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Filing accounts and tax returns late, not paying tax on time or making errors in your figures can result in fines and penalties being imposed. Many of the fines are progressive meaning that they increase the longer the missed filing is left. Without going into the detail of the many and varied fines and penalties that can be imposed by both HMRC and Companies House the key takeaway is not to miss deadlines and to make sure that your accounts and tax returns are complete and accurate. Ignorance is not accepted as an excuse by HMRC; they will simply insist…
Tax years for self assessment (sole trader) and corporation tax (Limited Company) are different. The Self Assessment Tax Year A tax year for self assessment runs from 6th April each year to the following 5th April. Income tax rates and allowances are set by reference to tax year. Limited Company Corporation Tax A tax year for a company runs from 1st April to 31st March with the corporation tax rate set by the company tax year. This means that for a company it could be the case that the accounting year end is different to the tax year. This can…
No matter what business structure you choose to operate your business through the ultimate aim must be to make a profit so that you can pay yourself something out of the business to live on. How you do that depends on your business structure – sole trader or limited company. Before we move onto explaining how to pay yourself let’s take a look at the reality of being self employed. Ditch the monthly payslip Moving into the world of self employment means ditching the usual weekly or monthly PAYE (pay as you earn system of taxation with your employer sorting…
The thing about a Limited Company is that it’s not your money! The company is a completely separate entity in the eyes of the law. You may own the company but the legalities mean that you must treat all transactions with your business as being an “arm’s length arrangement”. In reality that means that you cannot just dip in and out of the bank account taking what you need when you need it. There must be a clear account kept of what monies have been taken out of the business and what they were for. This must happen at the time that the transaction occurs not…
As the owner of a self employed business you do not pay yourself a wage or take dividends. There are no formalities that need to be done when you take money out of the business nor are there any restrictions on how much you can take from the business and when. You would simply extract the money paying it from the business bank account, assuming you have one, into your personal bank account. The amount taken would be described as Drawings being the proper accounting term to use. Drawings are not an allowable cost for tax. They will not reduce your…
Cloud accounting systems have made huge advances since they first hit the market way back in the mid 2000s. The sophistication of the technology now means that many small business owners can file their year end accounts and the Corporation Tax return directly with HMRC and Companies House respectively from the data that they have entered into the system. And the best news is that the small business owner no longer needs an accountant to help them. Or do they? Ignorance of the law is no defence There are a significant number of rules, regulations and laws that apply to…
All Limited Companies, regardless of size, have to prepare accounts and file tax returns. The exception is that if the company is dormant and has informed HMRC of being so in which case it does not need to file a Corporation Tax return but does still need to file dormant accounts at Companies House. Deadline Reminders What you have to file and when depends on the structure that you operate your business under. HMRC and Companies House, where applicable, may send reminders of the key dates. However, the best advice is to make a list of key dates for your…
Almost all businesses, regardless of size, have to prepare accounts and file tax returns. It’s only those sole traders with a turnover below £1,000 (the Trading Allowance) that do not have to file a tax return but will still need records or accounts to prove that their turnover is below that figure. Deadline Reminders What you have to file and when depends on the structure that you operate your business under. HMRC may send reminders of the key dates. However, the best advice is to make a list of key dates for your business and set up recurring reminders in…
Employing staff is a topic in its own right and much more than just making sure that the gross pay is taxed correctly. As well as adhering to employment laws and drawing up employment contracts thought needs to be given to areas such as but not limited to: For more information refer to https://www.gov.uk/employing-staff in the first instance and think about securing the services of employment experts if in doubt. Payroll and PAYE If you employ someone, including yourself as a company director but not yourself if you are a sole trader, then you will generally need to operate a…
Although in first view VAT looks simple as if applied it is generally at one standard rate of 20% which has remained static for some considerable time now, the reality is that VAT is one of the most complex of UK taxes. As well as the standard rate there is a reduced rate of 5%, a zero rate as well as exempt items or things which are outside of the scope of VAT. Potentially businesses have to register for VAT and complete returns in other EU countries that they operate in when they reach certain thresholds. The actual calculation of…