Melot Accounting Limited

Bristol Business
Mums

Start Up Workshop!
Accountancy and Taxes
Overview
❖

Business set up choices.!

❖

Who to tell you’re in business.!

❖

What taxes will you need to pay?!

❖

Do I ...
Business Set Options
❖

There are two choices of how to set up your business:!

1. Self Employed / Sole Trader!
2. Limited...
Pros & Cons
Self Employed
❖

❖

Simplest set up if just testing the
water.!
Business profits are personal money
which can b...
Who Should You Tell
❖

Companies House!
•

❖

If you want to incorporate a Ltd company.!

HMRC !
•

Both self employed / s...
What Taxes Will I Need To Pay?
Self Employed

Limited Company

❖

VAT if registered.!

❖

VAT if registered.!

❖

PAYE tax...
Business Bank Account
❖

Limited Company MUST have a separate bank account!!
•

❖

The company is its own legal entity and...
How Do I Get Paid? (v.v.v important!)
❖

Limited Company:!
•

•

Note that all employers will need to be providing staff w...
What Records Should I Keep?
❖

Sales Invoices.!

❖

Receipts from purchases and expenses.!

❖

Till rolls.!

❖

Payroll re...
How To Keep Records - Bookkeeping
❖

Excel Spreadsheets.!

❖

iPhone App for simple income & expense records: Earnest etc....
What Costs / Expenses Can I Claim?
❖

Ltd Company = ‘wholly & exclusively’ rule.!

❖

Self Employed/Sole Trader = business...
Do I Need An Accountant?
❖

Bookkeeper - personal choice whether to use this service.!

❖

PAYE RTI Returns - HMRC RTI or ...
Questions

???
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Accounting & taxes by Myriam Melot

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This talk was given during the workshop 'Start Your Own Business' organised by Bristol Business Mums.
November 2013

Published in: Business, Economy & Finance
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Accounting & taxes by Myriam Melot

  1. 1. Melot Accounting Limited Bristol Business Mums Start Up Workshop! Accountancy and Taxes
  2. 2. Overview ❖ Business set up choices.! ❖ Who to tell you’re in business.! ❖ What taxes will you need to pay?! ❖ Do I need a separate business bank account?! ❖ How will I be paid - salary etc?! ❖ What records should I keep and for how long?! ❖ Expenses - what can I claim?! ❖ Do I need an accountant? What would they do for me? Cost?
  3. 3. Business Set Options ❖ There are two choices of how to set up your business:! 1. Self Employed / Sole Trader! 2. Limited Company! ! ❖ Which set up you suits you best depends on your own circumstances…
  4. 4. Pros & Cons Self Employed ❖ ❖ Simplest set up if just testing the water.! Business profits are personal money which can be taken at any time.! ❖ The individual and the business are one and the same.! ❖ Only one return to file with HMRC each year.! ❖ Limited Company ❖ Most tax efficiency and flexibility for profits withdrawal.! ❖ Can provide a more professional appearance to clients.! ❖ Some degree of protection as an individual - company is a legal entity.! ❖ More onerous in terms of returns and filing, and less easy to shut down.! ❖ Accountancy is more expensive. Accountancy is much cheaper.
  5. 5. Who Should You Tell ❖ Companies House! • ❖ If you want to incorporate a Ltd company.! HMRC ! • Both self employed / sole trader, and Ltd once company is incorporated with Companies House.! • To register for VAT if you want /need to.! • To register as an employer if you need to as a Ltd employing yourself, or as sole trader who will need to employ somebody else.! • To register for CIS if working within the construction industry.
  6. 6. What Taxes Will I Need To Pay? Self Employed Limited Company ❖ VAT if registered.! ❖ VAT if registered.! ❖ PAYE tax & Classes 1 and 1A NI if employing staff (see Ltd co).! ❖ PAYE tax if registered as an employer on salaries over threshold of £9,440 at 20%.! ❖ Income Tax on profits over £9,440 at rate of £20%. Higher rate on profits over £41,450 at 40%.! ❖ ❖ Class 2 National Insurance if profits are likely to be over £5,725 of £2.70 per week.! Class 1 National Insurance Contributions on salaries over threshold of £7,748 at 12%. Then at 2% over £41,444.! ❖ Class 1A National Insurance on salaries over £7,696 at 13.8%.! ❖ Corporation tax on profits of company at 20% (small co rate profits less than £300K).! ❖ Income Tax and Class 4 NI on Director’s income (see Self Employed). ❖ ❖ Class 4 contributions on profits over £7,605 at 9%. Reduced rate on profits over £41,450 of 2%.! Note that you may have to pay 50% upfront for the following year’s tax!!!
  7. 7. Business Bank Account ❖ Limited Company MUST have a separate bank account!! • ❖ The company is its own legal entity and will have to have a business bank account set up in its name for incoming and outgoing cash.! Self Employed / Sole Trader:! • No legal requirement to have a separate business bank account but this is highly advisable to maintain clear boundaries between business and personal money.! • Can set up a second current account in the interim to keep things simple. Usually this is very simple and can be done almost instantly with online banking.! • Business banking is better for established businesses as there will be specialist managers to assist with business needs.
  8. 8. How Do I Get Paid? (v.v.v important!) ❖ Limited Company:! • • Note that all employers will need to be providing staff with registered pensions and contributing to these over the next couple of years!! • Dividends on post tax profits of the company.! • ❖ Salary if registered as an employer, once payroll RTI reports filed each month. Advisable to keep up National Insurance years in employment, but not a requirement.! Restrictions on what can be taken in dividends at any given time.! Self Employed / Sole Trader:! • Drawings. ! • Taken whenever required. ! • No restriction on what can be taken other than having the cash available to withdraw.
  9. 9. What Records Should I Keep? ❖ Sales Invoices.! ❖ Receipts from purchases and expenses.! ❖ Till rolls.! ❖ Payroll records if registered employer.! ❖ P60s and P45s as an employee.! ❖ Records for VAT Returns.! ❖ Banking Records.! ❖ Keep all records for 6 years!
  10. 10. How To Keep Records - Bookkeeping ❖ Excel Spreadsheets.! ❖ iPhone App for simple income & expense records: Earnest etc.! ❖ Cloud bookkeeping packages: FreeAgent, Xero, Kashflow etc.! ❖ Desktop bookkeeping packages: Sage, Quickbooks etc.! ❖ Hire a Bookkeeper.! ❖ If Ltd Company it’s a requirement to keep financial records up to date - HMRC could ask to review at any time!! ❖ Advisable to keep good records in any case - up to date knowledge of business’ financial health, reduced stress, and less cost in the long run.
  11. 11. What Costs / Expenses Can I Claim? ❖ Ltd Company = ‘wholly & exclusively’ rule.! ❖ Self Employed/Sole Trader = business % rule.! ❖ Expenses can be claimed for pre-trade costs as far back as 7 years.! ❖ Things to consider are:! • mileage for business travel to unusual locations or meetings: car 45p per mile, bicycle 20p per mile, motorcycle 24p per mile.! • Proportion of car running costs and petrol calculated on % business miles / total miles (self employed only).! • All car or van costs if owed by the business itself (less personal use % for self employed). Ltd would need to restrict any personal use to insignificant in order to avoid company car benefit tax.! • Mobile phone costs (treatment differs for SE and LTD).! • Household costs: mortgage interest, rent, council tax (only SE), gas & electricity, cost of calls only for home telephone.! • Insurance - PI, PL, Employer/ Business possessions or premises insurance in its entirety. ! • Household insurance - only SE can claim a % of this.! • Simple rates options for home use: £4 per week for Directors of Ltd, for SE/ST calculated on hours worked per week.! • Business equipment such as computer, printer, software etc.
  12. 12. Do I Need An Accountant? ❖ Bookkeeper - personal choice whether to use this service.! ❖ PAYE RTI Returns - HMRC RTI or use bookkeeper/accountant/payroll service. ! ❖ VAT Returns - HMRC online or use bookkeeper/accountant.! ❖ Self Employed / Sole Trader - Self Assessment Return - HMRC online service, or can use an accountant if preferred.! ❖ Limited Company Incorporation - can do online via Companies House, other online services (for a charge) or get an accountant to do it for you along with HMRC Registration.! ❖ Limited Company - Statutory and Abbreviated Accounts, Corporation Tax Return accountancy is strongly advised. Can use the HMRC joint filing service if doing yourself.! ❖ Company Annual Return with Companies House - can do yourself online for £13.! ❖ Costs will vary but can expect to pay around £8 - £15 per hour for bookkeeping, £120 £250 for Self Assessment Returns, and £500 - £1,000 for Ltd Company Returns.
  13. 13. Questions ???

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