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Registering as self employed – a to do list

12 August 2009 No Comment

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You have 3 months in which to register

When you first become self-employed there are a number of things you should do . . . today!

  • Register with HM Revenue and Customs (HMRC)
  • Compile a list of things that you have introduced into the business
  • Set up a simple accounts system to record income and expenses
  • Open up a business bank account
  • Earmark a separate savings account for keeping your tax reserve

And, before doing any of that you should think carefully about the official date of commencement of your business. That’s important for two reasons. Firstly, you must register with the tax office within 3 months of that date. And secondly, you can go back over your expenditure in the previous 3 years and (if it relates to this new business) claim those expenses in your first set of accounts. You may also be able to reclaim the VAT (subject to precise rules) and that’s something to talk over with your accountant.

You don’t want to use a date which you have arbitrarily decided upon if it means that the 3 month time limit and the 3 year time limit cause you any problems. Having established the actual date:

  • Register with HMRC. Make a note of your national insurance number and then call 0845 915 4515. You can also do this on the Revenue web site, but the phone call is normally easier. You must register within 3 months of starting otherwise there will be a fine for late notification.
  • Prepare a list of computer hardware, motor vehicles and furniture, fixtures and fittings which you have introduced as business assets on day one. Use a good estimate of their current market value (optimistic values rather than pessimistic ones) or if they are recent purchases, you can use their original costs. An analysed list with the headings, date bought, description, serial number and cost/value . . . and for later on date sold and sale proceeds. Those headings should be enough. There’s an example here. Your description should be detailed enough to distinguish this HP laserjet printer from the next one you buy!
  • Keep a copy of all invoices you issue to your clients. And keep original receipts for all the things that you buy on account of your business. Use a business bank account for all business INs and OUTs. Keep your business affairs businesslike and keep your private affairs private. That way you can easily see how well the business is doing. We can help you with a bank account if your bank is slow.

There are many software packages available to help you. Sage is fine for people who like to do things the Sage way (and their system is different to most packages).

The online book keeping services (like Netsuite) keep your data on their web server. You need copies, so if you are buying into an online service, make sure that you can regularly download everything and keep your own back up(s) on a local system.

In our experience, most new start ups can cope with a simple spreadsheet until the business becomes more established.

If you are going to make a profit, then you are going to have a tax bill. As a rule of thumb, put aside 25% of your income so that you are ready when that first tax bill arrives!

Lastly, think about your year end. It does not have to be the same as the end of the tax year on 5 April. You can choose any date you like, the first anniversary of trading or 31 December or 31 March are popular dates.

Let us know if you need any help. That could be an accounting question or anything related to business . . . we have 25 years of experience and a wide network of trustworthy contacts.

Posted on 12 Aug 2009 by The Proactive Accountant Dot Com