The Personal and Financial Implications of Starting a Business
FAIA, FFA, FIPA, CME
How Starting a Business may affect your personal finances.
This includes a review on the effects of benefits, tax credits and PAYE implications.
1. BUSINESS PLAN
By deciding to go into business you have displayed that you have the rare quality of enterprise. You certainly have an idea or ideas. What you now need is action to remain focused. For this it is essential to put down your ideas in writing. You need a business plan.
The business plan will cover marketing, opportunities, competition, credit and personnel. You will need to create a Profit & Loss budget and a Cash Flow Projection.
2. LIMITED, PARTNERSHIP AND SOLE TRADER
Many businesses start up as sole traders and convert to Limited Companies later although it makes more sense to commence trading via a Limited Company from the very outset.
Staff have rights which include ‘Notice,’ ‘Sick Pay’ and ‘Holiday Pay’. As the employer, you will be paying 12.8% National Insurance.
4. WORKING FROM HOME
It is cheaper to set up and run your business from home rather than from rented premises. You can claim money for use of your home. You can also claim for telephones, fax, mobile phone, publications, postage and stationery.
If you are using a computer, a car or any equipment that you have previously owned, get it valued and treat it as an asset of the business.
The Business you set up will shape your lifestyle. So it is essential that it is there to stay. For this you need to give careful consideration to marketing your business.
- Can I lease equipment to save adverse cash flow?
- Can I get credit with suppliers or do I have to pay cash with order or a delivery?
- Can I factor my debts?
- How will I fund stock or work in progress?
It is now a legal requirement for all businesses to keep proper books of accounts. These can be simple spread sheet records or a commercial accounts package. You need to decide what suits your requirements.
8. PERSONAL TAX
You will be taxed on the profits of the business, not on your drawings. Tax is payable in January and July based upon the previous year’s profits.
9. COMPANY TAX
If you trade through a Limited Company, the company will pay Corporation Tax 10 months after the year end. You will draw a combination of salary and dividends. This provides an opportunity for Tax planning with a view to minimising your Tax.
Your local Employment Agency will advise you on whether you can claim benefits or Job Seekers Allowance whilst setting up your business.
Ask Business Link about available grants for your business.
For further information about Goddards Accountants, please call us at our offices:
102 Acre Lane
High Wycombe Office
c/o Franklin James
Axis 40, Oxford Road,
109 Church Street
8 High Street
Tel: 020 8941 2187