Pre-start up Sole trader personal funds need advice.

[lukep1]

Hi All,

I'll be applying to be a sole trader to start a small business.

I am already employed and understand that I need to register as self employed and fill out a SA form and file my tax returns each year.

I will be using a spreadsheet to keep track and then may upgrade to the 'quickbooks' accounting software.

I am planning on doing the accounting myself (I am a do it yourself kinda guy) as I have a little bit of experience working admin in an accountants. When the business grows I'll get myself an accountant if need be.

I just have a few simple questions.

1. I will be funding the business bank account with my personal funds regularly (especially for the first year). I have been informed by an accountant that this would be classed as loads to the business. I'd just like a second opinion on this as I have seen it mentioned that this would be classed as "capital introduced". What are the differences between "a loan to the business" and "capital introduced".

2. Will I need to mention these when I do my self assessment?

Bonus question:

Is interest accrued in my business bank account taxable? If so I assume i will need to declare it to HMRC on my SA?

Many thanks
Luke

 

[DontAsk]

I'll be applying to be a sole trader to start a small business.

You just do it, you don't apply to anyone.

[edit] some will misconstrue that. You do need to "register" with HMRC, but you are telling them, not applying for permission. [/edit]

1. I will be funding the business bank account with my personal funds regularly (especially for the first year). I have been informed by an accountant that this would be classed as loads to the business. I'd just like a second opinion on this as I have seen it mentioned that this would be classed as "capital introduced". What are the differences between "a loan to the business" and "capital introduced".

Sounds like your accountant thinks you are setting up a Limited company, in which case it would be a Director's Loan.

As a sole trader, YOU are the business. There's no distinction between personal and company funds, other than the convenience of keeping a separate bank account to make the accounting easier. You can move money around at will.

When you do your SA it can be as simple as adding up all the income and subtracting all the expenses. The rest is (taxable) profit. The SA has different sections for PAYE income from your current employment and profit from the business. As the business grows it may get more complex. You can certainly start out without an accountant (I did, for 10 years until incorporating).

2. Will I need to mention these when I do my self assessment?

No.

Bonus question:

Is interest accrued in my business bank account taxable? If so I assume i will need to declare it to HMRC on my SA?

Yes. It is income. It isn't declared separately on your SA.

 

[lukep1]

You just do it, you don't apply to anyone.

[edit] some will misconstrue that. You do need to "register" with HMRC, but you are telling them, not applying for permission. [/edit]


Sounds like your accountant thinks you are setting up a Limited company, in which case it would be a Director's Loan.

As a sole trader, YOU are the business. There's no distinction between personal and company funds, other than the convenience of keeping a separate bank account to make the accounting easier. You can move money around at will.

When you do your SA it can be as simple as adding up all the income and subtracting all the expenses. The rest is (taxable) profit. The SA has different sections for PAYE income from your current employment and profit from the business. As the business grows it may get more complex. You can certainly start out without an accountant (I did, for 10 years until incorporating).


No.



Yes. It is income. It isn't declared separately on your SA.

Perfect!

"Apply" was the wrong term used. Apologies. Yes I will be registering.

You have answered everything i needed answering.

Thank you very much.