Setting up your own business is a great step towards achieving your goal of being self-employed. However, everything does not end at the setup stage. One of the essential things you need to do for your business success is managing your finances. You don't need to be a math guru to manage your small business accounting needs successfully. Here are simple insights that will guide you in the accounting journey of your small business.
Opening A Bank Account
To be more prepared and effectively operate your taxes, your business needs to have a separate bank account. A savings account will help you manage your funds well. An account is also an essential tool for planning for your taxes.
When opening an account, you should do your best to find the best bank that offers the type of products you are looking for. You should do some research to find the best account that suits all your business needs. Compare the fees across different banks and settle for the best.
Once you find the best bank, make inquiries about all the documents they need. By this time, you should have already set up a business name because you are going to use it in your new business account. Tracking your expenses When conducting day to day business, you are going to incur many expenses and a lot of them you won’t even notice. To avoid incurring losses due to expenses that you cannot account for, you should track your expenses. Applemed Accountancy Essex says that keeping a record of your income and expenditure will help you monitor your business growth, build your financial statement, monitor deductive expenses, prepare your tax returns and support your tax return report. You should organize all your receipts and records carefully. You must account for all the expenses you use on yourself and your business.
Developing A Bookkeeping System
Bookkeeping is a good process that will help you deal with various tasks such as expense records, invoices, paying employees and monitoring outgoing expenses. With a good bookkeeping method, you will be able to accurately record all your transactions, categorize and reconcile all bank statements. There are many bookkeeping methods you can choose from; you should choose one that suits all your business needs.
Setting Up A Payroll System
After starting up your business, you are probably going to need some extra hand to help you with the daily duties of the business. So, if you decide to hire some employees, you are going to have to pay them at the end of the month. This is where a payroll system comes in. You need to set up your payroll schedule and withhold taxes correctly. You should be able to track the amount you will be paying your employees correctly.
Annual Accounts
To know whether your business is doing well or not on financial matters, you must present your yearly financial record formally and in a prescribed format. No matter the type of business you are operating, you need to complete and file your accounts with Companies House every year.
Corporation Tax
All limited companies in the UK are required to pay corporate tax. The tax is 19 percent of every profit your business generates every year. You must complete a corporate tax return. This is done with tax due for payment within nine months of the accounting period to HMRC.
Self-Assessment Income Tax
You also need to calculate all your income tax on all your income for the entire year. To do this, you must fill a form and record any tax paid in the tax year.
Income Tax Rates
Everyone has a tax-free personal allowance of £11,850. A basic rate for every £32,000 above the personal allowance is taxed at 20 percent. Any income above the rate falls into the higher rate band which is taxed at 40 percent. Any earning above £150,000 is taxed at 45 percent. Additionally, any person earning more than £100,000 starts losing their personal allowance.
VAT
You must register for VAT if your earning goes above £85,000. For those who earn less than this amount, VAT registration is optional. You will then charge your customers 20 percent of VAT which is the standard rate. You must add this 20 percent to your sales invoice values and keep the amount aside from what your customers pay.
PAYE
You need to deduct income tax and national insurance from the gross income and salaries of your employees and pay to the HMRC. A 12 percent standard rate applies to national insurance. An employer is also charged national insurance at 13.8 percent on the gross salary.
I hope you enjoyed this blog post about how to manage your accounts as a small business in the United Kingdom.
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