If you have decided that in 2020 you want to set up a new business, then read this article first. There are lots of benefits being self-employed, and at the same time, it can be very challenging as there is so much to think about when you are setting up.

We work with a lot of start-ups and give them the advice to ensure that they have set up their business structure correctly and understand their commitments to HM Revenue and Customs (HMRC).

Here are three things to consider getting started:

Decide on the best company structure for your business

Most people decide to operate as sole traders so are self-employed initially. This is the simplest way to operate.  You need to register with HMRC and keep records of your business income and expenditures. However, you may decide that you should set up a Limited Company.

If you do this, you have to register with Companies House first, and you do have more statutory obligations. However, the benefit is that you do legally keep your company finances separated from your personal finances which helps reduce risk.

Decide whether you want to be VAT registered or not

For the 2019/20 tax year, the VAT registration threshold is set at £85,000. This means you don't have to be VAT registered until your turnover reaches this value. However, for some businesses, it is better to be VAT registered from the outset. If the amount of VAT you are paying on goods and services is higher than the amount of VAT you are paying, you can collect the difference from the HMRC, saving you money.

Some small businesses that have clients that are large corporates prefer to be VAT registered as it gives them the status of being more significant than they are. If you do decide to be VAT registered, you do have to complete quarterly VAT returns so be aware that there is more paperwork involved.

When do you pay your first tax bill?

When you are self-employed, you have to pay tax and your National Insurance Contributions on January 31st following the end of your tax year. Your accountant can advise you on how to choose the date for your accounting year-end. Most people align the accounting date with the tax year. But if your accounting year is different, you need to make sure you are clear about when payments need to be made. For example, if you started your business in October 2019, you wouldn't have to pay tax until the Self Assessment deadline for 2019/20, which is January 31st 2021.

It would be best if you also considered that the HMRC asks for payments on account to be made on January 31st and July 31st for the following years estimated tax. Therefore, you need to make sure that you have funds to cover this as well.

If you are starting a business or you are in your first year of trading, then you can contact us, and we can offer a lot more advice and support to help you manage your business finances more effectively. 

You can call 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..