STARTING A BUSINESS? DON’T FORGET THE BOOKKEEPING
Key things to consider when you are starting a business – bookkeeping
Starting a business is exciting and scary – taking that great idea and turning it into something workable sees you investing a huge amount of effort to deliver the end result. Mixed in with the highs and lows are the practical and essential parts of running a business and sadly, at some point, you do have to turn your attention to what you may feel is the more mundane. However, these are the ones that can make a difference to whether you keep trading or not – managing your business finances.
When anyone starts a business, putting the effort in to keep on top of their bookkeeping is essential – it helps with planning, forecasting and making sure they are operating profitably.
To begin with your turnover may not be that high; however, as soon as your taxable turnover has reached £85,000 over the past 12 months or if you expect it to reach that figure in the next 30-day period, then you need to register for VAT. There are some exemptions and we can discuss those with you if you have any uncertainties, but for most businesses, this is a fact.
There are benefits and downsides to VAT registration and it is possible to register before you reach the threshold, but once you reach the threshold, the choice disappears. Registering before you reach £85,000 can, for example, be helpful from a trust perspective with your clients – they will view you as an established business; but of course, it comes with the requirement to undertake the VAT return process.
And of course, once you are VAT registered, you need to be aware of Making Tax Digital (MTD) but only if you have reached the £85,000 threshold. If you have pre-registered for VAT before reaching that turnover figure, you don’t need to worry about MTD yet.
MTD for VAT
MTD has been around for a few years now as the government introduced the concept and then began the roll out. As someone new to business, you may not be aware of what is entailed so here is a quick recap, MTD is applicable if your business is VAT registered and has sales that are subject to VAT that are above the VAT threshold of £85,000. We covered it in more detail in our blog – Making tax digital.
As long as you are registered for VAT and reach the threshold, then you need to comply with the new requirement to provide VAT returns electronically and directly to HMRC. To enable you to do this, you currently have two options:
1 Choose to use MTD-compatible accounting software which is able to store records of transactions affected by VAT, transfer the information directly to HMRC’s systems and files the VAT returns directly to them.
2 Use a spreadsheet such as Excel which needs to be API enabled or use bridging software to link and transfer the data to HMRC. This must be automatic though and not manual.
The alternative is to work with a bookkeeper or an accountant who will operate as your agent and provide the data to HMRC on your behalf.
Taking on your first employee can also be a pretty momentous day – it normally happens when you have completed your third month of working 12+ hour days, every day, and you finally accept you cannot do it all. But with an employee comes the added task of operating a payroll for them with the tax and NI deductions and tax codes and yet more work. This is another task that can be outsourced to a reputable bookkeeper and they will simply expect you to provide some straightforward information to them on a weekly or monthly basis. You are happy and so is your employee.
You don’t have to do it all yourself
When you start out in business, money does tend to be tight and you may make decisions on that basis, not fully considering that if you free yourself up to grow the business, that might really be a more cost effective way to move forward. Talking to a reputable bookkeeper could make all the difference in those early days to free you up to do the fun things and enable you to focus on the reasons you decided to start your own business in the first place.
Do let us know if we can help you.
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