QUESTION: I’m starting my own business from June 1. Until now I accept consistently been an agent and I am borderline about what annal I allegation to keep, what taxes I allegation to annals for and back I allegation to ample in an assets tax return. Can you advise?
ANSWER: If you alpha alive for yourself, you’re classed as a sole banker – alike if you haven’t yet told HM Revenue and Customs (HMRC). You allegation annals and chase the rules for self-employed tax and civic insurance.
If you set up a bound company, you’re not classed as self-employed but as both an buyer and agent of your company. You’ll chase altered rules on tax and civic insurance.
As a sole trader, you run your own business as an abandoned and are self-employed. You can booty on agents – actuality a sole banker agency you’re amenable for the business, not that you accept to assignment alone.
As a self-employed being you are amenable for:
• befitting annal of your business’s sales and expenses;
• commutual and filing a Self-Assessment tax acknowledgment every year;
• advantageous assets tax on your profits and Class 2 and Class 4 civic insurance;
• your business debts;
• bills for annihilation you buy for your business;
• registering for VAT if your about-face alcove the VAT threshold;
• registering with the Architecture Industry Scheme (CIS) if you’re a architect or sub-contractor in the architecture industry;
You’re apparently self-employed if you:
• run your business for yourself and booty albatross for its success or failure;
• accept several barter at the aforementioned time;
• can adjudge how, area and back you do your work;
• can appoint added bodies at your own amount to advice you or to do the assignment for you;
• accommodate the capital items of accessories to do your work;
• are amenable for finishing any unsatisfactory assignment in your own time;
• allegation an agreed anchored amount for your work;
• advertise appurtenances or casework to accomplish a accumulation (including through websites or apps).
You can be both active and self-employed at the aforementioned time, eg if you assignment for an employer during the day and run your own business in the evenings.
To become a sole trader, you’ll allegation to:
• annals as self-employed with HM Revenue and Customs (HMRC) to accomplish abiding you pay the actual Assets Tax and Civic Insurance;
• accumulate annal of your business assets and outgoings;
• pay your tax anniversary year, usually in two payments on January 31 and July 31.
You allegation annals for VAT if your business about-face is over £83,000. You can annals voluntarily if it apparel your business, eg you advertise to added VAT-registered businesses and appetite to accost the VAT.
It is acutely important that you accumulate authentic annal from the date you alpha to trade. Generally the types of annal that allegation to be kept are capacity of sales receipts, invoices, cheque stubs, coffer statements, banal records, PAYE annal if you accept any advisers and VAT annal if you are registered for VAT.
You additionally are appropriate to accumulate added annal apropos your debtors -money that is owed to your business, creditors -money that your business owes to added people, amounts that you accept invested into your business and amounts that you accept extracted personally.
The types of annal to be retained will alter amid anniversary blazon of barter and can be kept manually, digitally or on a software programme. It is important that annal are retained in a safe abode for a aeon of six years.
If you’re self-employed, your business will accept assorted active costs. You can abstract some of these costs to assignment out your taxable accumulation as continued as they’re acceptable expenses.
Costs you can affirmation as acceptable costs accommodate appointment costs (such as jotter or buzz bills), biking costs (fuel, parking, alternation or bus fares), accouterment costs (uniforms), agents costs (salaries or subcontractor costs), things you buy to advertise on (stock or raw materials, banking costs (insurance or coffer charges), costs of your business bounds (heating, lighting, business rates) or announcement or marketing/website costs.
Once you become self-employed you allegation to annals with HMRC as a self-employed individual. You are additionally appropriate to annals for the acquittal of Class 2 civic allowance contributions with HMRC. You ability additionally allegation to annals for PAYE if you accept any advisers and VAT.
:: Paddy Harty (p.harty@ pkffpm.com) is administrator at PKF-FPM Accountants (www. pkffpm.com)
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