Running your own business sounds idyllic in theory, being in control of your working hours and having no one to answer to. However, in practice, this is far from the truth. Running your own business is much more stressful than working for someone else, as everything is in your hands. If you don’t properly handle your business registration, records, business expenses, taxes, and employees, you will be left in an extremely difficult situation. With this being said, being self-employed is extremely rewarding and you will have immeasurable pride in your business and rewards.
So, what do you need to keep on top of when it comes to running your own business? Here are the essentials for being self-employed successfully.
Registering Your Business
First thing’s first, you must register your business with your governing body. This is for VAT and tax purposes, and you can create an account online to register. Upon registering, you should receive a registration certificate within 30 days, although this isn’t a set time, and it could take longer. You will either receive this on an online platform or via the post.
In registering your business, you will need to supply information such as bank details, business activity, and turnover. From your effective date of registration, you will also need to pay any taxes or fees associated with the business.
Records You Must Keep
As a business owner, you will be responsible for keeping a handful of records, including your grants, personal income records, PAYE records, VAT records, business expenses, income, and sales.
It is important to keep these records as they are vital in working out any losses or profits for your tax return. On top of this, you’ll be able to show your records to your government body if requested. Proof of these records includes bank slips, till rolls, sales invoices, checkbook stubs, bank statements, and receipts.
Similarly, if you’re using traditional accounting methods, you should keep further records of how much money you’ve taken out for your own use, how much you’ve invested in the business within the last year, your end of year bank balances, the value of your stock and work in progress, what you’ve committed to spending but not yet paid, and what you’re owed but yet to receive.
Claiming Business Expenses
When it comes to setting up a business, you’re allowed to claim on a variety of expenses. These include the cost of training courses, advertising and marketing expenses, the cost of your business premises, financial costs, things you buy to sell on, staff costs, clothing expenses, travel costs, and office costs. As well as these expenses, you can also claim back the costs of business vehicles, machinery, and equipment.
With this being said, if you use something for both personal and business reasons, you’ll only be able to claim back a portion of the cost. For example, if you work from home, you may be able to claim a proportion of your costs for telephone and internet use, rent or mortgage interest, council tax, electricity, and heating.
If your business is associated with construction, including the likes of property developers, gangmasters, labor agencies, or builders, you’ll need to register as a contractor with the Construction Industry Scheme (CIS). This is for tax purposes, and it is a legal requirement to pay the correct amount of tax. In some cases, you may find that you’ve overpaid on your tax, in which case you’d be due CIS tax returns. However, it’s also possible to underpay your tax, wherein you’ll be chased up for the money that you owe to your governing body. Taxes are very complex and differ from business to business when working for yourself.