Startup business - doing own books

[DSB]

We are planning to start an online business and it's our first ever business venture. I met up with an accountant to find out estimated costs to maintain the books, both for a partnership/sole trader and for a ltd company. Now that I have an idea of the costs, and as I know we don't have any income coming in at the moment so I am thinking of doing our books myself for the time being. Once we start getting established we will definitely pass this duty on to the professionals.

Can someone please advise what various formalities are required by HMRC for sole traders? and any tips on doing our own books shall be appreciated.

We will be working mostly from home, and we won't need to buy any stock or furniture etc for business purposes. This business idea is about providing a online service. Any other info you need please ask.

Thanks

 

[OvcaX]

After 12 years in business. Don't do that!

At least hire an accountant for consultation and do a leg work yourself.

 

[Scalloway]

HMRC advice on what records to keep

https://www.gov.uk/self-employed-records/what-records-to-keep

VT Cashbook is a simple programme for krrping your accounting records

http://www.vtsoftware.co.uk/cashbook/

 

[UK Contractor Accountant]

Your post starts 'we are planning....' and then later mentions setting up as a sole trader?

It is important to get the structure right at the strart therefore the proper advice would be to get an Accountant engaged at an early stage.

The fines & penalties if you get it wrong can be horrendous.

 

[DSB]

Yes I understand it's important to keep the business structure right and we must consult the professionals. Like I mentioned above that I met up with an accountant yesterday and I was quoted about £150+ pm for doing the company accounts and personal tax returns etc. For partnership/sole trader it was about the half of the above. We don't have any income coming in at the moment, when it starts it will be slowly increasing as we become establish which may take up to 3 to 6 months easily. I'd assume our accounts to be fairly simple for this period.

My goal for now is to keep the expenses as low as possible by doing most of the work myself. This will enable us to spend money on the other areas (like PPC and marketing etc) to grow the business, which would mean we will have income and we can pay for the accountant Am I doing it wrong way?

 

[UK Contractor Accountant]

I think the quotes you have been given include book-keeping or they look a bit on the high side to me.

You should be able to sort out the book-keeping side of things youself using one of the free web based or desktop software - Scalloway has mentioned one above, Quickfile is another or one from the following link

http://www.techradar.com/news/softw...ting-software-8-programs-we-recommend-1136684

You then just need an Accountant to help guide you through the year and provide year end Accounts & Tax Return services - which you can get for a lot less than £150 (or £75 per month).

 

[MyAccountantOnline]

'Doing your books' is one thing, looking after your own accounts and tax is another.

Keeping accurate and well kept accounting records will greatly reduce the amount of work an accountant has to do and hence fees.

Certainly operating as a sole trade will minimise your costs but do make sure it is the best option for you - it would be awful to try and save costs by doing this and end up paying more in tax and NI

If you want to look after your own accounts and tax as a sole trader the HMRC website is probably one of the best resources for you.

 

[DSB]

Keeping accurate and well kept accounting records will greatly reduce the amount of work an accountant has to do and hence fees.

Certainly operating as a sole trade will minimise your costs but do make sure it is the best option for you - it would be awful to try and save costs by doing this and end up paying more in tax and NI

There is no income and/or only be very little for the first few months. would I still struggle u recon?
Just for an example, Instead of paying to accountant, 70 ppm X 5 = 350 pounds I can use that money for advertising whether we make any sales or not.

 

[MyAccountantOnline]

There is no income and/or only be very little for the first few months. would I still struggle u recon?
Just for an example, Instead of paying to accountant, 70 ppm X 5 = 350 pounds I can use that money for advertising whether we make any sales or not.

What is it you intend to deal with yourself is it just bookkeeping or also preparing your own accounts, dealing with your own tax affairs and completing your Self Assessment tax return?

 

[john1989]

Only you know your capabilities. If you know nothing about producing accounts and tax returns, expect it to take up a lot of your time to get right - and even then you can't guarantee that you have done it correctly or tax efficiently.

Remember, whilst you are spending time doing trying to do your accounts and tax, you are not spending time trying to grow your business.

 

[DSB]

What is it you intend to deal with yourself is it just bookkeeping or also preparing your own accounts, dealing with your own tax affairs and completing your Self Assessment tax return?

Yes I can do bookkeeping. Even the accountant I consulted gave me two different quotes i.e. one with book keeping and the other without book keeping and I'd have gone with without bookkeeping for now to keep the costs low. However, I am not feeling very confident about doing accounts and tax ... only because I haven't done it before. I did study some finance/accountancy related modules when I did my degree and have some understanding of it.

All I am trying to say is, in my mind I see my accounts fairly simple as there won't be much money going in/out. I won't claim any expenses (like web hosting costs, mileage and ppc) to keep matters simple. Any income coming in will be via Paypal so there will be downloadable reports of what I have earned in a given period and I can use that to do my taxes. Correct?

 

[DSB]

Remember, whilst you are spending time doing trying to do your accounts and tax, you are not spending time trying to grow your business.

Yes John, I get that. However, by spending my time I am saving money to NOT to pay the accountant and can use that money to grow the business by spending on advertising/ppc etc.

It's only a short-term goal while we shape up our business. I will be more than happy to pass on this duty to the accountant once we have grown a bit and income has started coming in.

 

[john1989]

Not claiming expenses to keep things simple is going to cost you money.

 

[Paul Norman]

From what you have said, I would do the bookkeeping yourself and pay the accountant to do the tax stuff.

You state, for example, that to keep it simple you wont claim any expenses. But not claiming expenses will mean you pay more tax that you ought to - those business expenses are a legitimate claim against tax.

Start off doing the books yourself, but get an accountant to do the tax. If your business is really not going to deliver enough income to pay for that (the cost will be in the range £750 to £1000 for the year), then I would advise against pursuing it at all.

 

[DSB]

Not claiming expenses to keep things simple is going to cost you money.

yes but I am paying for these expenses (hosting etc) already from my pocket whether I start the business or not.

 

[DSB]

From what you have said, I would do the bookkeeping yourself and pay the accountant to do the tax stuff.

Yes, I will most probably go that route too. Do you have any rough estimate of cost for this?

 

[john1989]

yes but I am paying for these expenses (hosting etc) already from my pocket whether I start the business or not.

But you are losing that tax relief from those expenses if you do not claim them - which, if I'm honest, is pretty stupid.

It seems you have already made you mind up about doing this yourself. These are a couple of helpful sites
https://www.gov.uk/government/organisations/hm-revenue-customs
https://www.citizensadvice.org.uk/work/self-employed-or-looking-for-work/self-employment-checklist/
http://www.which.co.uk/money/tax/guides/tax-for-the-self-employed/

 

[DSB]

No John its not about that I am fixed on this. There are two ways I look at it 1) spend money from my pocket, and just hope that the business is successful and I earn that back, if not I lose that money. 2) I spend money depending upon how the business is doing. If it doesn't do well then I lose out less money the first option.

But you are losing that tax relief from those expenses if you do not claim them - which, if I'm honest, is pretty stupid.

I know I said I won't be claiming expenses only if it was going to make matters difficult to handle but that doesn't mean I am not giving up that easy.

Thanks for the links. I'll take a look now.

 

[MyAccountantOnline]

From what you have said, I would do the bookkeeping yourself and pay the accountant to do the tax stuff.

You state, for example, that to keep it simple you wont claim any expenses. But not claiming expenses will mean you pay more tax that you ought to - those business expenses are a legitimate claim against tax.

Start off doing the books yourself, but get an accountant to do the tax. If your business is really not going to deliver enough income to pay for that (the cost will be in the range £750 to £1000 for the year), then I would advise against pursuing it at all.

Good advice the only thing I do disagree with is the fee if the OP wants a simple set of sole trade accounts prepared and a Self Assessment tax return completed I'd say the fee will be more likely in the region of £500 for a decent UK qualified accountant.

 

[john1989]

They have already been quoted £350.

 

[UK Contractor Accountant]

They have already been quoted £350.

Thats for 5 months only - full year fee was £900?

 

[john1989]

I don't see why anyone would quote 5 months - I got the impression that was just the way of the payment plan.

 

[UK Contractor Accountant]

I don't see why anyone would quote 5 months - I got the impression that was just the way of the payment plan.

He/she didn't quote 5 months - I think the OP was just saying by not engagaging an Accountant for 5 months he will save himself 5 x £75

 

[Paul Norman]

Good advice the only thing I do disagree with is the fee if the OP wants a simple set of sole trade accounts prepared and a Self Assessment tax return completed I'd say the fee will be more likely in the region of £500 for a decent UK qualified accountant.

On the subject of the potential fee I will bow to your knowledge, as you are in the accounting business! The OP did ask me to give an indication of what the likely cost would be, and I would refer to your figure.

 

[UK Contractor Accountant]

more likely in the region of £500 for a decent UK qualified accountant.

How much for a half decent one?

 

[john1989]

How much for a half decent one?

£350?