Dealing with taxing matters
HAVING just reached the end of another financial year and the prospect of starting a new one, I really believe that it’s important for young business people and anyone just starting-up in business to acquire a basic understanding concerning some of the key tax issues.
I have to admit up until recently, paying tax and national insurance were topics that didn’t really bother me too much, especially while I was at school. However, after starting my own business it’s a subject matter that I’ve decided to try and gain a little more knowledge about, even more so now that my livelihood now relies upon getting it right.
I recognise that for most business-people, it’s generally their accountant’s job to do much of the headwork/paperwork, alleviating most of the stress away from the individual, but I really think that it’s important for many young self-employed people to gain a deeper awareness as far tax procedures are concerned.
One thing that was immediately pointed out to me, even before starting my own business, was the importance of keeping accurate details.
Some people may wish to do their own books or the alternative is to hire a bookkeeper or accountant.
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Another really important piece of information that I discovered that new businesses might want to be aware of is that there are specific penalties enforced by the Her Majesty’s Revenue & Customs for not keeping accurate details, including tax returns.
So how did I learn more about these matters?
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After initially deciding to start my business and “go it alone”, I appointed a fully qualified accountant. My next big decision was to decide whether to either become a sole trader/self-employed individual or to operate as a limited company.
Having no previous experience in these matters, I searched for further advice from my newly appointed financial expert, who went through the finer details, explaining all the differences.
He informed me that as a sole trader/self-employed person my income tax and national insurance would be calculated by my business profits and the payment of tax and national insurance contributions would be calculated through a self-assessment procedure.
The other option was for me to form my own company. The first thing that I would have to do was to decide upon a name and then officially register it with Companies House.
The main benefit of becoming a limited company, apart from some possible tax savings is that it legally separates the business from its owner, meaning the company is liable for any debts and not the individual owners.
I have to be totally honest in saying that all of this information and protocol seemed very daunting and overwhelming to start with. However this is why I believe having a proficient accountant close to your side is not only invaluable but also essential.
My accountant, being the extremely nice man that he is, sat me down and explained thoroughly all the pros and cons concerning both categories of doing business. He made me fully aware of all the responsibilities and legal requirements in order to operate my business effectively. After that he placed the final decision on which way to go firmly in my hands.
After careful thought and consideration I eventually made my choice to form my own limited company. I couldn’t believe it, becoming a company director at the tender age of 23. This just seemed totally incredible, even though a little bit scary.
It wasn’t just the ego trip that I was after. Being the person I am, I wanted to prove that my company could thrive within the corporate environment and I wanted to make sure that I totally followed all the guidelines laid down by Companies House and HMRC. Let’s face it, if I didn’t follow the rules, there would be problems later on down the line.
Thankfully today, there is a lot of good practical advice out there. The internet has a lot of useful information and I urge anyone thinking of starting his or her own business or wanting to discover more about tax-matters to check out the following website; www.hmrc.gov.uk or www.businesslink.gov.uk
n What’s your view? Contact Rachel Ducker via e-mail at firstname.lastname@example.org