I want to set up my own business as a self-employed. What should I do?
If you want to start working as self-employed, you must register with HM Revenue & Customs, but first make sure you have a National Insurance Number. After the registration, you will receive your Unique Taxpayer Reference (UTR) and HMRC will set up the right tax and National Insurance contributions records. You should keep your UTR safe because you will need it when completing your Self Assessment tax return.
How can I know whether I am employed or self-employed?
This depends upon what your contract says or what your working arrangements are. You can be employed and self-employed at the same time. When defining your employment status, you should refer to the following questions:
a) A self-employed person:
– Runs own business and decides about the type and time of its work
– Bears responsibility for the success or failure of the business
– Have more than one customer at the same time
– Can hire people
– Takes care of the main equipment needed to perform business activities
b) An employed person:
– Has to perform the tasks imposed on their own
– Is told how, where and when to do your work
– Works within fixed hours
– Work for just one person at a time
– is not in charge of the business nor takes responsibility for it, that is the employer’s task
– is paid a regular wage or salary
When should I register for VAT?
You may need to register for VAT if you are doing business in the UK as an individual, a partnership, a company, an association, a charity, a local authority or any other organisation or group of people acting together under a specific name.
Registration for VAT is compulsory if your annual turnover exceeds £85,000 or you expect the turnover to be higher than that amount in the next 30 days. However, it may happen that your turnover has exceeded the registration threshold temporarily. In that case, you may apply for exception from registration. This applies for entrepreneurs supplying goods or services within the UK. If you take over a VAT registered business, your VAT taxable turnover over the last 12 months must be added to the turnover of the business you are taking over when checking if the registration threshold has been exceeded. And if you have received goods from other countries in the EU, registration for VAT is compulsory if the total value of the goods acquired has gone over £85,000 in the current year since 1 January.
Note that you cannot register for VAT if you sell only goods or services that are exempt from VAT or you are not in business according to the HMRC’s definition.
Can I register for VAT if my turnover is below the threshold for registration?
If you are doing business in the UK but your turnover is below the threshold for registration, you may register for VAT voluntarily. Remember to regularly check if your turnover has exceeded the threshold and you need to register.
I am renting a property, what do I need to do?
Any income earned through renting a property must be included
on your tax return.
What is CIS? Who are CIS contractors and CIS subcontractors?
CIS stands for the Construction Industry Scheme. CIS regulates the procedures of making payments to subcontractors by contractors in the construction industry. However, businesses outside the industry which involve in construction in the way that they spend much of their funds on construction may also fall under CIS.
What allowances are available for rentals?
Did you know you can claim Rent
a Room Allowance and earn £7,500 tax free.
What is a Company Tax Return?
A Company Tax Return is a document which is filed for each accounting period by companies liable for Corporation Tax. A company has to file a return each annual, even if it has not made any profit.
What is Capital Gains Tax?
Capital Gains Tax is a tax you pay when you make a profit by way of selling assets (e.g. shares or property). Your Capital Gains Tax may be reduced by a tax-free allowance and some additional reliefs. There are also some circumstances under which no capital gain tax has to be paid.
Do I have to manage my finances personally or can an accountant to do it for me?
In most cases you do not have to manage your finances on your own. You may authorise an accountant to act for you. In fact, some entrepreneurs find it too complicated or time-consuming to deal with financial matters by themselves. You can avoid many misunderstandings or mistakes if you authorise an accountant to do it for you. HMRC requires a special form for this purpose.Note that you are still responsible for your own tax affairs at all times.
How do I benefit from a reduced rate of VAT?
Benefit from a reduced rate of
5% VAT on refurbishment to some residential properties.
How do I reduce my tax liability?
There are many allowances that can be
claimed to help reduce the overall tax you pay. For companies did you know
providing employee benefits including company car, mobiles, health care can help reduce your tax?
I am subject to a tax enquiry, what do I do?
Why not let us take the burden
from you. We have the necessary experience and resources to assist you in
overcoming either a simple enquiry or a full investigation.
What are the advantages of being a Sole trader
There are no formation costs
– Sole traders are not required by law to have annual accounts nor to file accounts for inspection. However annual accounts are necessary for tax returns
– Sole traders are unrestricted in the amount and purpose of borrowings (but cannot create floating charges)
Do I have to set up a Limited company?
If you wish to trade and do not use a limited company you will be personally liable for the debt of your business. If you have assets or savings they are vulnerable to a claim made against you.
By trading through a limited company you are literally placing a limit on your liability. That limit is the value of the company, including any money you may have invested in, loaned to or are owing to the company.
The company has a separate legal identity from its owners and directors and unless they sign a personal guarantee for its debts they are not liable for these
There are a number of advantages in becoming a limited company, such as :-
- You can give a share of the business to others eg family.
- It may be easier to attract people to invest money in your business.
- Obtaining bank loans may be easier.
- There is no higher rate tax bands.
- In the event of a partner leaving or somebody dying it is easier to continue the business.
- It is easier to sell the business.
- You have better standing in the public eye.
- It can assist in the protection of a name.
- People have more confidence in your business as they can check up on your company on the public records at Companies House.
- Subcontractors and agency workers will find it easier to obtain work.
The main disadvantages of becoming a limited company are the extra costs of preparing of annual accounts and some loss of financial privacy.