Whilst the recession has provided a massive blow to the fortunes of
many, for some it has been the kick start they needed into embracing a
new way of life. It is widely believed that certain stress trigger
points cause us to re-examine our entire lifestyle and redundancy is one
of those trigger points. Although being made redundant inspires the
majority to seek new employment as soon as possible, for the rest it is
the springboard to try something new or to become self employed.
The
annual review of business contributions which is due out shortly will
make interesting reading. The last complete picture, released last year
using 2008 data showed the UK having 3.5 million sole traders with a
further 1 million small businesses employing less than ten staff.
Between them they contributed over £650billion to the UK economy.
Interim figures for the month of September 2010 reported a rise in self
employed people to 3.96million of which 2.9million worked full time on
their businesses.
Interview many self employed people and they
will tell you that whilst taking that first step can be scary, the
rewards are considerable. Yes, there will probably be an increase in
hours as you set up your business but this is offset by the ability to
manage a work-life balance and take time off to suit yourself for family
occasions.
The change in finances can also be daunting with a
regular salary being replaced by income based on work done. With the
need to understand tax returns, VAT and the best way to finance
purchases all thrown into the mix, managing your business records can
seem overwhelming. This is where having a good accountant really helps.
They will advise you on what records to keep, how to best manage your
finances and will breeze through your tax return, saving you money in
the process.
When setting up in self employment, the first step is
to register with HMRC. This can be done by post, phone or on line and
is a very simple process. If you anticipate your turnover will be in
excess of £70,000 you will also need to register for VAT. Your
accountant will be able to help with the registration and also guide you
through the VAT accounting process.
Whilst your accountant can
help you in so many ways, it will still be necessary for you to provide
them with the basic paperwork to enable them to prepare your returns.
The 31 October deadline for submitting paper returns is fast approaching
and ideally paperwork needs to be with your accountant by the end of
September to allow them time to process your return.
One way of
extending the deadline is to file your tax return on line. The deadline
for this is 31 January. However, you do need to register first and your
password can take up to three weeks to come through. Registering now
will avoid the rush and ensure you have the passwords on time. Then
agree with your accountant when you will let them have the paperwork and
stick to that deadline. A delay in filing your self assessment return
will lead to a fine.
Finally, it is generally believed that all
sole traders should spend at least two days a week working on their
business rather than in their business. Whilst some of that time will be
taken up in marketing and product development the amount of time needed
to keep ahead of tax, VAT, pricing and other finance matters should not
be underestimated. Bringing your accountant on board can not only free
up valuable time which can be spent in earning money for the business
but also save costs in the long run.
