FAQ

​In the UK, for the tax year 2023/24, the basic rate of income tax applies to earnings up to £50,270, and higher-rate tax applies to earnings above that threshold up to £125,140. Earnings above £125,140 are subject to the additional rate tax.

Keep in mind that tax rates and thresholds can change, so it’s essential to check the current rates on the HMRC website or talk to us for the most up-to-date information.

A limited company is a business structure registered with the Government, providing it with a separate legal identity from its owners (shareholders). The company has its own rights and responsibilities and can conduct business, own assets, and enter into contracts in its own name. Shareholders’ liability is limited to the amount unpaid on their shares, which means their personal assets are generally protected from business debts.

There are two main types of limited companies: private limited companies and public limited companies. Private limited companies are more common for small and medium-sized businesses, while public limited companies are typically larger and can offer shares to the public.

Registering with HMRC depends on the type of business structure you choose:

• Sole trader: You can register as a sole trader online on the HMRC website or by post.
• Limited company: If you set up a limited company, you can often register for corporation tax with HMRC at the same time as registering with Companies House.
• Partnership: Partnerships need to register with HMRC to ensure each partner is individually taxed. You can register a partnership online or with form SA400.

To register, you’ll need to provide information about your business, such as your business name, address, nature of business activities, and personal details.

After registration, HMRC will issue you with a unique taxpayer reference (UTR) and other relevant information for tax compliance.

HMRC requires businesses to keep records for at least six years from the end of the accounting period they relate to.

Records that must be kept include financial statements, invoices, receipts, expenses, payroll records, VAT records, and other business-related documents.

Retaining records for the required period is crucial for tax compliance, audits, and potential inquiries from HMRC. Always verify the current record-keeping requirements or talk to us for the most up-to-date information.

Taking on staff involves additional costs beyond their gross salary. These costs include:

• Employer’s National Insurance contributions (NICs): Employers are required to pay NICs on their employees’ earnings above a certain threshold. This is a cost that you, as the employer, have to bear.
• Pension contributions: If your employees are eligible for a workplace pension scheme, you will need to make contributions on their behalf.
• Benefits and perks: Additional costs may arise if you provide benefits or perks such as private health insurance, gym memberships, or company cars.
• Training and development: Investing in your employees’ skills and professional development may be necessary to maintain their productivity and growth within the company.
• Workplace expenses: Costs associated with providing a safe and suitable working environment for your employees.
• Recruitment costs: Expenses related to hiring and onboarding new employees.

Remember to budget for these additional costs when considering taking on staff, as they can significantly impact your business finances.

Whether to get a company car depends on your business needs and individual tax circumstances. Owning a company car has tax implications, and the tax treatment has changed over the years. Company cars are considered a benefit-in-kind, and the value of the benefit is subject to income tax and National Insurance contributions.

Consider factors such as the cost of the car, its CO2 emissions, and how much it will be used for personal purposes versus business purposes. In some cases, it might be more tax-efficient to use your personal car for business and claim mileage expenses instead.

Again, talk to us to evaluate the tax implications and determine the best approach for you.

The answer to this depends on various factors, including your business needs, goals, and risk tolerance. As a sole trader, you are personally responsible for all the business’s debts, and your personal assets are at risk. However, it is a simpler and sometimes more cost-effective structure, and you’ll report your business income on your personal tax return.

On the other hand, a limited company is a separate legal entity from its owners (the shareholders). It provides limited liability protection, meaning your personal assets are generally protected from business debts. It can also offer potential tax advantages, such as the ability to control the timing and method of taking money out of the company to optimise tax efficiency. However, running a limited company involves more administrative duties and higher costs.

Before making a decision, talk to us for tailored advice on the best structure for your business.

Starting a limited company involves several steps. Here’s a general overview:

• Choose a company name: Ensure the name is unique, not already in use, and complies with naming regulations.
• Registered office address: You’ll need a registered office address for official correspondence.
• Appoint directors and shareholders: You’ll need at least one director and at least one shareholder (these can be the same person).
• Memorandum and articles of association: These are legal documents outlining the company’s constitution and how it will operate.
• Register with Companies House: File the necessary documents with Companies House to officially register the company.
  Set up a business bank account: Keep your personal and business finances separate by opening a bank account for your business.
• Register for taxes: Depending on your business activities, you may need to register for VAT, corporation tax, and pay-as-you-earn (PAYE) if you have employees.
• Obtain licences and permits: Depending on your industry, you may need specific licences or permits to operate legally.

ETP & Sons can handle these steps on your behalf, ensuring you comply with all legal requirements. Contact us today to discuss how to start a limited company. 

At Peirsons, we’re dedicated to guiding our clients through complexity to achieve their goals. When you succeed, we succeed.

From the very beginning, you’ll have a dedicated contact at Peirsons, ensuring consistency and building strong, lasting relationships. We understand your time is valuable, so we promise to communicate clearly and efficiently, avoiding jargon and unnecessary complexity. Our focus is on cutting to the chase and providing the information you need.

Feel free to explore our full range of services. Don’t know what accountancy service you need? Call us – we don’t charge for queries and one of our accountants will be on hand to help.

Yes, if you have rental income from a property that’s over the property allowance of £1,000 in a tax year, you must register with HMRC and report the income on your tax return.

Allowable costs for rental properties are expenses that can be deducted from your rental income before calculating the taxable profit. Some common allowable costs include:

1. Mortgage interest: The interest on a mortgage used to buy or improve the rental property. However, tax relief on mortgage interest has been restricted since 2017 – check the current rules and talk to us for advice.
2. Property repairs and maintenance: Costs incurred to keep the property in good condition.
3. Insurance: Insurance premiums for the rental property, such as building insurance.
4. Letting agent fees: Fees paid to letting agents for managing the property.
5. Council tax: If you pay the council tax on the property, it can be deducted.
6. Utilities: Costs for utilities like gas, electricity, and water, if you pay them on behalf of the tenant.
7. Ground rent and service charges: For leasehold properties.

Keep in mind that not all expenses are allowable, and the rules may change over time, so it’s important to keep up to date with the latest regulations.

At ETP & Sons, we can provide personalised advice that’s specific to your circumstances and advise on your allowable deductions, as well as providing up-to-date tax information and making sure you’re compliant with current rules.

Getting money out of a company tax-efficiently involves careful planning to optimise your tax liabilities. Some common methods include:

• Salary and dividends: Paying yourself a salary up to the tax-free personal allowance and taking additional income in the form of dividends, as dividends are subject to lower tax rates.
• Pension contributions: Making contributions to a pension scheme can be tax-efficient as they reduce the company’s taxable profit.
• Expense reimbursement: Ensure legitimate business expenses are reimbursed, reducing the taxable profit.
• Director’s loan: If you lend money to the company, it can be repaid later without incurring tax.
• Business asset disposal relief: If you sell the company or business, business asset disposal relief can reduce the capital gains tax payable. We can advise you on selling your business tax-efficiently and complying with tax rules. Get in touch so that we can chat through your circumstances together. 

The VAT threshold refers to the annual turnover level at which a business must register for VAT. The VAT threshold changes over time, and businesses are required to register for VAT if their taxable turnover exceeds the threshold.

The UK’s standard VAT threshold is currently £85,000. If your business’s taxable turnover exceeds this threshold in any 12-month period, you will probably need to register for VAT with HMRC.

Once registered for VAT, you will charge VAT on applicable goods and services provided to your customers. Your customers, in turn, pay the VAT to you, and you are responsible for reporting and paying the VAT to HMRC.

If your turnover is below the VAT threshold, you don’t have to register for VAT, but you also cannot charge VAT to your customers. This might be advantageous for customers who are not VAT-registered themselves, as they won’t have to pay the additional VAT on your products or services.

Be sure to check the current VAT threshold and regulations or talk to us for the latest information.

Bookkeeping is the process of recording and organising financial transactions for your business. Proper bookkeeping is essential for financial management and compliance with tax regulations.

While it is possible to do bookkeeping manually using physical ledgers or spreadsheets, accounting software can simplify the process and reduce the risk of errors. Accounting software helps automate tasks, provides real-time financial information, and generates reports, making it easier to manage your business finances effectively.

Popular accounting software options include Xero and Sage, among others.

At ETP & Sons, we can help you to choose a software package that fits your business’s needs, size, and complexity. We’ll help you set up the software and provide guidance on using it effectively.