smallbusiness.co.uk: Helping your business think big

Before making the leap into self-employment, be sure you aren’t caught out by red tape or miss out on grants and loans. Here the Association of Chartered Certified Accountants (ACCA) offer a checklist for starting out

Make claims

If you buy equipment for your business, you may be able to get tax relief in the form of capital allowances. These allowances are for equipment, which you buy to keep and use in your business, such as vehicles, tools, computers and business furniture. Capital allowances do not cover things bought and sold as part of your trade, but you can claim these as business expenses.

Update your employment status

You can register with HM Revenue & Customs online, and the website will walk you through the process. Make sure you do register as self-employed, because if you don’t you will face a fine.

Prepare your finances

Having the correct credit management systems and payment procedures in place is essential to ensure the smooth running of any new business. Efficient cash flow is vital as expenditure is high, especially in the first year, and systems need to be in place to ensure that money is coming into the business, as well as going out.

Keep accurate financial records

Keeping full and accurate records from the start will make it easier to work out what you owe in terms of tax and National Insurance. All records must be kept for six years – both business and private. Failure to keep records could lead to paying too much tax or a fine of up to £3,000.

Keep the taxman happy

As a self-employed individual you will also be responsible for making your own contributions, this includes remitting your contributions on a quarterly basis. It is important to take care of your National Insurance for two reasons: firstly, you may end up contributing too much, and secondly, you will lose out on state benefits that are related to the amount of National Insurance contributions you have made.

Being self-employed requires you to complete and submit your tax returns. If you want to speed things up then you can submit a full tax return online – not only does this save on process time, but it automatically calculates your tax when you file your return online.  Whether you submit your return online or offline, make sure you check your tax calculation once you have received it, as this will form the basis of your payment.

Don’t wing it

Experienced professional advice can bring essential financial management procedures to your business, allowing you to concentrate on getting the company to where you want it to be