How do you start a business?
Small Businesses dominate Britain and Self Employment in the UK has the fastest growth rate in Western Europe. Here you have a few interesting statistics from the Federation of Small Businesses.
- There was a record of 5.4 million private sector businesses at the start of 2015.
- This is an increase of 146,000 since 2014 and 1.9 million more since 2000.
- Small businesses accounted for 99.3% of all private sector businesses at the start of 2015 and 99.9% were small or medium-sized (SMEs).
- Total employment in SMEs was 15.6 million; 60% of all private sector employment in the UK.
- The combined annual turnover of SMEs was £1.8 trillion, 47% of all private sector turnover in the UK.
All in all, non-employing business like the self-employed is the fastest growing. Look at the graphic below.
Read more about it on The report on small firms 2010 - 2015 by the Primer Minister's advisor on enterprise.
So, how do you become Self employed?
First of all, you should get a good overview of your new responsabilities. For example:
- Keeping records of your business’s sales and expenses
- Sending a Self Assessment tax return every year
- Paying Income Tax on your profits and Class 2 and Class 4 National Insurance – use HMRC’s calculator to help you budget for this
- Your business debts
- Bills for anything you buy for your business
- Registering for VAT if your turnover reaches the VAT threshold
- Registering with the Construction Industry Scheme (CIS) if you’re a contractor or sub-contractor in the construction industry
Naming your business
You can use your own name or trade under a business name – just follow the Goverment's rules for naming your business.
You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.
When should you get help from an Accountant?
Often business owners wait too long before they realise that they need help from an accountant.
Key reasons are:
- Not understanding the difference between a bookkeeper and an accountant
- Thinking that an accountant will just be an extra cost – the reality is that most accountants will save costs
- Thinking that accountants are just bean counters.
But if you choose a qualified and experienced accountant they can bring huge benefits: management tools to improve profitability, cost controls, tax savings, growth strategies, business planning, business structures and much more. So don’t wait too long – getting an accountant should be a priority for all businesses!
Avoid common Mistakes
First off – not having separate bank accounts. Many start ups try mixing business and personal transactions in their personal bank accounts, its a total nightmare, don’t do it, get a business bank account. Mixing things up will almost certainly have tax implications.
Not registering for tax or filing returns is another one. Getting things right at the beginning is extremely important and a CIMA Accountant can make sure that you choose the right business structure and will help you register for VAT, PAYE, CIS and other taxes. Choosing the right VAT scheme will save you tax. Not registering and filing returns will have severe consequences and lead to fines and penalties.
Also – contract mistakes. Ask your Accountant to review your contracts, they will be able to give you lots of useful tips.
Running out of cash: draw up a Budget and Cashflow and forecast how much cash you will need to run the business, looking at your cash cycle and managing it will be vital. If you need funding ask your Accountant for help, they will be able to look at all the options and help you choose the option that’s best for your business.