Liverpool Accountants Advice Starting a Limited company

Over the years that we have been open as Liverpool accountants we have helped many people start their own company. When you establish a limited company, your own personal finances are kept completely separate to your company’s (unlike becoming a sole trader) although you are still responsible for your limited company’s tax and accounting issues. Many people who own limited companies opt for hiring an accountant, but even if you choose not to hire an accountant, there are still a number of things you need to take care of.

Company Information

Professional accountants can help with your tax as well as various other money-related tasks and paper work but you yourself need to make sure that you keep hold of records about the company itself as well as financial and accounting records. You will also need to make sure you keep hold of any details regarding company secretaries, directors and shareholders, including any other money related documentation. This could be anything from loans, mortgages, transactions, unpaid declarations, shares, etc.

If you store your records somewhere other than the registered address of your company, you are obligated to inform the Companies House.

Accounting Information

As well as your company information, you must also keep any accounting records and these could be anything from money received and spent by the company, asset details, debts to be paid by the company or owed, stock the company owns, stocktaking’s, and information on the people and company’s you have had financial dealings with.

These tie in with what you will need to calculate your Company Tax Return, and it is also crucial that you hold on to any receipts, order and delivery slips. Remember to save any other documents that might potentially be useful.

In the worst case scenario if you fail to keep your accounting records, you will likely be fined £3,000 by HMRC or even suspended as a company director.

But when is the right time to let all paper go?

There will come a time when you can be rid of all those documents and bits of paper, and that is usually six years after the end of the last financial year that they are related to.

However, there may be some cases where you will need to keep your company’s accounting information. This is usually when there are specific transactions that overlap and extend over one year. This can also be the case if your business has purchased furniture or machinery that has been given a guarantee of over six years. You may have even sent off your Company Tax Return late.

Either way, HMRC have begun checks into the tax returns of organisations, therefore it is important to make sure you are efficient when it comes to your paperwork.


Advice from Liverpool Accountants: Tax, VAT and National Insurance with the self-employed business

Confusion and bewilderment are more than often common ingredients when it comes down to tax issues in the realm of self-employment and it is important to understand what money is going to be deducted and why it is being deducted from your business. There are many areas to tax, however the three that are going to have the most effect on your business are income tax, national insurance and VAT.

Income Tax

In order to initially work out whether or not you need to pay income tax, you will be required to fill out a self-employment document in addition to the main tax return, which should be sent to you as a response to you registering as self-employed.

When you are self-employed, you are the one responsible for your business and its finances; therefore it is down to you to declare and pay the taxes. Unlike corporate businesses, freelancers pay their income tax based on profit, rather than their overall income. You will also be able to claim capital allowances when you are self-employed and remove any losses that occurred from the previous year – your taxable income being the result amount.

VAT (Value Added Tax)

Unlike income tax, VAT is quite different from the others as it is tax on the items and services that you buy.

If your business is making over the set annual amount, you need to register for VAT. Bear in mind that the threshold for this usually raises by a few thousand each year. Even if you are not reaching that amount, you can still register for a VAT code when you don’t need to as this can also give you credibility and allow you to claim back VAT on certain purchases that you make.

Depending on how much you earn annually, you may have to register for VAT if you are self-employed, however it may be worth doing anyway.

National Insurance

National Insurance is used to pay for benefits such as state pensions, statuary sick pay, jobseekers, etc. and this is taken out of your wages if you are an employee aged between 16 and retirement age, however there is still a sure amount that you can earn without having to pay this.

There are four different categories, namely ‘classes’, within national insurance that determine whether or not you pay and if so, how much. Class one is for the standard employer were they will be charged around 11% on their earnings. Class 2 is a flat rate of pay in which the self-employed must pay weekly, class 4 is also compulsory for those who are self-employed and that is payable on their yearly profits. Class 3 on the other hand is for those who wish to contribute to particular benefits which could include the full state pension. Class 2 and class 4 are most relevant for self-employed and will be compulsory.