1. Accounting, Tax & Bookkeeping Business Basics
Steven Northam

2. Content Introduction Accounting Responsibilities Keeping Organised
All Things Taxation
How Do I Cope?
Overview

3. Introduction Accounting! Often the pain of business life..
Seems very confusing (it can be!)
Absolutely paramount its done correctly
Save fines, problems and headaches!

4. Business Accounting, the basics.
You need to record “transactions”
Money coming in
Money being spent
Keep receipts, invoices and bank statements
Need a 100% audit trail
Simple at the outset..
Getting it correct will save time and money!

5. Sole Trader / Self Employed
Accounting responsibilities?
Spreadsheets/Excel/Google Docs
Paper? Scanning Apps
All you income is taxed, rate depending on your income
Need to keep records for 5 years
Works well for small start-ups
Not tax efficient if you grow

6. Limited Companies Accounting responsibilities?
Keep records of transactions
6 years worth legally required
You MUST file annual accounts, VAT returns and PAYE and a Corporation Tax return with HMRC
You MUST file annual accounts and an annual return with Companies House

7. What is a legitimate business expense?
Limited companies are separate legal entities
You cannot spend company money of “yourself”
Doing so is theft
Legitimate business expenses only
Such as…
Legitimate expenses reduce your Tax bill..
Things you buy are owned by the company, not you personally (even though you may own the company!)
NOT Cars, Watches, Holidays and so on..

8. Corporation Tax Tax you pay on “Profit” your company makes
Currently this is 19% for most companies
You can make a loss or 0 profit and thus pay no tax (spend your money)
You have to make a profit to pay dividends (coming up)
Is profit always the end goal?

9. VAT – Value Added Tax
VAT is added to most goods/services, normally you wont be aware of paying it
Currently VAT is charged at 20%
If you make over £83,000 you must register and charge/pay VAT
You can register at anytime
If VAT registered you can claim back VAT on purchases (saving 20%)

10. Payroll, RTI, Auto Enrolment
Payroll – paying staff
Could do a 4 hour session on this!
Complex! But certainly feasible
Paying “Cash in Hand” will land you with £10k fine per person
Online systems to make it bit easier!
RTI – Real Time Information
Pensions Auto Enrolment

11. Staying Organised (The Art of Bookkeeping!)
HMRC state 6 years of records must be kept (5 years if self employed)
Literally impossible to file accounts without good system to record whole year of transactions
Best option often is to outsource to someone else as company grows…or try a using a good system..
Accountants around £ per year
Bookkeeping £ per month

13. Xero – Cloud Accounting
Self-Employment or Limited Company
Online accounting system
Quite straight forward to use and understand
Creates invoices, links to banking, PayPal etc.
Range of similar services also on the market (Sage, QuickBooks)

15. How can all this help me? Legally need to do it..but..
Understanding cash flow
Raise invoices easily!
Keep track of who owes you money and when
Plan for profit and corporation tax
Budget for expenses going forward
Understand when bills are due
Value your company as a whole
Help you prepare annual accounts!

16. When do I have to do things by?
Tax Year End/Starts 6th/5th April each year
You company accounting year can be anytime you set, best to do 31st March to fit with tax year
You have (generally) 9 months to file accounts after each year..AND pay Corporation Tax
You must submit annual returns each year to Companies House
Self employment 31st Jan each year for previous year
Budget over the year for your tax bill!

17. All Things Tax… How do I get paid in the most tax efficient way?
Each person have (this year) £11.5k per year tax free income
You can thus pay yourself this and its tax free..yay, alas not much to live on..
The things get complicated, if you keep it legal then its fine…
Lets look at the details..

18. What if I try and cheat? Good luck… Not worth the effort
Use legal ways to minimise tax paid
Paying tax is actually a good thing!!
Offshore…no point unless you have millions
HMRC estimate they loose £8billion a year via avoidance schemes and uncollected tax of £34billion a year!

19. PAYE – Pay As You Earn PAYE is the standard method to pay employees
Directors are employees
Shareholders are not by default
Employee personal allowance
£221 per week £958 per month £11,500 per year
UK Basic tax rate
20% on annual earnings above the PAYE tax threshold and up to £33,500
UK Higher tax rate
40% on annual earnings from £33,501 to £150,000
UK Additional tax rate
45% on annual earnings above £150,000

20. NI – National Insurance
National Insurance is quite complex
HMRC explain it..
You can pay zero NI and still have access to the benefits
Large range of variables
Paying something isn’t a bad thing and its not a huge amount!

21. Company Share Dividends
How do I get paid in the most tax efficient way?
Each person has a £2k dividend allowance, tax free per year
Then the following tax is applied:
Dividend ordinary rate - for dividends otherwise taxable at the basic rate
7.5%
Dividend upper rate - for dividends otherwise taxable at the higher rate
32.5%
Dividend additional rate - for dividends otherwise taxable at the additional rate
38.1%

22. So the best way to get paid is…
PAYE - £950 per month, £11,400 per year
Add £2k dividend allowance
£13,400..no tax at all
Take £22,500 more in dividends, pay only 7.5% (£1650)
Total £35,500…£1650 tax bill
On PAYE : £4500 tax bill and NI (above is roughly)
This is why running your own limited company pays 
You must report dividend payments on self assessment (like self employed people do)

23. Overview Often seen as the “boring” part of business
Getting it correct is important
Being on top of it is helpful!
Often best to outsource to experts! But understanding the basics is key.
These slides will be online 
Next week – Social Enterprise

24. Questions, Discussion & Support
Any questions?
What else do you need to help/support you?