3 important things to consider when starting a self-employed business
Starting your own self-employed business is an incredibly exciting time. Whilst you may be full of ideas and buzzing with anticipation for what the future holds, there are a few important things, and possibly legal, that you need to explore and implement. These include whether you need to register for self-assessment for tax purposes, if you need business insurance in Liverpool or the rest of the UK and whether you need a separate business bank account. Read on for some more information on these three topics.
I recently wrote a blog post titled 6 handy tax tips for bloggers, but it’s also relevant for small business or home business starts ups. There’s lots of useful information there about record keeping and how to register for self-assessment with HMRC, or even if you need to at all.
If you are a sole trader and your gross sales from your trades/services are no more than £1000 per tax year, then you do not legally have to register with HMRC or need to fill out a tax return. It’s called a trading allowance and everyone is entitled to one self-employment trading allowance of £1000. You can read the official information about this allowance to see if you need to register by clicking here: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income
There are still some reasons you might want to register, even if your gross self-employment income is under £1000, to entitle you to certain benefits. Or if your gross income will be over £1000 then you need to register. It’s very easy to find all the information you need and to register online at the HMRC website. You can learn how to do your own bookkeeping, accounts and how to be tax ready for your self assessment and tax returns, or you can hire an accountant to take care of your accounts and complete your tax returns for you.
Depending on the type of business you plan to undertake, you may need business insurance, otherwise known as commercial insurance. Many companies offer bespoke business insurance to cover your trade and many even offer home-based business insurance.
If you are selling products then you may wish to consider product liability to cover you for faulty products or issues arising from any products you sell. If you sell online you may want specialist ecommerce business insurance.
If you see customers in person or go to trade shows or fairs, then you may need public liability to cover any accidents on your property as an example. There are lots of reasons why your business may need insurance to ensure you are covered for injury to customers or damage to their property, for example.
Business insurance can also cover your equipment from damage and theft, such as laptops and cameras, tools and even stock and business cash. It’s definitely worth considering so you’re not out of pocket should the worst happen. There are lots of companies that can offer advice about insurance and let you know whether you need it. If you require commercial insurance in Liverpool and the North West then consider contacting Rigby Financial for advice and a quote.
Business bank account
You may also need to open a business bank account for your start up. If you are a sole trader then you are under no obligation to open an official business bank account and it could even be an additional expense that is not needed. Many business accounts have tempting offers of no fees for the first year, but then charge a fee after this. It’s fine to use a personal bank account for sole trader transactions – just make sure you highlight which is for business use or even better, open a separate personal bank account for your sole trader transactions.
If you are a limited company, however, then you do need to open a business bank account to keep its finances separate. You cannot open a personal bank account in your business name - your business is a separate entity to yourself. If you’re looking to borrow money or have a company credit card, then you’ll need a business bank account to apply for these.
Please seek your own professional advice when purchasing business products.