Keeping records/accounts

[Frazer1981]

Hi all

Sorry if this has been asked before but just trying to clarify a few issues

Im starting as self employed (sole trader) in 2 weeks. Handed my notice in at my current place etc so its all go!

I am just wondering what you guys do regarding accounts? My plan is to open a Business Account, all monies can be paid into here and items paid for from here. I then will open a seperate savings account to deposit my 20% tax from each job into which will be then ready to pay off my Tax bill etc. I may then open a 3rd account just for my personal use ie food shop, beers etc which i will make deposits to each month from my business account? This frees up my business account to focus on business bits.

Does any of this sound fair or would you guys suggest something different.

Any help/suggestions are greatly appreciated!

 

[joni os]

Keep whatever account you now have plus your new business account. 20% saving on jobs unnecessary it's 20% on profit/labour, and even that only after £10K personal allowance and £2K fuel(estimate).
Your trading tax year does not have to be same as tax year to 5 April. By choosing start date say 1st September the business tax to 31st August 2016 is accounted in tax year ending 5 April 2017 and payable by 31st January 2018. In your case as you weren't trading zero tax but a refund on PAYE.
Tax to 31st August 2017 doesn't need paying until 31st January 2019 and although your business has only 6 months trading you can offset your full £10K personal allowance against profit for that period.
Cash in the bank will be necessary as trade credit will be difficult for a new start and your boni fide will need to be established over a period of time.

 

[joni os]

Keep whatever account you now have plus your new business account. 20% saving on jobs unnecessary it's 20% on profit/labour, and even that only after £10K personal allowance and £2K fuel(estimate).
Your trading tax year does not have to be same as tax year to 5 April. By choosing start date say 1st September the business tax to 31st August 2016 is accounted in tax year ending 5 April 2017 and payable by 31st January 2018. In your case as you weren't trading zero tax but a refund on PAYE.
Tax to 31st August 2017 doesn't need paying until 31st January 2019 and although your business has only 6 months trading you can offset your full £10K personal allowance against profit for that period.
Cash in the bank will be necessary as trade credit will be difficult for a new start and your boni fide will need to be established over a period of time.

 

[Frazer1981]

Keep whatever account you now have plus your new business account. 20% saving on jobs unnecessary it's 20% on profit/labour, and even that only after £10K personal allowance and £2K fuel(estimate).
Your trading tax year does not have to be same as tax year to 5 April. By choosing start date say 1st September the business tax to 31st August 2016 is accounted in tax year ending 5 April 2017 and payable by 31st January 2018. In your case as you weren't trading zero tax but a refund on PAYE.
Tax to 31st August 2017 doesn't need paying until 31st January 2019 and although your business has only 6 months trading you can offset your full £10K personal allowance against profit for that period.
Cash in the bank will be necessary as trade credit will be difficult for a new start and your boni fide will need to be established over a period of time.

Cheers for your response! I admit im a little confused but it seems that i should keep my current account and open a new business account to pay all incoming monies into?

I can then link all invlices etc with the business account i assume

 

[firemant]

Joni made some fair points. You don't need to save 20%, but it is a good idea to have a separate tax account.Try opening one that pays interest, although you normally have to pay a minimum amount in each month. I have a couple, and I have a SO that pays £1K in on one day, transfers to another the next day,which in turn goes back to where it came from the next day.

Remember that if you trade for say 5 years, then go back on the books, there is a time lag where you will still be getting tax demands, so a disciplined approach to tax account saving will eventually pay dividends.

Re the trade credit situation: Apply for an account at an independent where they know you, if there is one. Introduce yourself to the others (PC etc) and ask if an acceptance is automatic. It may be but for a small amount. Use the Indie as a reference. Get a credit card with an either an interest free credit period,ora cash back facility - ASDA has a card that pays 0.5% in vouchers wherever it is used-,and use it solely for business use, paying it off in full (subject to the IF period).DO NOT use it to pay a trade account balance, as they (the merchants) will normally charge a fee, typically at least 2%.

A business account is more professional,but you will pay charges after a honeymoon period. Why not just open a personal account FOC? Make sure ALL payments go through this at some stage, and it will be easier to arrange your accounts when the time comes.

Be rigorous in recording everything, (either using a proprietary accounting system,or just knock up a spreadsheet - I successfully did that for 30 years). It is so much easier to start properly, rather than playing catch up.

Oh - Good luck.

 

[Frazer1981]

Thanks so much for this. Some good advice and ill look into these. Thanks again

 

[oz-plumber]

Do you really want to know what you should do?

You should book in to see an accountant and get their professional advice.
Spend as long as necessary with him / her and take their advice.

The money you spend with them will be recouped very quickly.

Most of us have been where you are and in the same situation - not very cluey in operating and funding a business.

Get some professional advice and you will be streets ahead of where you will be if you don't.

 

[Last Plumber]

As far as bank accounts go, yes I'd open one and put all sales into that. Pay merchants, accountant, fuel, PL insurance, van etc out of it and Standing order a wage amount into personal account.

Tax: you'd obviously be wise to set aside some for that, don't forget that you'll pay On account for the following years tax too. so the first tax bill you get will seem double what it should be.
You can zero the payment on account but if you should have paid it they charge interest, ( I think it's 4% but don't quote me, ask your accountant).

I would look at it that around a third of what you earn ( profit after allowances and overheads), is not yours, it goes to tax and national insurance,.

I think, NI was around 8 or 9% last time I was self employed. Tax is 20%. These are both taken off net profit after your allowances.

You need to speak to an accountant

Don't worry though, it's not as complicated as it might sound.

I always concentrate on work and pay accountants to do book keeping and accounts etc.
There invoice is big but it saves me time doing paperwork ( unpaid) and lots of headaches.