YourBusinessWithJamesCaan2016 - 30

Some customers may be used to a
culture of late payment, so establishing
what method of payment they prefer is
crucial to resolving the matter quickly.
The more varied and creative your
collection strategies the better.

DON'T MAKE TAX
ISSUES TAXING

Starting a new business requires you to
register with HMRC. What type of taxes
you register for is dependent on how
your business is structured.
Your main responsibilities will reflect
your new classification as a sole trader
(self-employed), and you will have to a
file a self-assessment tax return, due
each year by 31 January. HMRC will
calculate the income tax you owe based
on this assessment, so keep thorough
records, and consider using an
accountant for the first year.
If you have employees being paid
more than £112 per week you will need

to keep payroll records and report your
findings to HMRC monthly. This
system (known as PAYE) can become
quite involved, and payroll software
such as QuickBooks is recommended so
you can keep track of how much you
can expect to pay.
The business-friendly VAT is a tax
you must register for when your
earnings exceed £83,000 in a 12-month
period. It may, however, be in your
interest to register voluntarily if your
customers or suppliers are also
VAT-registered businesses.
The relationship between two
VAT-registered businesses is a mutually
beneficial one, as each party may
reclaim VAT incurred on any purchases
- up to 20%. Your supplies will be
cheaper and other companies will be
more likely to buy from you, due to the
perceived discount.
If your profits exceed £5,965 annually
you will be required to pay national

JAMES SAYS
Always make sure
you know your
numbers inside
and out
insurance, though the rates fluctuate
dependent on your earnings.
Corporation tax is only relevant for
wildly successful new businesses, as
you won't need to register unless your
annual fees exceed £300,000.

The art of bookkeeping describes the
systematic recording of all financial
transactions within a business.
Most commonly used is the
dual-entry system, with two
columns, one debit and one
credit. Were you to pay a
utility bill, this would be
reflected in both columns,
with your credit decreasing
and debit increasing.
This system allows you to
readily assess the financial
health of the business, makes it
easier to spot errors or fraud
and more effectively chart
trends in profit or loss.
The data is also easily
extrapolated when
preparing financial
statements or tax returns.
If you are more focused
on growing your business
you might consider
taking on a bookkeeper
for a few hours a week, as

30

WORDS: LOREN HARWAY | PHOTOGRAPHY: SHUTTERSTOCK

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