Small Business Accounting Guide

What's Next:

  • We've emailed you a guide or download it here
  • Scroll through the guide here
  • Set up a free consultation with one of our accountants
  • Get an instant quote for accounting & virtual office services
Get an Instant Quote
No items found.

Small Business Accounting Guide

We've emailed you your guide.

Inside our Limited Company Expenses guide:

Select your customer type
Contractors

We started as contractor accounting specialists and built a service designed for contractors.

Self Employed / Sole Traders

For self employed individuals (sole traders) we reduce you admin and give you clear insights on your tax.

Small Business

We help you small business grow, take on your admin and make sure you’re running efficiently.

Book a Free Accounting Consultation
Book a free consultation with one of our accountants.

Read More Guides below:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Should I charge VAT for international/ overseas sales?

Whether or not VAT should be charged on your sales to your overseas clients all depends on what HMRC refers to as the place of supply of your services.

Generally, if your client is a business customer, the place of supply will be where the client is based but if they are a non-business customer, the place of supply will be where you are based.

For most contractors, this means that your place of supply is generally where your customer is based.

If your place of supply is in another EU country, you do not need to charge UK VAT - providing they are a registered business in their country. You will need to request their VAT registration number and display this on your invoices. It will also need to be reported to HMRC within your VAT return and a separate EC sales list.

If your place of supply is in a country other than the EU then you do not need to charge VAT as it is outside the scope of VAT entirely. No further actions are needed for this other than not including VAT on your invoices.

If you are looking to check if you need to charge VAT or need assistance with any other VAT matters, contact one of our VAT experts today.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I know how much tax to put aside?

When it comes to setting aside money to pay your tax bill, the general rule of thumb percentage for self-employed individuals is 25% - 30%.

This figure will vary depending on the amount of profit you report. If your profit falls between £50,000 - £100,000, it is recommended that you set aside 40% for tax. And if your profit exceed £100,000, you should be setting aside 45% for tax.

Bear in mind that these are general recommendations, and may not be an accurate estimation depending on your circumstances. HMRC's ready reckoner tool can help you work out an approximate figure you need to set away each month. We recommend consulting our Forma accountants if you need further tax advice.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

When should I charge VAT?

You should charge VAT when your business becomes VAT registered-whether the registration is mandatory or voluntary.

VAT registration is mandatory when:

  • your VAT taxable turnover exceeds the current threshold of £85,000 (for a 12-month period ending in 2020/21). The VAT taxable turnover refers to the total value of everything that you sell that isn't exempt from VAT.
  • you expect your VAT taxable turnover to exceed £85,000 in the next 30-day period
  • your business had a taxable turnover exceeding £85,000 over the last 12 months

If you're thinking about registering for VAT voluntarily, these are the main benefits and downsides you should consider:

Benefits:

  • It enhances the perception of your business
  • Able to reclaim VAT

Downsides:

  • Administrative burden
  • It makes your goods or services seem more expensive
  • You may be faced with an unexpected VAT bill
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Dividend Calculator (Excluding VAT)

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Dividend Calculator with VAT Flat Rate Scheme

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I set up a Limited Company?

To set up a limited company, you need to take the following steps:

  • Decide what kind of limited company you need
  • Choose a business name
  • Choose how to set up your limited company
  • Complete the company formation process
  • Open a business bank account
  • Inform your stakeholders
  • Get your VAT registration or transfer sorted out
  • Set up your payroll
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I transfer/ change a company name?

You can change the name of your limited company through a third party (such as a company formation service), or directly with Companies House.

If you're opting for the latter, you need to complete form NM01. There is a £10 fee payable to Companies House to file the form.

If you're trading as a limited liability partnership, you need to file form LL NM01. A £10 fee applies.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Key considerations when you register a Limited Company

As a freelancer, contractor, or small business, it is typical to start with the simple structure of operating as a Sole Trader.

While taxes and other administrative work may be relatively easy when you are a Sole Trader, as your volume of business goes up, there are more and more reasons to take on the task of becoming a Limited Company.

For instance:

  • A Limited Company protects your personal assets. If you are found liable in a lawsuit, only your business assets are at risk.
  • A Limited Company is usually more tax efficient than being a Sole Trader.
  • Once you have your name chosen as a Limited Company registered through Companies House, no one else can take your company name.

Luckily, running a Limited Company doesn't have to be exceedingly complex, though following a set plan will help to keep the complexity to a minimum.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I register for VAT?

You can register for VAT online through creating a VAT online account (also known as the 'Government Gateway' account). You'll need your online account to submit your VAT returns.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Can I claim VAT back on my mileage?

You can reclaim VAT on the fuel portion of your mileage expenses if you don't pay a fixed rate under the Flat Rate Scheme.

You can reclaim all the VAT on fuel if you use your vehicle exclusively for business.

If your vehicle is driven for both business and personal use, you may handle VAT in the following ways:

  • Reclaim all the VAT and pay the fuel scale charge for your vehicle
  • Reclaim the VAT on fuel you use for business trips
  • Don't reclaim any VAT. This may be the better option if you use your vehicle for business purposes on rare occasions, such that the fuel scale charge exceeds the VAT you can reclaim.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

What are the disadvantages of a Limited Company?

The drawbacks to setting up a limited company include:

  • There are additional filing and reporting requirements to adhere to.
  • Reduced privacy
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How to make and send an invoice for your clients

You've delivered your work, and it's time to receive your payment.

Before that, you'll need to make an invoice. It's an important document: not only does it help you obtain money you're owed, it also serves as evidence of a transaction in the event that you need to seek legal action to handle non-paying clients.

If this is new to you, you might be wondering: How do I create an invoice, and what must I include? Are there best practices or tips I need to know?

We'll answer all of these questions below:

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

VAT Calculator

Working out the VAT

With our calculator, you can work out your VAT in just a few quick clicks.

If the price doesn't include VAT:

  • Select the ‚ÄòAdd VAT' option
  • Select the rate of VAT on the slider
  • You'll obtain the gross price (inclusive of VAT) and the VAT element of the bill.

If the price includes VAT:

  • Select the ‚ÄòExclude VAT' option
  • Select the rate of VAT on the slider
  • You'll obtain the pre-VAT price (exclusive of VAT) and the VAT element of the bill.

VAT basics: What you need to know

VAT, or Value Added Tax is a consumption tax that is applied to most goods and services. While the standard rate (20%) applies in most cases, there are items-such as children's car seats and sanitary products-that are charged at the reduced rate of 5%. Using the slider on our calculator, you'll be able to calculate the VAT and gross or net prices for different VAT rates. If you're unsure about the correct rate you should apply, refer to HMRC's resource on VAT rates.

Resources:

-

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I deregister for VAT?

You can cancel your VAT registration online, or by sending form VAT7 via post.

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I find a my tax status?

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

When do I need to pay my self assessment tax bill?

Payments for your Self Assessment tax bill are due on:

  • 31st January: You'll need to pay tax that you owe for the previous tax year, as well as your first payment on account. For the 2020/21 tax year, the first payment on account is due by 31 January 2021, while the balancing payment is due on 31 January 2022.
  • 31st July (following the end of the tax year): You'll need to pay your second payment on account. For the 2020/21 tax year, the second payment on account will be due on 31 July 2021.
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I receive trading and property income allowance?

"According to HMRC, you can claim trading allowance if you have trading income from:

  • Self-employment
  • Casual services
  • Hiring personal equipment

You can claim the property allowance if you have income from land or property.

You won't be able to claim the allowances if you have trade or property income from:

- A business that you or an individual connected to you owns or controls
- A partnership where you or individuals connected to you are partners
- Your employer, or your spouse's or civil partner's employer

You can't claim the property allowance if claim:

- Claim the tax reducer for finance costs such as mortgage interest for a residential property
- Deduct expenses from income from letting a room in your own home, instead of using the Rent a Room Scheme"

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

How do I receive tax free childcare?

To get tax-free childcare, you need to:

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

5 disadvantages of a limited company

What are the advantages of a private limited company?

In the UK, the majority of self-employed people operate as sole traders. While there are many advantages to being a sole trader, you could take home more money and give your business a professional edge by setting up as a limited company.

In this article, we'll look at the advantages of operating as a private limited company to see how it could benefit you. If you're interested in seeing whether a limited company could be a good option for your business, check out our Business Structure guide. If you're already operating as a sole trader, making the jump to a limited company is more straight forward than you think.

Advantage 1 ‚- You pay less tax and National Insurance Contributions

Who can turn their nose up at the prospect of increased take-home pay? Well, that's the principle benefit of setting up a limited company and one of the main factors that drive people to switch from a sole trader.

As a director of a limited company, the way you pay tax is different from how you pay as a sole trader. As a sole trader, you'll pay 20% or more on everything you earn over the tax threshold. As a limited company, you typically pay yourself a small salary so you incur as little personal tax as possible. The majority of your income will come in the form of dividends that are taxed at a much smaller rate, meaning you're able to maximise your take-home pay.

As well as the tax benefits, paying the majority of your income through dividends means that you're able to pay less National Insurance Contributions (NICs) as these do not apply to dividend payments.

Example - Here's a quick comparison of the difference in take-home pay for a sole trader and a limited company.

  1. Sole Trader
    Revenue: £40,000
    Expenses: £1000
    Tax at 20%: £5,300
    Class 2 NIC: £158.60
    Class 4 NIC: £2,655
    Take-home pay: £30,886.40


  2. Limited Company
    Revenue: £40,000
    Expenses: £1000
    Corporation tax: £5741.04
    Dividend tax at 7.5%: 1,406.92
    Take-home pay: £ 31,852.04

As you can see, you save £965.64 as a limited company. What's not to like?

Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Small Business Accounting Guide

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns
Read Full GuideRead Full GuideCalculate Now

Download Now:

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.