There is a lot to think about from a financial perspective when setting up a business.  Firstly you need to decide on the structure – self employed or a limited company.  Tax used to be a big factor in this but HMRC have closed the gap between the two over recent years.  A company protects your personal assets but is more complicated and comes with greater reporting obligations.  It is important to understand how your decision impacts on future liabilities and bearing in mind too how your business may grow – business partners and employees for example.

VAT is one of the first taxes that will impact on you.  The registration threshold is a turnover of £85,000 and there may be competitive advantages to postponing registration as long as you can although it depends on how much VAT is on your costs.  There is a perception too from customers about your size.

Most important is having the right accounting software to run your business.  Xero is one of the leading ones and can ensure you get into some good habits from the beginning.  Understanding the numbers is not as daunting as you might think and you can soon identify, and monitor, the key ones – such as who owes you money.  The software makes a lot of the compliance easy, enabling VAT returns to be easily submitted, and payroll as well.  You can do a lot on your phone with the addition of integrated apps.

Throughout the life of your business, seek advice and ask lots of questions at every step.  A good accountant will support you, with access to specialists, so you can focus on what you know best. 

Article by Chay Took, Kreston Reeves