Fine Winter 2019

a clear vision of where you are going will
help you stay focussed and enable you to
steer your fledgling business in the right
direction.
Test out your business idea
Do some market research and get some
feedback on your product or service.
Find out who your competitors are.
Understand your target market. If no-one
else is doing what you are doing, is there a
reason why not? What will be the demand
for your product or service? Who will
your potential customers be? Let people
get hands on with your product or service,
they might see a problem you have missed
or use the product in a way you haven’t
foreseen which presents your business
with further opportunities. Listen carefully
to feedback received and consider
implementing changes if necessary.
Business structure
There is no definitive answer when it
comes to choosing the right business
structure, much will depend on the nature
and potential size of your enterprise. There
are different costs, accounting, tax and
reporting requirements for each structure.
It is also worth thinking ahead to what
will happen when you want to sell your
business, retire or if you die. Exit planning
will again differ depending on which
business structure you choose. The four
most common business structures are:
• Sole trader
• Partnership
• Private limited company
• Limited liability partnership
Budget
Draw up a budget that takes into account
all the set up costs for your business plus
the regular, ongoing running costs. Also
think about the personal costs you need
to cover like rent/mortgage, utility bills,
food, childcare, car, and insurance. This will
help you decide whether you can afford
to invest some of your own money in the
business or whether you will need to look
for an investor or bank loan.
Initially your business may have fluctuating
levels of income. You should budget for
the lowest expected monthly income.
Should your income then be higher you
can start to build a safety net to help you
cover your costs should your income fall
back, or to help you ride out seasonal
fluctuations. Once your income settles
into a pattern you can revise your budget
and use it as a helpful tool to keep your
finances on track.
Don’t forget to budget for the tax and
national insurance you will need to pay on
your self-employed earnings. The tax due
on earnings made in the tax year is due
for payment at the end of the following
January, so you have nine or so months
to prepare, but if things have gone well it
could be a large bill.
If you have set your business up as a
private limited company or a limited
liability partnership then the corporation
tax on the profits will be due nine months
after the year end.
Write a business plan
A business plan will clarify your main
business idea and define your long-term
objectives. It sets out how the business
will be run and includes benchmarks to
measure your progress against. It will be
a key document if you are looking for
finance from a bank or potential investors.
Registering for VAT
You must register your business for VAT
if it has a taxable turnover of more than
£85,000pa. Sometimes it is beneficial to
register for VAT if your turnover is below
this level. Being registered for VAT means
that you have to charge VAT on the
goods and services you supply, however
you can claim back the VAT you pay
on goods and services relating to your
business.
Making Tax Digital for VAT was
introduced from 1 April 2019. This means
that VAT registered businesses with a
taxable turnover of over £85,000pa
must keep their records digitally and
submit their VAT returns through a
compatible software package. This may
sound unduly complicated, but good
record keeping will help you keep your
finances on track (see below).
Record keeping and bookkeeping
software
The rules for record keeping and the
accounting method you can use (cash
basis v traditional accounting) are different
depending on the turnover of your
business and the business structure.
Investing at an early stage in an online
bookkeeping package that will grow
with your business will help with record
and bookkeeping and make life easier in
terms of invoicing customers and keeping
track of bills from suppliers. Several
software providers have entry level
packages designed for sole traders or
small companies that will save time and
money in the long run as well as helping
with compliance.
Bank account
If you are a sole trader or partnership
you do not need a separate business
bank account, although you might find
it easier to keep your business and
personal finances separate. If you are a
limited company you will need a separate
business bank account.
Insurance
Adequate insurance for your business
is essential and the type of cover you
require depends on the nature of what
you are doing. If you are running your
business from your home, you may find
that your home insurance does not cover
things relating to the business. If you
employ people you will need employer’s
liability insurance.
If you have previously been employed and
are used to employer provided sickness
cover or health insurance you may also
wish to consider some sort of personal
insurance policy.
Intellectual property protection
Make sure you have your product or
intellectual property adequately protected.
You may need to consider registering:
• Trademarks
• Copyright
• Design protection
• Patents
Licences/permits
Are there any specific licenses or permits
you need to cover what you are doing?
HMRC provides a useful tool to help
determine what you might need for your
business. Your local council can provide
support in this area as well. Some business
sectors have very specific regulations
which you will need to get to grips with if
you are operating in one of those areas.
Employing people
There are a number of additional
responsibilities that arise when you
employ people including:
• Registering with HMRC as an
employer
• Running a payroll
• Paying national insurance
• Providing a workplace pension
• Checking someone has a right to
work in the UK
• Making sure you are paying at least
the National Minimum Wage
The above by no means covers
everything! I haven’t touched on the
considerations for selling online, selling
products abroad or importing products
into the UK, for example. There are also
the very necessary health and safety
requirements your new business will need
to comply with.
I hope that this does give you at least a
starting point for realising the dream of
working for yourself in 2020. Good luck
and a very Happy New Year.
Caroline is the partner responsible
for My Accountancy HQ and has a
passion for helping small and growing
businesses. Having trained as a
Chartered Accountant and worked with
entrepreneurs for much of her career,
Caroline understands what makes
business owners tick. My Accountancy
HQ provides flexible bookkeeping,
accounting, tax and business growth
services allowing entrepreneurs to get
time back to themselves and focus on
growing their business.
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