all sounds a bit too much to cope with there are a number of schemes you can sign up to which are designed to make VAT reporting much easier for small businesses. We’ll talk about three of the most commonly used schemes for now:

 

Standard Accounting. Using standard VAT accounting, you must complete four VAT Returns each year. Any VAT due is payable quarterly and any VAT refunds due to you are also repayable quarterly. You pay VAT on your sales whether or not your customer has paid you.

Cash Accounting Scheme. Using this scheme you pay VAT on your sales when your customers pay you and you reclaim VAT on your purchases when you have paid your supplier. This scheme can offer you cash flow advantages and is useful if there is often a delay between the time that you issue VAT invoices to your customers and when you actually receive payment from them.

Flat Rate Scheme. When you use this scheme you don’t have to worry about your purchases. You just have to total-up your sales each quarter and pay over a flat percentage as VAT to the Taxman. From April 2017, the Government introduced a new 16.5% flat rate VAT scheme that many ‘labour-only’ businesses, such as contractors, have to move to. This increased the rate at which VAT is paid under the Flat Rate scheme for many businesses, which means you need to review your VAT status. Ask your accountant if this scheme is still beneficial for you.

 

Some people prefer to keep their total sales below the compulsory VAT registration threshold, so they don’t have to charge VAT and submit VAT returns. They do this by turning down work that would take them over the VAT threshold. This is not illegal, but HMRC may be suspicious of businesses who manage their sales in this way. If you use this strategy to avoid VAT registration, you need to be able to prove all your sales are correctly recorded and declared.

As an employer you are required to collect repayments of student loans your employees took out through the Student Loan Company (SLC) while they were studying, during years after September 1998.

You are told to start making SLC deductions by a SL1 notice from HMRC. You should work out the correct figure of employee earnings on which Student Loan deductions are due. The figure to use is the same gross pay amount that you would use to calculate your employer’s secondary Class 1 National Insurance contributions (NICs).

Start making Student Loan deductions from the next available payday using the correct plan type, which you will select from a dropdown box on your HM Revenue and Customs (HMRC) submission, if any of the following apply:

• your new employee’s P45 shows deductions should continue – ask your employee to confirm their plan type
• your new employee tells you they’re repaying a Student Loan – ask your employee to confirm their plan type
• your new employee fills in a starter checklist showing they have a Student Loan – the checklist should tell you which plan type to use
• HMRC sends you form SL1 ‘Start Notice’ – this will tell you which plan type to use
• you receive a Generic Notification Service student loan reminder – ask your employee to confirm their plan type

Plan types and thresholds

With effect from April 2018, the thresholds for making Student Loan deductions are:

• Plan 1 – £18,330 annually (£1527.50 a month or £352.50 a week)
• Plan 2 – £25,000 annually (£2083.33 a month or £480.76 a week)

Stopping Student Loan deductions

Stop making Student Loans deductions when you receive a SL2 ‘Stop Notice’ from HMRC and from the first available payday after the deduction stop date shown on the notice. The ‘first available payday’ is the first payday on which it’s practical to apply that notice.

Self Employed

If you have a SLC loan yourself and are self-employed, the SLC loan repayments should be collected through your annual self-assessed tax bill.

If your self-employed profits are less than £18,330 per year, you are not required to make any SLC repayments. This also applies if your salary is under £18,330 or you have a number of jobs from which you earn under that threshold in each.