FREQUENTLY ASKED QUESTIONS
Here you'll find a few of the most common questions we get asked. If you can't find an answer, or your question is a little more complex, then don't be afraid to drop us a message.
HOW LONG SHOULD I KEEP MY ACCOUNTING RECORDS?
If you're self employed you must keep your records for a minimum of 5 years after the filing date for that tax year e.g. the filing date for the tax year 2020-2021 is 31st January 2022- so you should keep your records until at least 31st January 2027. If HMRC have launched an enquiry into your tax affairs then you must keep your records until at least the completion of the investigation. Timescales for limited companies are longer.
DO I NEED AN ACCOUNTANT?
There is no legal requirement for you to use the services of an accountant or bookkeeper, but you do have a legal obligation to keep financial records and provide correct information to HMRC. If your circumstances are straightforward i.e. one income source from self-employment and minimal expenditure, you have an understanding of tax and you have the time to file accounts, then you may be able to do it yourself. However, if your circumstances are complicated or you have multiple revenue streams, or simply don't have the time then you may need to hire a professional.
HOW MUCH DOES IT COST TO HIRE AN ACCOUNTANT?
As a business, all costs must be considered and one thing to think about is how long it would take you to complete your own accounts- this is vital time that could be spent in dealing with customers and running your business. You should also consider any penalties that HMRC may levy against you for late or incorrect filing of accounts along with any additional costs that an accountant would then charge to help clear the mess up for you. A good accountant is an asset not a liability, they should be able to guide and help you to achieve your business goals. What's more, accountancy fees are an allowable expense for tax purposes.
WHAT ARE THE BENEFITS OF USING AN ACCOUNTANT?
Accountants spend years studying different aspects of taxation that most people are not aware even exist. Training is heavily regulated and accountants must pass exams and have experience in all aspects of work they wish to undertake. We are also bound by a Code of Ethics set out by our governing body and subject to sanctions where these rules are not adhered to. Accountants understand the best way to minimise your tax liability and how best to utilise losses and the various allowances available to you. An accountant is not a cost, but an investment in your business's future success.
SOLE TRADER OR LIMITED COMPANY?
There are great many differences between sole traders/ partnerships and limited companies and each one has their own benefits and drawbacks. One of the main differences is the way that each are taxed and the way that earnings are taken from the business. For sole traders it is relatively straight forward- you pay Income Tax and National Insurance at a similar to level to employed workers with the key difference being that you can deduct certain expenses from your income before paying tax. The treatment for partnerships is similar to that of sole traders. Limited companies require a greater amount of record keeping and are governed by more stringent rules and regulations. Limited Companies pay Corporation Tax on profits and are separate legal entities to their "owners". "Wages" can be taken as dividends, via PAYE or a combination of the two and the tax treatment is different to that of sole traders and partnerships. There are a great deal more differences and a great deal of thought needs to be had before choosing a particular business structure.
For a brief guide on Limited Company set up and how to open a Limited Company, click here.
To find out how to register as a sole trader, click here.
WHAT IS XERO?
Xero is a cloud based accountancy software meaning that everything is done online. It can handle all sorts of tasks such as payroll, CIS, VAT and CT600 submissions to name but a few. We choose to use Xero as it enables both ourselves and our clients to view everything that is going on within the business. Xero also has a bank feed integration making it much easier to reconcile transactions going in and out of the business without the need for paper statements. To learn a little bit more about the software that we use, head over to our Software page.
We can incorporate the cost of Xero into your monthly fee, or you can pay for it yourself and invite us in.