Q&A with Rachel from Accountant She
1. What are the main benefits of having an accountant as a small business?
Ah, my favourite question! Drum roll please.. you should get an accountant, when you want one! The benefits you get from working with an accountant are endless (I am a bit bias!), but the main reasons are:
Peace of mind, not only do you have a professional doing all of the statutory bits for you, but you also gain a trusted advisor to work with throughout the year so that you can ask lots of questions, get lots of training and elevate your business by working closely together
Time savings, lots of business owners simply don’t have the time to prepare all of their statutory requirements and we find that for many people the finance side of the business is one of the first things that gets outsourced!
Tax efficiency, I find that for individuals that complete their own taxes, it’s like walking through airport security. You know you’ve not done anything wrong but you can’t help but feel a bit hot and sweaty! Having an accountant can really give you the guidance to claim all of your allowable expenses, lots of which some business owners don’t even know they can claim!
2. What is VAT and when should I register for VAT?
Okay so VAT can be super confusing and a bit scary for small business owners so first things first, what even is it? Value Added Tax is a tax which is charged of most goods and services in the UK. When you buy a product that is eligible for VAT (in a shop for example) VAT is automatically included in the price you pay.
You can register for VAT voluntarily but you must register for VAT when:
Your VAT-taxable turnover (your total sales) exceeds the current threshold of £85,000 within a rolling 12 month period
You expect your VAT-taxable turnover to exceed the threshold in a single 30-day period
You need to register for VAT within 30 days of meeting any of these criteria.
3. What is the difference between a sole trader and a limited company?
This is one of the most common questions I get asked as it’s a one that impacts all self-employed individuals! So let me break it down for you:
Limited Company
A limited company is a separate legal entity that you can create to run your business, even if you’re a one man band. As a director, you’re responsible for any legal and financial decisions the company makes. The company’s assets and liabilities are completely separate from your own personal finances.
Sole Trader
If you’re a sole trader, you run your business as an individual and you are classed as being self-employed. You keep all of your business profits after you’ve paid tax on them. You’re personally responsible for any losses your business makes.
4. What are the benefits of becoming limited?
The first benefit of becoming limited is in the name, limited! The word limited means limited liability and so as the company is a separate legal entity, your personal assets are protected. If your company needs to close or experiences financial difficulties, your personal assets cannot be taken from you to pay company debts.
The second big benefit of become a limited company is the potential for greater profit and tax efficiency! As a sole trader, all of the profits made by your business are taken as income and taxed as such. Through a limited company, you’ll pay corporation tax on your company profits and can pay yourself through a combination of dividends and salary. This will minimise your PAYE and National Insurance outgoings and any further payments you make to yourself will usually be taken as dividends.
5. What good habits can I get into as a small business owner?
One of my top tips for any small business owner is to set up a separate company bank account! Separating your business and personal finances will not only give you clarity but it will make your life much easier when it comes to preparing your tax return!
Planning and saving for tax is another huge thing you can do from the very beginning to help get into really great habits! If you’re not sure how to do this, I created this video to help you to learn how!
6. Can you give any tips on how to budget for your business?
Of course! Budgeting is actually super straight forward for small business owners and the best piece of advice I can give you is that you’ll never get it 100% accurate but a great budget can help you to plan and strategize how to take over the world as a small business owner! So here’s my 8 step process for putting together a budget:
Estimate your monthly fixed costs
Determine your variable costs
Predict one off costs
Project your income
Track your profit or loss
Make adjustments as you go, it’s always a work in progress!
Set up an emergency fund
Schedule regular budget reviews
7. And finally, what's your top piece of advice for a small business starting out?
My number one piece of advice for small business just starting out is to ask for help. At brits, we are literally terrified to ask people for help but honestly, it’s so easy to forget how great it is to be asked for help! You’ll be surprised just how much people really want to help and support you on your journey. Whether it’s brand new Instagram friends, other small business owners, friends and family – ask them for help and support along the way, you’ll be surprised!! ❤