Help available for small businesses during the coronavirus crisis – A quick summary…

Help is available for small businesses during the coronavirus crisis - A quick summary...

Throughout the pandemic, the government have announced a number of measures to help small businesses cope with coronavirus, including support for those that need to pay statutory sick pay and changes to the benefits system to help employees on zero-hour contracts, here is a quick breakdown of what you may be able to benefit from…

Business loans:

The government is encouraging finance providers to continue lending to small businesses throughout the coronavirus crisis, via the Business Interruption Loan Scheme. The funds are accessible via loans and other types of financial support though nearly 40 business lenders. If you think a loan could be the right solution to help keep your business ticking over throughout the crisis, you need to be aware that the market for business finance is moving fast – some lenders are asking for security, while others are pulling out of the small business market completely. The government has also announced the ‘bounce back’ loan scheme to give small business owners access to credit. Loans are available up to 25% of a businesses annual turnover and up to a maximum of £50,000. Crucially, it appears that there will be no viability check and the government has agreed to take on 100% of the default risk, which means there is no risk to the provider and arguably the biggest barrier to lending has been removed.

Help with tax and VAT:

If your business is having trouble paying any tax it owes because of coronavirus, call HMRC’s new dedicated COVID-19 helpline on 0800 0159 559 to talk about Time to Pay support. If you are self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021. The government has also announced a VAT deferral scheme, which means no business will pay VAT between 20th March 2020, and 30th June 2020.

Business rates holiday:

The government has introduced a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. If your business paid discounted rates in the 2019 to 2020 tax year, you will be rebilled by your local authority as soon as possible.

Help with salaries:

The government has announced that it will pay grants covering up to 80% of the salary of workers kept on by companies, up to a total of £2,500 per month, just above the median income. Known as the Coronavirus Job Retention Scheme, employers who can’t cover staff wages due to COVID-19 may be able to access support to continue paying part wages for staff. There’s still little detail available on how to access the scheme, but if you plan on applying you’ll need to classify your staff as furloughed workers, which you’ll be able to do once the online application form is up and running. Being a furloughed worker means employees are kept on the payroll, rather than being laid off, and they must not do ANY work for you during this time – this is really important as it will allow you to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month. You can make up the shortfall between this payment and your employees’ salaries, but you don’t have to. If you’re the director of a business and you pay yourself a salary through PAYE, you’ll also be able to claim this benefit, so long as you classify yourself as a furloughed worker and don’t do any work while claiming this benefit.

Sole traders and the self-employed:

The government has announced that it will be launching the Self-Employed Income Support Scheme, to pay self-employed business owners, including freelancers and sole traders, who don’t qualify for the Coronavirus Job Retention Scheme, which pays up to 80% of employees’ wages. The scheme will pay self-employed people who have been adversely affected by the coronavirus, a taxable grant worth 80% of their average income over the last three years, up to £2,500 per month, for at least three months. The scheme will be open to business owners with an income of £50,000 or less, who make most of their income from self-employment, and will be based upon your previous three years’ tax returns to confirm income. If you only have one years’ worth of tax returns, this will be used to work out your income. It was initially thought that business owners who pay themselves via dividends would be eligible to apply, it seems this is no longer the case, as dividends aren’t regarded as income. It’s also possible that you won’t qualify if your income is a mixture of part-time income and self-employment, and you’ll not be eligible if anyone in your household earns more than £50,000. If, on the other hand, everyone in your household earns £49,000, you will all get full support. If your application is successful, another issue is that the money won’t be available until the start of June.

The welfare system has also been adjusted so that self-employed people can now access Universal Credit in full. For instance, a self-employed person with a non-working partner and two children, living in the social rented sector, can receive welfare support of around £1,800 per month. Anyone in this position is being urged to apply for any relevant benefits as soon as possible, including Universal Credit and any associated housing benefits, and look into business interruption loans or other financing options, including payment breaks and mortgage holidays.

These measures are open to change so we hope that what is currently available is helping you to keep your business running.

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Financial help for small businesses in the UK during COVID-19…

small business covid-19

A short video showing the financial help for small businesses being made available by the UK government during the pandemic. We hope this explains the assistance you may be able to receive…

Subscribe to our YouTube channel to keep up to date with all relevant small business news relating to the government assistance process, as and when it becomes available.

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How to Prepare for the End of the Tax Year…

tax year

Going it alone and starting your own business can often be a bit of a culture shock! Terms that were not part of your everyday vocabulary, such as ‘tax year’, ‘financial years’ and ‘bookkeeping’, suddenly take on a whole new significance. When it comes to the financial admin of the business, as you may have already realised, is now all your responsibility.

Your aim as a business owner is to keep on top of everything, to ensure that you’re not bogged down in paperwork and you’re not involved in any last-minute scrambles to meet tax deadlines. Headaches are easily avoidable so long as you’re prepared. Here we focus on the end of the tax year, what it means for an up-and-coming business and how you should prepare for it.

So, what does ‘end of tax year’ actually mean? When you see the phrase ‘tax year’ this refers to the personal tax year, which runs from April 6- April 5 the following year. As a director of a company, the end of the personal tax year is very relevant, as all company directors must complete a personal tax return each year. It also takes account of any dividends you have received from the company, which are liable for income tax.

Staying organised and being prepared for the financial reporting milestones throughout the year will make your life as a business owner much easier.

The end of the tax year: how should I prepare?

Think of getting prepared as an ongoing process rather than something that has to be dealt with all in one go at the end of the tax year or when the payment deadline looms on the horizon. File your paperwork as it arrives (rather than having to sort through it from scratch at the end of the tax year). Self-employed business owners are taxed on their business profits after deductions for expenses. For this to be assessed accurately you need to be able to track each and every transaction your business is involved in. In the early days, these transactions may seem few in number. It is inevitable that invoices, statements and bills will mount up and the pile of unsorted paperwork is only going to get higher.

Bookkeeping:

In the early days especially, a simple spreadsheet may be all that’s required to give you an at-a-glance overview on what’s happening with transactions. Allotting an hour or so a week to review this is useful not just from a tax perspective, but also for keeping on top of unpaid customer invoices to prevent storing up cash flow problems. As activity increases and bookkeeping starts to eat into more of your valuable time this may be your cue to invest in a dedicated invoicing and accounting software solution.

Deductions:

Get everything in place early to avoid losing your entitlement. Travel costs, using your home as an office, phone bills, overdrafts, capital allowances on equipment and even wining and dining prospective clients: don’t leave it until the first week in April to start thinking about how much you’ve actually spent on nurturing your business over the last year.

Cash basis accounting:

If your turnover is £150,000 or less you can choose to work out your income and expenses for your Self Assessment tax return through cash basis accounting. For this, you must keep records of all business income and expenses throughout the tax year. One benefit of this is that you are only taxed on income you have actually received during the tax year and not on invoices that have been issued but not yet paid.

Simplified expenses:

For business vehicle costs, working from home and living in your business premises, sole traders and partnerships can also use simplified expenses: a system of flat rates for calculating costs in these areas. Throughout the tax year record, your business miles and the hours you work at home and then at the end of the tax year apply these flat rates to work out your expenses.

Receipts:

Make sure you have a system in place for retaining receipts and logging transactions as they happen. Otherwise, you are at risk of under-calculating your business running costs.

As your business grows, as transactions become more complex and you consider taking on staff, expert accountancy advice can help save you money in the long run.

DNA Accountants

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Are you “Limited” in Business?

limited company

Business owners are often unsure about which entity to trade as – sole trader, partnership or limited company. Regardless of size, ownership structure, industry etc, generally there is no legal obligation to trade using a particular entity, but there are stark differences between them. And it is the impact of these differences that must be evaluated in order to decide which entity to trade as.

Hundreds of freelancers, contractors and small businesses decide to form a limited company every day in the UK. There are many reasons a sole trader or small business may choose to incorporate, here are the three main advantages of going Limited:

Liability: Limited liability basically means if your company goes bust, your personal property can’t be touched. Your maximum losses can only be up to what you put into the company in the first place – meaning you only stand to lose what you invested. Limited liability can become invalid if you act illegally though – so don’t do anything naughty!

Employability: Many clients – especially big corporates – will be more inclined to do business with limited companies. For them it means your payment is purely a business transaction and they avoid the muddy waters of PAYE and national insurance contributions. In fact, many large companies (usually financial institutions) refuse to do business with sole traders.

Profitability: As a sole trader, you’ll be taxed on your income. This means you’ll end up paying income tax and national insurance contributions on everything you earn. Once you get into the higher echelons of earning you could be seeing a significant chunk of your take-home pay being whisked away by the tax man. By operating through a limited company you will pay corporation tax, and can pay yourself through a combination of low wage (to minimise your PAYE and NIC outgoings) and dividends. This will result in less of your money going to HMRC, meaning more of it in your pocket.

But Wait…

Although forming a limited company can be a sensible and beneficial business move, it does come with certain duties that you, as a director, must perform.:

Duties of limited company directors

The Companies Act 2006 outlines the statutory duties of company directors as seven general duties;

  1. Duty to act within your powers as a company director
  2. Duty to promote the success of your company
  3. Duty to exercise independent judgement
  4. Duty to exercise reasonable care, skill and diligence
  5. Duty to avoid conflicts of interest
  6. Duty not to accept benefits from third parties
  7. Duty to declare interest in proposed transaction or arrangement with the company

Financial responsibilities

As a company director, you have several accounting-related obligations, it is best to employ a good accountant to ensure that all tasks are carried out:

  • Keep good accounting records from which accounts can be prepared which give a true and fair representation of the financial position of the company.
  • You must submit accurate company accounts, and file them on time with Companies House.
  • You must submit your corporation tax return (Form CT600) to HMRC and pay any tax liabilities due.
  • You must deal with the correct payment of staff (and yourself) – including the deduction of income tax and national insurance contributions, where they apply.
  • You must trade solvently, ensuring that you are able to meet the financial liabilities of your business.

Legal responsibilities of company directors

  • You are responsible for completing and filing a Confirmation Statement every year.
  • To produce and maintain a register of Persons with Significant Control, the PSC Register must be filed, as part of the Confirmation Statement, with Companies House annually.
  • To submit forms to Companies House to notify of any changes in the particulars of company director(s) or company secretary.
  • Notify Companies House if you change your registered company address.
  • You must always act in the interests of the company shareholders. This means that the directors cannot enrich themselves in a way that damages the company.

If this all seems like too much to get your head around then get in touch, we can set you in the right direction as Director of your limited company and we’re always happy to talk business.

DNA Accountants

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The tax deadline is looming…

tax deadline

….we all know that businesses need to pay tax, but how many sole traders and small businesses are actually properly advised on what they should be paying? If you’re trading as a sole trader or partnership you are eligible to pay (how much you actually pay is a whole other ball game!!) Income Tax and National Insurance, some businesses will be required to charge VAT on their sales too.

Sole traders must complete a Self-Employment tax return at the end of each tax year. The return allows you to provide details of your business’ income and expenses. This information is used to work out how much Income Tax and National Insurance Contributions you have to pay. 

Here are the basics…

– Self-employment/self-assessment return

The UK’s VAT registration threshold (above which persons making taxable supplies are required to register and account for VAT) is currently set at £85,000, although businesses can opt to register voluntarily if their taxable turnover is below this.

All you need to provide on the relevant pages of your tax return are:

– Details of your turnover

The total allowable business expenses, rather than a breakdown of each expense, net profit or loss, details of any adjustments, allowances or losses

If you prefer, you can still give a fuller breakdown of all your expenses in the relevant boxes on your tax return. Businesses below the VAT registration threshold can also use cash accounting so turnover and expenses will be cash received and payments made in the period.

– Tax and NIC liability

After deducting the personal allowance (in 2019/20 this is £12,500), profits from self-employment are paid as income tax at the basic rate of 20% on your taxable earned income that falls within the basic rate band. The basic rate band for 2019/20 is £37,500. If you have taxable earned income that exceeds the basic rate limit, you have to pay more tax.

There are two classes of National Insurance Contributions (NIC) for the self-employed. The first (called Class 2) starts at profits of £6,365 and is £3.00 per week. Class 4 NIC starts at profits of £8,632 and is payable at 9% up to profits of £50,000, 385 when Class 4 drops to 2%.

– Payment of Tax

Self-assessment payments are due by 31 January and 31 July each year. For the business profits in 2019/20 tax year (accounting periods ending by April 5, 2020) the first payment on account is due by January 31, 2020, the second payment is due by July 31, 2020 and any balance must be paid by January 31, 2021. Failure to make these deadlines will result in interest being charged.

If you feel that you are out of your depth making these returns on your own, then do not delay in contacting us at DNA Accountants, we are here to make sure you get on with what you do best, while we take care of the boring stuff. We can also make sure your money is working for you by assessing your tax efficiency. Get in touch and we’ll make your income work smarter for you.

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How To Pick The Perfect Business Name – Don’t Over Think It…

business name

What is the most difficult element of starting your business?
Coming up with the concept, writing a business plan, raising funding? No!!! it’s how to pick the perfect business name. Get it right and people will instantly remember you, get it wrong and you can give yourself a bit of a headache.

The main factors in choosing your business name are, don’t overthink it, just go with these 3 rules:

– Is it easily understood – if you have to explain that little play on words then it’s just not working.
– Can it be clearly pronounced – will people misinterpret what you are trying to say.
– Does it stick in your mind – if someone just gets a glance of the name on a van as it drives down the road, is it memorable?

Once you’ve dealt with those points it’s time to get creative. You could go with an alternative/abstract name, like Xero the accountancy software people (It’s pronounced Zero), this way you are more likely to get the domain name to match without compromising and it’s less likely you have someone else trading under the same name.

Alternatively, there is the informative name, it basically does what it says on the tin. If you are John Smith the Baker, then people know who you are, what you do and it’s easy to remember, but on the other hand, you may not be unique (sorry to break that to you!!).

Then finally we have phrases, they flow naturally, become good branding, become your slogan and are memorable. Without breaking into song, a prime example would be “Go Compare” – it may be annoying as hell, but we all know about it.

If you are really struggling there are tools available online to help and give you that little bit of extra help:

https://www.shopify.co.uk/tools/business-name-generator

https://www.squadhelp.com/business-name-generator

Finally, when you have made a decision, road test it on family, friends, webcheck it on Companies House to make sure it’s not already in use, look for your domain name and once you are comfortable go ahead and get started.

 

DNA Accountants

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Making Tax Digital – The Facts

Making Tax Digital - The Facts

When it comes to Making Tax Digital (MTD) the self-employed and small businesses are still a little in the dark! So let us take you through our need to know guide…

What exactly is Making Tax Digital?

HMRC want to go paperless, so it makes sense to convert to keeping digital records and using software to complete tax returns, it’s also a good step towards being more eco-friendly! According to HMRC it is an important part of the government’s plans to “make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”A personal tax account had already been brought into play in 2015, which HMRC had hoped would help make it easier for people to manage their tax affairs – so this is the next stage. Making Tax Digital is being phased in gradually, MTD for VAT will start from 1 April 2019, affecting VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000. Eventually, HMRC will introduce Making Tax Digital for Income Tax and Corporation Tax. What’s more, it’s expected they’ll extend Making Tax Digital to all VAT-registered businesses, but there’s little detail on this at the moment. The earliest these changes will be phased in from is April 2020.

What is the Timeline Making Tax Digital (MTD):

  • April 2019 – VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 need to keep digital records and submit digital VAT returns using compatible software (some ‘more complex’ businesses* get a six-month deferral)
  • October 2019 – more complex businesses who were deferred need to comply with Making Tax Digital
  • April 2020 (at the earliest) – HMRC will implement Making Tax Digital for Income Tax and Corporation Tax (self-employed people and landlords can currently sign up for the Income Tax pilot, instead of filing Self Assessment returns).

What digital records will need to be kept by business and self-employed individuals?

You can use spreadsheets to calculate or summarise VAT transactions and work out what information you need to send to HMRC. But ultimately you’ll need to use compatible software to send that information. You might also need what HMRC calls ‘bridging software’, which converts your records to the right format before you submit. You’ll need to use compatible software to keep records and send an income and expenses summary to HMRC every three months. You’ll be able to see estimates of how much tax you’ll owe. At the end of the accounting year, you’ll send a final report and your tax for the year will be calculated. This is the point at which you’ll claim any allowances and reliefs.

What software is required for Making Tax Digital?

Businesses will need to use compatible software to send digital tax returns. Your digital records don’t all have to be in one place, but HMRC wants data to flow and be exchanged digitally between applications by 31 March 2020. Until then you can use copy and paste to transfer information. We have a guide to the best accounting software for small business. The product you use to submit digital tax returns needs to be compatible with HMRC. HMRC has a list of compatible software – examples include Xero, Quickbooks, and Zoho.

Businesses that don’t already use accounting software are likely to face one-off and ongoing costs. There are also likely to be costs when training staff to use the software and comply with Making Tax Digital. Making Tax Digital for individuals is not compulsory (yet) but self-employed people and landlords can sign up for a digital tax returns pilot scheme. The pilot lets you keep records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return. Both sole traders with income from one business and landlords who rent out UK property (excluding furnished holiday lettings) can also sign up.

So do you feel that you’re now ready for Making Tax Digital? If not please do get in touch with us here at DNA Accountants we are always happy to talk business.

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Accounting Tips That Will Keep Your Small Business on track

accounting tips

The life of a small business isn’t easy, your day is packed with jobs and other activities that need to be done, but they may not always be how you would like to be spending your time – keeping on top of your accounting is generally one of the least favourable tasks! But there are some steps you can take right now that are both easy and can set your business up for plenty of success.

Here are some small business accounting tips so that your finances are always on track…

 

  1. It’s not personal, it’s business:

Always keep personal and business transactions separate. Instead of throwing everything into your personal account, take the simple step of opening a new bank account for all of your business stuff. You will be more organised, your personal finances can stay personal and your business transactions will be easier to find in your business account. No more wasting time shuffling through endless receipts.

 

  1. Keep it Tidy

Some people like a bit of clutter and others can’t work if their documents aren’t neat, tidy and organised. That might be great in your personal life but when it comes to your books, try and keep them in good shape so you’re not wasting time looking for them when they’re all over the place.

 

Neat and tidy records mean you waste less time searching and more time doing, well, whatever else you want to do. When those sneaky tax deadlines are getting closer, you’ll be glad that you took a little bit of time to make sure that you kept your records neat, tidy and a lot more organised.

 

  1. Remember and Stick to Tax Deadlines

Speaking of those sneaky tax deadlines, whatever will help you remember that the tax deadline is approaching, do it. Phone reminders, a countdown – anything. A looming tax deadline can be quite stressful, especially if you’re rushing because you forgot and any mistakes made can take longer to process.

 

It’s really quite a simple step. Set a reminder beforehand so you give yourself enough time to actually complete your tax returns without any mistakes and the rest is a breeze. HMRC won’t be on your case, your records will be accurate and you can forget about it until the next deadline.

 

  1. Keep All of Your Receipts

Keep any business-related purchase receipts so that you can claim for any business expenses. It all depends on the type of business yours is as if you’re working from home, then you can claim back some domestic bills, for example.

 

It can be anything from stamps to stationery. Keep hold of any business-related purchases or expenses and file them in those neat and tidy records we mentioned earlier.

 

  1. Go to a Free HMRC Workshop

Find out if there’s a workshop being held in your area and tag along or check out their e-learning tutorials so that you gain some more knowledge on aspects that actually matter to you.

 

It can be introductions to VAT, setting up a limited company, online filing and that’s just scratching the surface. You might just find something really useful to you which can be a massive help.

 

  1. Budget for Tax

Even though you might be rolling in the big bucks and made a profit, not all of the money is yours as you’ll need to hand some over to the taxman. A good rule to follow is that you budget for this as you go along so that you’re not massively shocked at the end of the year.

 

If you have a savings account or something similar, set a little bit of your income aside so that you can easily pay off your tax bill without any worries and enjoy the rest of your profit.

 

  1. Get to Grips With Tax Rules

When it comes to tax, it’s important you know exactly which ones apply to you and your business so you know which types of tax you’ll actually need to pay. Income tax, National Insurance, Corporation tax, VAT and business rates – do your research into all of them so you know what you need to pay.

 

  1. Create Profit and Loss Statements

A profit and loss (P&L) statement basically gives you a snapshot of the financial health of your business. It’ll summarise the expenses, costs and revenues of your business during a specific time to satisfy HMRC and their requirements.

 

It should include information such as your gross profit, net profit, operating profit and your profit before tax. This makes it a lot easier to show revenues, costs and how much profit your business has made, usually over the last 12 months.

 

  1. Use a Digital App

There’s an app for pretty much everything nowadays, so it comes as no surprise that there are bookkeeping and accounting apps you can download to keep your incomings, outgoings and taxes properly organised. This makes it a whole lot easier for you to manage your financial records.

 

With the Making Tax Digital deadline approaching, you’re going to need to take relevant steps towards using technology which makes it easier for you to get your tax right and keep on top of your affairs. This helps make your entire process more effective and efficient. The best part is that using the right software means you don’t even need to be the most tech-savvy business owner out there. Some are designed to stay simple and sleek so that only the features that matter to you are used and you won’t be overwhelmed when tax season approaches.

 

Overall, it’ll give you more peace of mind that everything is organised and ready to submit, leaving you more free time to focus on making more of a profit.

If you need to get back on track with your accounting, please do get in touch with us here at DNA Accountants we are always happy to talk business.

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It not often we blow our own trumpet…

Accountant Surrey Small Business

…but we will make an exception in order to share these lovely words from a client we have helped over the past few months:

 

“As a contractor, I’ve experienced nothing but mixed advice, late notifications and three years of challenging my previous accountants!

Due to the high levels of debt I continually seemed to be in with HMRC, a friend of mine recommended Gillian at DNA to me. After an initial conversation with Gillian, I felt for the first time I was talking to someone who knew what they were doing. After meeting Gillian face to face this opinion only grew. Gillian’s initial assessment of my position was spot on and even better for me she had a plan to turn my situation around.

Since February 2019 and following Gillian’s every instruction I am now seeing a clear way forward knowing what to do and when. Better than this Gillian has worked her magic with HMRC which was nothing short of a miracle and has completely removed the massive stress this was putting me under.

I simply cannot thank Gillian and everyone at DNA enough.”

 

As a business owner, your job is to focus on what you do best and the thing that brings you the most income, that often isn’t liaising with HMRC, which often ends in people being bamboozled by their demands. That’s where we come in because that’s exactly when we went into business!!

So don’t struggle on alone, get yourself a good accountant and let them do their thing.

 

DNA Accountants

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Are you about to commence your start-up journey?

start-up journey

You’re starting a company – that’s great news! You’ve had an amazing commercial idea and you’re following your passion to create your own business. Good for you! But do you know what happens next? Follow this advice and your start-up journey will be a success…

You should assess the types of business entity based on your available time, commitment and resources, and consider long-term goals for your business. Although you can change your ownership type at any time, you should decide carefully, at the beginning of your start-up journey because the form of business you choose will affect the way you file paperwork, face personal liability, pay taxes and, if necessary, file for bankruptcy protection.

Sole Trader

One person owns and manages a sole tradeship, which means you are responsible for all debts incurred.

Advantages: Easy. Inexpensive. Complete control of operating decisions. Generated income goes to owner to keep or reinvest. Easy to dissolve if the business does not go as planned.

Disadvantages: Unlimited liability. Funding difficulties. Less attractive to prospective employees.

Tax requirements: Sending a Self Assessment tax return every year, paying Income Tax on your profits and Class 2 and Class 4 National Insurance.

Limited Company

A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company after it pays Corporation Tax. The company can then share its profits.

Advantages: Higher take-home pay, claim on a wider range of expenses, entitled to the Flat Rate VAT scheme, personal assets are covered and you have complete control of your business.

Disadvantages: A certain amount of paperwork involved, accounts need to be filed every year, costly if contracting for a short period of time and not ideal for contracts less than £25,000 per year.

Tax requirements: At the end of its financial year, your limited company must prepare full (‘statutory’) annual accounts.

You then use this information to:

  • send accounts to Companies House
  • pay Corporation Tax – or tell HM Revenue and Customs (HMRC) that your limited company doesn’t owe any
  • send a Company Tax Return to HMRC

Partnerships

In a business partnership, you and your business partner (or partners) personally share responsibility for your business. You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits.

Advantages: Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return. This way the business does not get taxed separately.

Easy to establish.

There is an increased ability to raise funds when there is more than one owner

Disadvantages: Each partner is individually liable for the debts and obligations of the business; if the business does not have enough assets to pay back business debts, creditors can take the personal assets of the partners.

A partner cannot transfer an interest in the business without the unanimous consent of the partners.

Partnerships can potentially be unstable because of the danger of dissolution if one partner wants to withdraw from the business or dies.

Tax Requirements: The nominated partner must send a partnership Self Assessment tax return every year.

All the partners must:

  • send a personal Self Assessment tax return every year
  • pay Income Tax on their share of the partnership’s profits
  • pay National Insurance
  • The partnership will also have to register for VAT if you expect its takings to be more than £85,000 a year.

If you are about to commence your start-up journey, please do get in touch with us here at DNA Accountants we are always happy to talk business.

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