Name your business
- Do a thorough check: First up, you should ensure that the names aren’t offensive, nor do they contain sensitive words and expressions. You’ll need to run a search on Google to check that the names you’ve come up with are not already in use, and check that the name doesn’t infringe an existing trademark. If you’re setting up a limited company, you’ll need to register your business name (tip: run a check against Gov.uk’s company name availability checker tool to ensure that it isn’t the ‘same as’ an existing name). There are different rules for sole traders and partnerships.
Determine your legal business structure
Choosing your legal business structure is a weighty decision. It affects a number of key aspects relating to you and your business—from the amount of administrative work involved, to how much tax you pay and your personal liability should your business fail. As such, it’s a good idea to consult a business attorney or accountant before you make a decision.
There are five business structures for UK startups: sole trader, partnership, limited liability partnership, private limited company and guarantee company (non-profit). Further information on each business structure, the pros and cons to consider and key factors to evaluate can be found here:
- What type of business structure is best for you?
- Deciding between sole trader vs limited company vs umbrella
- What is a sole trader?
- What is a limited company?
- What is a contractor?
Register your business
Now that you’ve decided on a name and legal structure, you’ll need to register your business with the relevant authorities. Here’s an overview of the items you’ll need to check off your list to get your business established:
1. Register as a sole trader:
- Register with HMRC: You may complete the online form, mail the form by post or call up HMRC on 0300 200 3310
- Name your business
- Register as self-employed
2. Register as a limited company:
- Decide on the type of limited company to set up
- Register your business name
- Register with Companies House (or use a company formation service)
- Complete the company formation process: You’ll need to complete and submit the Memorandum of Association, Articles of Association, Form 10 and Form 12
- Register for Self Assessment
- Set up as a sole trader
- How to set up a limited company
- How to register as self-employed with HMRC
- UTR numbers: what is it and how to get it
- Self Assessment tax returns for the self employed
Purchase the right insurance for your business
As a small business owner, you need insurance to ensure that you’re protected against the various risks that you face—from property damage, to liability claims and theft. An Entrepreneur.com article highlights the types of insurance business owners need to have in place as soon as possible:
- Professional liability insurance
- Property insurance
- Workers’ compensation insurance
- Home-based businesses
- Product liability insurance
- Vehicle insurance
- Business interruption insurance
- What business insurance do I need?
- Understanding how business liability insurances protects your company
- What is an insurance broker?
Apply for licenses and permits
Depending on the nature of your business, you might require a license or permit before you can start operating. Examples of businesses that require licenses include:
- Child minding and nursery businesses
- Financial services
- Pet businesses
- Sale of alcohol
- Sports coaching
- Security services
Set up an accounting system
Having an accounting system in place is an important part of running your business. Without it, you won’t be able to keep track of your finances, meet your reporting requirements or obtain an overview of your business performance. To get started, you’ll need to:
- Set up your business accounts
- Choose your accounting method
- Select an accounting software
- Set up a chart of accounts
- Create a checklist: Put together a small business accounting checklist to help you keep track of what you need to do across the year to maintain your business accounts.
- Review how you’re managing your accounts periodically: Assess how much time you’re spending; for example, while spreadsheets may work well at the start, it may be more time-efficient to transition to a more advanced solution as your business grows.
- Work with the right accounting partners: Enlisting the help of professionals can make managing your accounts easily. An accountant, CPA, bookkeeper and tax advisor are professionals you may turn to—whether you’re looking to outsource your accounting, or just need advice from time to time.
- How to find an accountant
- How much should I be paying: A guide to accounting fees for a new limited company
- When do you need accounting software?
- Benefits of Accounting Software for Small Businesses
- Moving to the Cloud: Excel to Accounting Software
Keep up with your business tax obligations
The main business tax obligations you’ll need to stay on top of are:
- Income tax: As a sole trader, you pay income tax on business profits. If you’re running your business as a limited company, you’ll pay income tax on salary or dividends you draw from your business.
- National Insurance: National Insurance contributions (NICs) are a tax on earnings that are paid by both employers and employees.
- Sole trader: You’ll pay Class 2 NIC, unless your profits fall below the small profits threshold. You’ll also pay Class 4 NIC if your profits go over the lower profits limit.
- Limited company: Class 1 employee’s NIC will be deducted from your salary. Class 1 employer’s NIC will be paid for by the company.
- Corporation tax: If you run a limited company, you’ll need to pay corporation tax.
- VAT: Regardless of your business structure, you’re required to register for VAT if your VATable sales exceeds the VAT registration threshold.
- Business rates: Business rates are a tax on the right to occupy non-domestic or commercial property.
- Gov.uk: Rates and allowances: National Insurance contributions
- Gov.uk: Corporation tax
- Gov.uk: Business rates
- What Are Your Tax Obligations When You're Self-Employed?
- Income tax calculator
- Corporation tax calculator
- VAT calculator
Know your filing dates
These are key dates you need to keep in mind for the 2020/2021 tax year:
- 31 January 2020: Deadline for first payment on account for the 2019/2020 tax year
- 31 May 2020: Final day to provide employees with P60 for 2019/2020
- 31 July 2020: Deadline for making your second payment on account for the tax year ending 5 April 2020. If this payment does not completely cover your tax debt, you'll have until 31 January 2020 to make a 'balancing payment.'
- 5 October 2020: Deadline for notifying HMRC that you are self-employed
- 31 October 2020: Deadline for a paper tax return for the 2019/20 tax year
- 30 December 2020: If you want your self-employed tax owed to be collected via instalments through PAYE, you need to file your online tax form by 30 December. Keep in mind that you're only eligible if your Self Assessment tax bill falls below £3,000, and you are paid a salary or pension.
- 31 January 2021: Deadline for filing your online tax return for the 2019/20 tax year. Also the deadline for paying your tax bill for the 2019/20 tax year.
Set aside money for your taxes
As a self-employed person, tax season can be a taxing affair. That’s because you need to work out how much you need to set aside (keeping in mind your payment on account instalments). Take advantage of tools that help you budget for your taxes, such as HMRC’s ready reckoner.
Claim your tax deductions
As a small business owner, you’re always on the lookout for ways to save money. Tax deductions are a way to do that, yet it can be confusing. If you’re left wondering: ‘What can I claim as a business expense?’, check out our resources to get a better understanding of what you can and can’t claim: