When operating on a self-employed basis as a sole trader, you are your own boss, which means that you’re legally responsible for the financial affairs of your business, including the maintenance of financial records, daily bookkeeping and retaining the likes of invoices and receipts. As you keep close watch of your income and expenditure to ensure that the business is running smoothly, there are reporting obligations you are required to meet, writes Mark Halstead of Red Flag Alert.
limited company
Readers’ Question: I want to start a business and have looked at both the sole trader and limited company structure. I think that running as a limited company will be better for me. What is the best and most cost-effective way to register a company?
Readers question: I want to give my shares from my limited company to my partner, so my question is how do I transfer shares to a partner of my limited company?
A shareholder has the right to receive dividends. When the company has retained profit available, they may declare a dividend. A dividend is a share of profit paid out of the company which is proportionate to the number of shares held.
We all want to keep our businesses taxes as low as possible and one way is to claim all legitimate expenses. But the general rule that says you can claim all expenses incurred wholly and exclusively for the purpose of your business is, sadly, not entirely straight forward.
The tax season for 2019 in the UK is officially defined as the period between 6 April 2018 and 5 April 2019. Each tax season, all businesses, regardless of size, must provide their employees, contract workers, and others, with tax documentation that is required by the HMRC so that workers can file their tax returns. Unless an extension is requested, all tax paperwork must be postmarked or filed with HMRC by no later than 31 January 2020.
Readers questions: My partner and I have between us around 30,000 thousand pounds worth of tools/equipment as a sole trader, can we take them over to the ltd company or can the ltd company pay for them? We don’t want money out, we would like to offset our tax bill, can it be done?
Disgruntled creditors get desperate, and when all approaches to recover a debt have failed, they may send a winding-up petition to the beleaguered company as a last resort to get paid. It’s an extremely serious move and not one that should be taken lightly as it’s typically preceded by a statutory demand. In the UK, HMRC is the most common business creditor and is normally aggressive in its pursuit of tax liabilities. The majority (60%) of all winding up petitions are served by HMRC.
If you are thinking about getting private healthcare insurance for yourself and your family, you can pay for it in two ways. You can either pay for your private healthcare insurance through your limited company or do it from your personal accounts. Depending on various factors, the tax efficiency of both methods will vary. Therefore, it’s always a good idea to get an opinion of an accountant to help you find the best option.
[continue reading…]If you are classed as self-employed or have a source of untaxed income, you will be required to complete a Self-Assessment. However, this criteria is vague and many are left confused as to whether they actually need to file the tax return or not.
When setting up a new business there are many things to think about but probably the first key thing to decide on is what kind of business do you want to set up – which business entity will work best for what you want to achieve?
Readers question: As a director of my Limited Company, the majority of my income comes from my contracts, plus my properties and land. Can I still take a £2,000 dividend tax-free regardless of my other earnings which take me to the 40% threshold?
Readers questions: A small limited company has signed an agreement with me to provide certain services when its building project is complete. So my question is if the company is sold on, does the acquiring company have to honour this agreement with me?
For a lot of people, starting their own business requires a huge leap of faith. The reason behind this is simple – it is most often a step into an unfamiliar world, where you cannot be sure whether any of it is going to work out, even if you have a brilliant business idea. However, the very fact that you are seriously thinking about it is already enough for a good start. You are aware of the risks, and you have already heard all the intimidating statistics on startup failure.
Getting tax right requires careful planning. Whether you are a sole trader, a business owner with staff, or a higher rate taxpayer, you need to be talking to your advisors and keeping your eye on the ball.
Readers Questions: Does limited liability still apply with just one director?
Readers question: I have set up my own catering company at the moment and I am doing the food in a large Irish bar in Edinburgh. I will be paying my employee and buying all the food stock etc. My query is, would I be better off being an employee of my company and paying tax NI as normal with the addition of employer NI, or would I be better to take dividends monthly as my salary, my salary will be £40,000 per annum.
Readers Question: I do fostering and am classed as self-employed and I have an accountant that deals with my accounts and also my personal allowances with the tax office. I am thinking of running a property business – buy to let and set up a limited company. Will I need a different accountant to deal with my small business company hence 2 accountants?
Here are some tax and finance tips which could help you save money as a limited company owner, based on our experience of running limited companies, and dealing with accountants and tax advisors over the past 15 years.
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Readers Question: Just completed my first “job” as an LTD company, providing professional services. The work was done over a 4 month period in New Zealand and my invoice was submitted to a 3rd party UK agency, net of 15% New Zealand tax. How do I go about proving to HMRC that tax has been deducted and also how to pay the balance of 4% tax owing?
