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Running your own business

Understand tax perspectives & key aspects of working for yourself as a sole trader or limited company. Learn about compliance, tax advantages, choosing an accountant, and HMRC obligations.

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Running your own business

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  1. Running your own business What you need to know from a tax perspective if you choose to work for yourself. Martin Connell FCCA martin@martinconnell.co.uk

  2. Running your own business • Important to choose how you will operate. • Main options are to be self-employed (sole trader) or incorporate as a limited company. • There are advantages and disadvantages to both options. • Information that you need to provide to HMRC. • Do you need an accountant and advice on choosing an accountant. Martin Connell FCCA martin@martinconnell.co.uk

  3. Running your own business • Advantages of self-employment • From a tax compliance point of view it is fairly simple. • You do not necessarily need to employ an accountant to file your tax return. • Cost of using accountant should be lower than if operating through a limited company. • Disadvantages of self-employment • You will pay more tax than if you operate through a limited company. • You have to pay 50% of the tax due for the following tax year in advance. Martin Connell FCCA martin@martinconnell.co.uk

  4. Running your own business • Advantages of incorporation as a limited company • You will pay less tax to HMRC. • The liability of shareholders is limited to share capital issued. • Disadvantages of incorporation • There is a lot more tax compliance as well as dealing with Companies House. • You will need to employ an accountant and they will charge more than if they are just preparing your income tax returns. • The company accounts in an abbreviated form has to be filed at Companies House. Martin Connell FCCA martin@martinconnell.co.uk

  5. Running your own business What you need to tell HMRC Self Employment • You need to inform HMRC that you are self-employed. • You will have to file a tax return. • You will also need to prepare accounts for your business. • If your turnover in an accounting year is over £81,000 you must register for VAT. You can choose to register for VAT even if your turnover is less than the registration limit. • You will pay Class II NIC at £2.75 per week unless your earnings are below £5,885. Martin Connell FCCA martin@martinconnell.co.uk

  6. Running your own business What you need to tell HMRC Operating through a limited company • The name and registered office of the company. • You will also need to register for PAYE as you will take at least some of your income as salary. • You will also need to file an income tax return. • The company is required to file accounts and an annual corporation tax return. Martin Connell FCCA martin@martinconnell.co.uk

  7. Running your own business Do you need an accountant? • If you decide to operate through a limited company. Yes you will need an accountant. • Strongly recommend that the accountants that you choose are regulated by either The Institute of Chartered Accountants or The Chartered Association of Certified Accountants. • Most accountants will offer a free initial consultation. • You may be able to reduce the fees you pay your accountants by doing some of the accounts preparation yourself. Martin Connell FCCA martin@martinconnell.co.uk

  8. Running your own business Martin Connell FCCA martin@martinconnell.co.uk

  9. Running your own business Links to useful web-sites https://www.gov.uk/set-up-sole-trader http://www.hmrc.gov.uk/selfemployed/index.shtml http://www.hmrc.gov.uk/ct/getting-started/new-company/start-up.htm Martin Connell FCCA martin@martinconnell.co.uk

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