Updated: Feb 29
Once you have decided on the form of your company – Self-employed, limited company or partnership - see my blog Self-Employed or Limited company? - use this checklist to ensure you are aware of all the rules and regulations for accounting and tax purposes.
(For a limited company checklist see Starting a business? - limited company checklist)
1 Choose a name
There are government rules on what names are acceptable, here are the basics:
· you can use your own name or you can choose another name for your business
· you do not need to register your business name
· must not include ‘Limited’ ‘Ltd’ ‘LLP’ ‘PLC’ in the name
· cannot be offensive or contain a sensitive word or expression or suggest a connection with a government organisation
· check if a trade mark exists with the same name – use this link: Gov.uk check trade marks
2 Consider rules for your type of business
If you are selling goods online, buying or selling abroad and/or store or use personal information, you will need to be aware of further rules for your business.
Make sure you check out these rules here:
3 Register the company
Self-employed – online at HMRC by Oct 5th of the year following the start
Need to register if over £1,000 turnover in a tax year (April to March)
Note the payment on account rules – these can catch you out in the first year of business as you will need to pay not only that years tax, but 50% of the following years also – see my blog for more details: Self-employed - HMRC payments on account explained
4 Consider signs and stationery
- You do not need to display a sign at non home address if you are self-employed
- Stationery requirements on documents, publicity, letters, order forms and website including:
- name and business name if applicable
- address from which you work
- contact information
Particular rules apply to invoices.
Invoices you send need to include the following information
· full company name, address and contact info
· sole trader name and business name (if any) and address
· a unique reference number
· the company/person you are invoicing name and address
· a clear description of what you are charging for
· the date the goods or services were provided
· the date of the invoice (if different from above)
· the amount(s) being charged
· the total amount owed
There are further rules for invoices where you are VAT registered – see more info here Gov.uk VAT invoices
5 Keeping business records
Your business must keep records this is also known as bookkeeping – see my blog for more details: 5 steps for simple and effective bookkeeping
6 Paying business taxes
Your business will pay income tax via your personal self-assessment tax return. See the due dates here.
Therefore, the amount of tax you pay will be based on all your income from employment, rental income and self-employment under the marginal tax system.
7 Where to work – home or rented office
Working from home
Insurance – home insurance may not cover the items you need covered – and the activities for example using equipment – check the terms and conditions of your policy and if unsure call the broker to ask – there is no benefit to having insurance if it will be invalid if you need to make a claim
Permissions may be needed
- Mortgage company
- Landlord if a rented property
- Local council for Council Tax and business rates (call to enquire)
Claim business expenses relating to home working
If you are self employed or in a partnership you can claim business expenses.
The easiest way to ensure you do not fall foul of the rules would be to claim ‘Simplified Expenses’ – these are rates provided by the government that can be claimed based on miles travelled and hours spent working from home.
See my blog for more details Self-employed - claim expenses to reduce your tax bill
The lease you and the landlord sign will determine the responsibilities you each have.
In addition to these there are certain aspects that are determined by law as follows:
Health and Safety
Repairs and Maintenance – be aware that you will need to return the property to the same condition (and if requested the same layout) as you took on. As such you could consider putting aside a fund that you can draw on to use to make the repairs. The more you change the configuration the more likely a find will be needed
8 Taking on people
This is a straightforward way to take on workers – you will have a contract with the worker or agency that supplies the worker. Other than this you will simply pay the invoices that are presented by the worker/agency.
If you are taking on employees for the first time you will need to:
· Run a payroll – simple or software
· Pay employers NIC
· Provide a workplace pension for your employees
In addition the government point you to these 7 steps:
1. Decide how much to pay – you must pay at least the minimum wage
2. Check that someone has the legal right to work in the UK
3. Check if you need to apply a DBS check
4. Get employment insurance – you need employers liability insurance as soon as you employ someone
5. Send details of the job in writing to the employee
6. Register with HMRC as an employer
7. Check if you need to auto enrol your staff into a workplace pension
Health and Safety
You will always be responsible for the health and safety of your workers. This is a complicated area but more information and simple steps to follow to ensure the workplace is safe can be found here https://www.hse.gov.uk/simple-health-safety/index.htm
9 Taking money out of the company
Being self-employed allows you to take what you need and what is available.
Expenses – if you have spent you own money or driven to a business meeting in your own car these expenses can be reclaimed from the company. They will reduce the amount of tax the company pays.
In all of the above cases you need to keep records of the transactions flowing through the company bank account - see more here on keeping records 5 steps for simple and effective bookkeeping
10 Value Added Tax (VAT)
VAT is payable by any business (self employed or limited company) when turnover in last 12 months is greater than £85,000
You would then register and pay excess of the VAT on sales over the VAT on purchases that can be reclaimed.
There are various schemes to consider including annual, flat rate and cash accounting. Each has conditions and pros and cons to consider.
And you can reclaim the VAT paid before you registered:
4 years for goods or services still in the business
6 months for services
See blog for more information VAT and the impact on a small business