Setting Up Your Own Business?
28th January 2016
We get it. There's no feeling in the world like being your own boss. You get to make your own rules, and break them when they get in the way. You're in charge of your own future, and you get to take pride in your business.
It's on the other side of the coin that things get tricky. Running a business can be lot harder than just working for one. You're risking your own money, and stand to lost more than just your shirt if it all goes wrong. You'll also have the taxman taking a much more personal interest in your affairs. In fact, you'll be spending a lot of your time shuffling papers to keep him happy. Believe us when we say that an unhappy taxman is never a fun houseguest.
Becoming A Sole Trader
A lot of this is going to come down to how you're set up. If you're a Sole Trader, you'll generally have a smoother ride with your paperwork. It'll also cost less to get up and running, and whatever profit you make after tax is yours to keep. On the other hand, HMRC won't see the difference between you and your business. If they're coming after your money, you'd better hope they don't decide to take your house with it! Basically, you're personally responsible for:
- Any losses your business makes.
- Any claims made against you by the public when they've dealt your business.
- Paying for things you buy for your business, like stock or equipment.
- Keeping records of your business sales and spending.
- Taking on and paying staff, if you use any.
Becoming A Limited Company
If the Sole trader route seems too risky but you still want to own your own business, you might be better off as a Limited Company. Basically, that's just an organisation you set up to run the business. The main difference is that you and your company are separate this way. When the taxman gets ugly, you've got some personal protection. Of course, there's a down-side to that, too. A Limited Company isn't your personal piggy bank, and you can't just spend its money like your own. Any profits after tax can be divvied up among the Shareholders instead. Of course, that might well mean just you!
If you're running a Limited Company, you've got some extra homework to do. Each financial year, you'll have to:
- Send Statutory Accounts to all Shareholders and Companies House.
- Send HMRC a Company Tax Return and accounts showing how much Corporation Tax you need to pay.
- Send Companies House an Annual Return.
- File VAT returns and make VAT payments to HMRC if you're registered for it.
If you're a Director, you'll also need to register for Self Assessment and fill in a personal tax return every year. HMRC will want this even if you're on PAYE and don’t take any other company benefits.
Depending on what your business does, you might have some other things to take care of.
If you're in construction, for instance, there's the Construction Industry Scheme to think about. The CIS is a special tax scheme just for the industry. Contractors make CIS tax deductions from their subcontractors, and pay the money to HMRC. That way, when the subcontractor does their tax return, most or all of their tax has already been paid.
However you decide to set up your business, get in touch with RIFT to see how we can help. We can sort out your paperwork, keep the taxman off your back and do a whole lot more.
Take five minutes off to ring or email for a chat. After all, you're the boss now!