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Archives for September 2019

Going self-employed? 5 things you need to do

Setting up a new business can be daunting and the To Do list endless.  Here are 5 things that you need to do to get the financial side of your business up and running:

  1. Register with HMRC

    You need to tell HMRC that you have become self employed.  You can do this online here.  You will receive your Unique Taxpayer Reference (UTR) in the post within about 2 weeks from HMRC.  This is a 10 digit number which you need to keep safe, as you need this to be able to file your tax return.

    You should register with HMRC as soon as possible after you start trading, and by 5 October following the end of the tax year in which you started self-employment at the latest.

  2. Set up a Separate Bank account

    It is always a good idea to have a separate bank account that you just use for your business.  Not only does it make preparing your year end accounts easier, it makes sure that you account for all your business expenses, gives you a clearer idea of how your business is doing, and if HMRC were ever to enquire into your affairs, gives them less scope to start asking other questions!

    As a sole trader, you don’t need to set up a “business” bank account.  You just need to have an account in your name that you use solely for business purposes.  If you have any business related DD’s (mobile phone/subscriptions) move them over to this account.

  3. Set your prices

    Presumably you want to make money out of your business, so you do need to think about what you are going to charge people for your services.  I’m not going to cover various pricing strategies here, but it is important to have think about all the different types of costs that are going to be involved with running your business, and to make sure that your prices will generate enough income to cover them.

    You also need to consider the amount of “admin” time that is involved in running a business.  Running that “hour workshop” won’t just take an hour of your time, you need to plan it, advertise it, deal with the finances of it, follow up etc so you need to build all this time into your pricing strategy.

  4. Keep your records

    You need to get this organised from the start.  Unless you are going to be raising only a handful of invoices and have very few expenses, I would definitely consider using a cloud based accounting package.  These are subscription based, so you need to take this cost into account, but packages start at under £10 a month, so are well worth the cost. At Wilkins & Co, we use Xero with our clients, but there are many others to take a look at as well.

    Make sure you are aware of the types of expenses that you can claim against your business and keep records of all these, as you will need them to prepare your accounts for HMRC, or to pass to your accountant.

  5. Put Money Aside for Tax

    Being self employed as opposed to employed, no-one pays your tax for you!

    It is your responsibility to pay HMRC your tax and NIC.  You will do this by preparing a set of accounts for your business and sending HMRC a tax return. Your accounts will generally be prepared to the end of the tax year (5 April), and then you have until the following 31 January to submit your tax return and pay your tax and NI.

    It is therefore a good idea to put money aside as you go along to pay your tax bill.  It is very easy to see money in your business bank account, and take it out and spend it – and then realise you have a tax bill to pay at 31 January that you have not budgeted for. How much you should put aside does depend on your personal situation, and what other income you may have in a tax year, but 20-30% of your profits put aside should cover your tax bill for the year.  Do check with an accountant though for personal advice on this.

  6. Did I say 5 things – oh well!

    No 6 could be the most important – talk to an accountant!!!  You can contact me at rosie@wilkinsco.co.uk.

 

 

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Can my business pay for my new “work outfit?”

“I’ve bought a new outfit that I’m only going to wear for work – this must be a business expense?”

I hear this all the time but unfortunately HMRC may not agree with you as to what constitutes “workwear”.

So what are the rules?

HMRC will not let you claim any clothing that has dual use – eg that could be worn both personally and for your business.  So you may live 24-7 in jeans, and buy one “work outfit” to go to client meetings and networking events in, but HMRC are not going to let you claim the cost of it through your business, as you could very easily also wear it outside work.  The fact you don’t is irrelevant.

Branded clothing

If your clothing is visibly and permanently branded with your company logo, then HMRC will accept that it is only worn for business purposes and let you claim the cost (think branded polo shirts/fleeces etc)

The branding does have to be both clearly visible and permanent – so a badge won’t work, nor will a tiny label sewn or written on areas not generally seen!! (yes I have had a client try this one)

Nor will buying a green jacket, just because your company colours are green!

Safety wear and protective clothing

If you need safety wear or protective clothing for your business, then you can claim this.  But we are talking high viz jackets, steel capped boots, hard hats etc.  Buying a super warm jacket because you work outside a lot may protect you from the cold, but HMRC would not consider it a business cost.  You are quite likely to wear this walking the dog as well, so it has dual use.

Uniform or costumes?

Police, nurses uniform etc – yes (assuming this is your profession 😊)

White shirt and navy skirt because that’s what you are expected to wear – no.

“Sensible” shoes is one that people like to try to claim – if you are on your feet all day you are going to want comfortable shoes, but HMRC are unlikely to let you claim these, as again they have dual use, even if you wouldn’t be seen dead in them outside work.

Another common one is gym kit for personal trainers, yoga instructors etc.  Although you will have to purchase more of this than the rest of us, it still has dual use and therefore can’t be claimed.

So there is generally very little scope to claim any “workwear” as a business cost, which I agree in some circumstances may seem unfair!

For any further information or help with your accounts, please contact Rosie Forsyth at Wilkins & Co

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