How do I file my business accounts? (my first time)

[samdesigns]

I'm a first time LTD company owner and VERY new to all of this. I need to file my company accounts but I'm not sure how. I have no overhead or costs beyond laptop and software (graphic designer working from home) and my income is a simple figure (just an addition of all the income which is invoiced as a 50% deposit and the remainder - no complex itemised bills).

Do I literally just go through the pages filling in information? Is there anything I need to be aware of or watch out for?

 

[STDFR33]

There’s lots of things to watch out for.

There a most likely be a number of expenses that you haven’t thought of that would reduce your corporation tax.

You ought to engage an accountant. Limited company accounts are not for novices.

 

[samdesigns]

You ought to engage an accountant. Limited company accounts are not for novices.

Am I really unable to do this myself? There are no overheads, expenses or costs beyond the few that I know (domain name, hosting, laptop, software, virtual office space). I've kept great records so my income is easy to follow. I owe no one and haven't even started paying myself yet from the company (that's being set up this tax year).

Is it worth the cost paying an accountant to run through this with me at such an early stage?

 

[GLAbusiness]

Is it worth the cost paying an accountant to run through this with me at such an early stage?

Yes

 

[STDFR33]

It’s in the early stages where you will benefit a lot. Not paying yourself a salary may have cost you quite a bit in itself.

 

[MyAccountantOnline]

I'm a first time LTD company owner ...

Do I literally just go through the pages filling in information? ...

You could do but you might miss out on some very big tax savings.

With hindsight if you wanted to DIY you may have been better trading as a sole trader.

 

[Mr D]

Am I really unable to do this myself? There are no overheads, expenses or costs beyond the few that I know (domain name, hosting, laptop, software, virtual office space). I've kept great records so my income is easy to follow. I owe no one and haven't even started paying myself yet from the company (that's being set up this tax year).

Is it worth the cost paying an accountant to run through this with me at such an early stage?

While a few do bravely do their own annual company accounts, most of us pay accountants to do it.
Probably because of the time and money saved by paying a specialist to do it.

 

[samdesigns]

While a few do bravely do their own annual company accounts, most of us pay accountants to do it.
Probably because of the time and money saved by paying a specialist to do it.

Absolutely, and I really do know an accountant would solve everything but at this stage, when things are relatively simple and my income is low, I don't know if I should pay £500 for one.

 

[samdesigns]

You could do but you might miss out on some very big tax savings.

With hindsight if you wanted to DIY you may have been better trading as a sole trader.

This was actually a decision made on purpose. The quality of clients and the number of clients I get has increased drastically from when I only freelanced. As a LTD company, I find I get a lot more respect and have a lot more power when negotiating.

 

[alan1302]

Absolutely, and I really do know an accountant would solve everything but at this stage, when things are relatively simple and my income is low, I don't know if I should pay £500 for one.

You've been told 4 times you should out of 4 replies...

 

[samdesigns]

You've been told 4 times you should out of 4 replies...

I'm trying to get an understanding of the process rather than just be told to get an accountant. I have all my costs and all my income, I've kept track of absolutely everything coming in and out. I want to understand why it isn't as simple as me just filling out the forms (at this early stage).

 

[Mr D]

Absolutely, and I really do know an accountant would solve everything but at this stage, when things are relatively simple and my income is low, I don't know if I should pay £500 for one.

If can afford to spend the time to learn how to do it right and file correctly then go for it.
However if you get things wrong, will the cost savings be worth it?

 

[MyAccountantOnline]

This was actually a decision made on purpose. The quality of clients and the number of clients I get has increased drastically from when I only freelanced. As a LTD company, I find I get a lot more respect and have a lot more power when negotiating.

That's often seen to be one of the advantages of a limited company and it's something quite a few of my clients over the years have found, but it does mean accounting and tax become more complex than trading as a sole trader. I do sadly think you've missed out lots of tax saving opportunities already from your post.

 

[GraemeL]

5 times. Use an accountant.

 

[Rawlinson Pryde]

Some online advertising e.g. Quickbooks have given people a false sense of what an accountant does. If you do not want an accountant then as mentioned above staying a sole trader would’ve been better for you as you are likely to make less mistakes.

It sounds like you have done a good job at bookkeeping, bookkeeping is not accountancy however. Keeping good records will help to keep your costs down, but there is a reason why a qualified accountant needs 3 years of experience and had to pass 14 exams to get their qualification.

You could spend a whole week solidly trying to learn what you have to do and still be in the same situation of not knowing what to do.

As mentioned above having an accountant could have saved you far more than the fee you are worried to pay. A few examples:

Salary of circa £8,600 (if you had the profits) could have potentially saved corporation tax at 19% roughly £1,640. There was your fee potentially saved in seconds.

Not having a salary may mean you may have missed out on a state pension qualifying year (although may not be important as you may still meet the requirements)

If you had taken Dividends you could have potentially had tax free money out of the business.

Have you utilised other allowances and tax free benefits and mentioned claimed for costs that are allowable etc. etc.

There is lots you could and should do. Paying an accountant is one of those things (unfortunately) any limited company owner should do.

 

[simon field]

OP you would not attempt to perform dentistry on yourself (although if you get toothache you might have to at the moment!)

Do what you do and.....

Pay a professional. It is money well spent.

 

[Colin_W]

I appreciate I in a minority of one here, but thought I'd virtually throw myself to the virtual wolves in the interest of balance.

I was/am in the same position as OP when it came to accounts - I had a fairly straightforward business model, kept good records and needed someone to create end of year accounts and submit these to HMRC and Companies House. The records were accurate and complete - I paid myself a salary, didn't take dividends (wanted to keep money in the business) and included the working from home allowance and mileage as well as the "visible" expenses.

In the end, I found someone on one of the freelancing websites to do this and they charged around £150 last year. I gave them access to my online books and they worked their magic (including calculating depreciation which I hadn't done), sent me the accounts to me for approval and submitted them.

I had no need or wish for "advice" or guidance, so saw no need for an accountant. And the argument that spending £1800 on an accountant to save £1600 doesn't work for me.

If I had a complex business, or needed advice or help on an ongoing business, then an accountant might have been worthwhile - but to the OP, it is possible to survive without an accountant.

**Braces self for onslaught**

 

[Mr D]

I had no need or wish for "advice" or guidance, so saw no need for an accountant. And the argument that spending £1800 on an accountant to save £1600 doesn't work for me.

If I had a complex business, or needed advice or help on an ongoing business, then an accountant might have been worthwhile - but to the OP, it is possible to survive without an accountant.

**Braces self for onslaught**

Would spending £500 on an accountant to save £1600 have worked?

 

[Colin_W]

Would spending £500 on an accountant to save £1600 have worked?

Possibly (who wouldn't want a net saving of £1100?), however - I had been paying myself a salary, so that particular saving didn't apply; and if I hadn't been paying myself, the saving would have been dependent on contracting with an accountant at the start of the year, rather than at the end (which is what I would have done and it seems what the OP is doing).

I'm not against accountants - if/when a business reaches a scale/complexity where that level of professional input is needed by the owners, then get an accountant. I just wanted to show a slightly different perspective; not every business NEEDS an accountant in the same way as not every business needs to retain a solicitor, or a financial adviser, or a quantity surveyor, or any other professional. But when a business does need one, they should find a good one.

 

[STDFR33]

Possibly (who wouldn't want a net saving of £1100?), however - I had been paying myself a salary, so that particular saving didn't apply; and if I hadn't been paying myself, the saving would have been dependent on contracting with an accountant at the start of the year, rather than at the end (which is what I would have done and it seems what the OP is doing).

I'm not against accountants - if/when a business reaches a scale/complexity where that level of professional input is needed by the owners, then get an accountant. I just wanted to show a slightly different perspective; not every business NEEDS an accountant in the same way as not every business needs to retain a solicitor, or a financial adviser, or a quantity surveyor, or any other professional. But when a business does need one, they should find a good one.

Not every business needs an accountant, I agree.

I’ve seen lots of ‘good’ records from clients over the years. The good records usually meant I had to spend additional hours fixing all their mistakes.

Bookkeeping can be done to a reasonable standard by clients, don’t get me wrong. But in my experience, the majority way overestimate their capabilities.

 

[Mr D]

Possibly (who wouldn't want a net saving of £1100?), however - I had been paying myself a salary, so that particular saving didn't apply; and if I hadn't been paying myself, the saving would have been dependent on contracting with an accountant at the start of the year, rather than at the end (which is what I would have done and it seems what the OP is doing).

I'm not against accountants - if/when a business reaches a scale/complexity where that level of professional input is needed by the owners, then get an accountant. I just wanted to show a slightly different perspective; not every business NEEDS an accountant in the same way as not every business needs to retain a solicitor, or a financial adviser, or a quantity surveyor, or any other professional. But when a business does need one, they should find a good one.

And as I said if he can take the time to learn how to do it right then go for it.

 

[Rawlinson Pryde]

When you do it yourself with limited or a lack of knowledge, the danger is you don’t know what you don’t know, which can cause you issues and lost opportunities.

You can think you have done a good job, but what you have probably done is cost yourself, especially around tax planning.

One simple thing you could’ve potentially done was to pay dividends (if the reserves were there) and still have left it in the business by effectively loaning it back. This would have potentially saved yourself some tax in the future. £2k @ 7.5% = £150 straightaway. Higher rates is £650.

The other important thing to know is that software does not always work! After picking up a new client a few years ago. We discovered a well known cloud based program was creating overlap losses (there is no such thing) for the year that the new client had done. Without the knowledge they assumed the software had done it correctly, reality was losses were overstated by £8k, which was equivalent to over £3k of tax, which would have been under declared at some stage. We spotted this before HMRC did, so saved the client an real issues.

 

[OMGVape]

Bookkeeping can be done to a reasonable standard by clients, don’t get me wrong. But in my experience, the majority way overestimate their capabilities.

As do accountants.

I’m on my 4th accountant in 10 years. None have ever given advice to save me money. First company charged £225 + vat per month. All they did (all of them) was take the figures that I put into my accounts software, and submitted to the authorities. My current (chartered) accountant does this annually for £150+ vat.

 

[samdesigns]

I would very much like to learn how to do this myself, but it seems that it's safer to get an accountant. I have done some research and found a freelance accountant who's been great so far, taking the time to explain things to me etc, and although he'll be handling everything (basically everything) I'm following closely so that I at least know what's happening with my business and my money. I disagree with everyone saying nothing more than 'get an accountant' and I think business owners, especially of my age, should be encouraged to learn the inner workings but I understand why they are saying it. I have hired him, we are working together on this.

 

[Mr D]

I would very much like to learn how to do this myself, but it seems that it's safer to get an accountant. I have done some research and found a freelance accountant who's been great so far, taking the time to explain things to me etc, and although he'll be handling everything (basically everything) I'm following closely so that I at least know what's happening with my business and my money. I disagree with everyone saying nothing more than 'get an accountant' and I think business owners, especially of my age, should be encouraged to learn the inner workings but I understand why they are saying it. I have hired him, we are working together on this.

Yes at the very least business owners should be aware of what is going on.
Have heard of people who simply pass receipts and invoices to accountant and leave it at that. Less a finger on the pulse of the business than glancing occasionally from down the street to see if business is still standing...

Seriously though, many business owners are aware of some accountancy stuff. Enough to be dangerous perhaps or enough to know what the accountant is talking about.
But keeping up with all the ins and outs while also being head of marketing, head of recruitment, head of HR, head of purchasing, head of asset management etc...
Usually simpler and cheaper to get specialists doing their work so can concentrate on the money making side of things.

 

[Argentum Tax]

I disagree with everyone saying nothing more than 'get an accountant' and I think business owners, especially of my age, should be encouraged to learn the inner workings

Interesting viewpoint.
However if you need an optician, would you instead learn the 'inner workings' of optometry and then do it yourself? Similarly if you buy a house and need a solicitor or conveyancer would you instead do the conveyancing yourself?
What do you think is different about accountancy that you can learn everything in your spare time?

 

[samdesigns]

Interesting viewpoint.
However if you need an optician, would you instead learn the 'inner workings' of optometry and then do it yourself? Similarly if you buy a house and need a solicitor or conveyancer would you instead do the conveyancing yourself?
What do you think is different about accountancy that you can learn everything in your spare time?

I disagree with your comparisons. If I needed an optician I would go to an optician. Likewise for a solicitor or surveyor; I would hire one.

A more accurate comparison keeping in mind my circumstances (size of business etc) would be like hiring a computer repair person to fix my laptop. It's easier to hire someone and probably safer but it's not impossible for me to learn and fix myself (which I actually did). I don't want to learn everything about accountancy, I don't claim to be an expert and I likely won't ever be. I just don't want to completely ignore it and hire someone instead.

 

[Colin_W]

I'm pleased to say the response to my post has been much less harsh than I had expected. And in the process, I have learned something that I missed out on (the paying a dividend and then lending it back to the company suggestion from above) and which could have saved a few hundred Pounds. So the real cost is, as was said above, the opportunity cost of not knowing what I don't know.

In my case, I am still happy with a transactional relationship of having accounts prepared and submitted, but I have possibly lowered the threshold of where I may need advice/assistance/guidance in the future.