Tax and Accounts Advice for Small Businesses

Business Tax forms

Manage Costs And Get The Best Advice To Keep Your Small Business Healthy

Managing accounts and understanding tax rules are key to survival and success in challenging financial times.

Every entrepreneur dreams of turning his small business into the next Microsoft or Virgin, but the sad truth is that more than 50% of businesses fail within the first five years.

Key to nurturing your fledgling organisation through this critical time is keeping on top of finances. While this might sound obvious, business owners are usually focused on developing their products and services and generating sales.

They just do not have the time or indeed the specialist expertise to manage their accounts effectively. By turning to one of the top accountants in Peterborough, you can be guaranteed the best advice to make your money go further and ensure you are paying the right taxes to avoid unpleasant surprises.

There are specific rules relating to small business owners and the self-employed. These can vary depending on whether you have a limited company or an unincorporated business and upon the sales and profits that your business generates.

Profit Implications – Income Tax

If your unincorporated business generates a profit in excess of your personal allowance, then you will need to pay income tax. The personal allowance varies year on year, but is currently £11,000 per year.

If you have other income, for example from salaried employment or consulting work, then this will all count towards your personal allowance too.

To work out your taxable profit, you will need to understand the implications of allowable expenses and capital allowances, which can be deducted from your pre-tax profits.

Allowable Expenses

These are essentially the day-to day running costs of your business. They include, among other things, salaries, subcontractor costs, general office expenses, fuel costs and bank charges.

Capital Allowances

These can be claimed on one-off capital expenses used in your business, for example plant, office furniture and vehicles. This is an important consideration, and can make capital expenditures more palatable, particularly for businesses seeking to minimise costs, for example by purchasing used computers and other equipment.

Working From Home

If you work from home, you can claim a proportion of your household costs against the business. This includes such expenses as electricity, telephone, heating, council tax, etc. The potential complication is assessing what proportion of these costs you can reasonably claim, and this is why it is vital to take good advice.

VAT

Like income tax, there is a threshold at which your business becomes liable to pay VAT. This time it is on sales, and the threshold is currently £83,000 per 12-month period. If your annual VATable sales exceed this amount, then you will need to become VAT registered. “VATable sales” means sales of goods or services that would have VAT charged on them if supplied by a VAT registered company.

Business Rates

If you operate out of business-specific premises, you will probably be liable for business rates. These are the business equivalent of the council tax paid on domestic properties. Some types of business are exempt from business rates or entitled to a degree of financial relief.

Be Aware

The rules for small businesses are complex and have a tendency to change with little notice or fanfare. Also, note that many of the above points only apply to unincorporated businesses and the rules are different for corporations. Take the best advice to ensure you pay neither more nor less than you should, to give your small business the best chance to thrive.

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