Every sale you make and every penny of profit you achieve all started with one spark of an idea. In legal terms that idea is known as your Intellectual Property (IP).

In this blog post we’ll be exploring why it’s so crucial to protect your IP and your creative assets at all costs, covering:

• What Intellectual Property actually is
• Why it’s so important to protect IP
• At what point you should protect an idea
• The best ways to protect your business ideas
• What to do if your IP has been infringed

What is Intellectual Property?

Intellectual Property is anything original you create, covering all sorts from music or artwork to software or a product invention – and so many more things in between. It also includes your business name, logo, products, or services.

Owning IP makes sure it’s only the creator(s) who can legally profit from their work by preventing other people or businesses using it unlawfully.

There are a number of ways you can protect your work – your IP – and we explore each of these in more detail further down.

Why it’s so important to legally protect your IP

There are a number of reasons why protecting your IP and creative assets is so important, including:

• Safeguarding your income and preventing anybody from profiting from your ideas without your explicit permission
• Shielding what helps you stand out from the competition and preventing your competitors replicating whatever brings you success
• Helping you avoid costly legal action further down the line if you find yourself in a situation where your IP has been infringed. It’s much better to prevent a problem than to have to deal with its consequences.

At what point should you think about protecting an idea?

In general, it’s important to think about protecting your ideas and your IP as soon as possible. The point at which you can do this very much depends on the circumstances.

If you’ve just got an idea for a business that hasn’t started trading yet, applications for IP protection aren’t typically accepted. So, if you want to safeguard an idea for further business development later on, you might consider:

• A Non-Disclosure Agreement (NDA) so you can talk to other people about your idea, but they can’t disclose it elsewhere
• Setting up a company (and leaving it dormant) so it can ‘hold’ your IP until you’re ready

If you’re looking to protect a practicing idea or creative asset for a business that is already trading, on the other hand, you should do so sooner rather than later. So, if your business is registered and you’re ready to start trading, there’s no time like the present to start protecting your IP.

The best way to protect a business idea

When it comes to safeguarding your ideas and Intellectual Property, there are a number of routes you can take, depending on the nature of your asset(s).

Non-Disclosure Agreement (NDA)

If your business isn’t trading yet and your idea isn’t in practice, the best way to protect yourself is with NDAs. Anybody who signs is under contract not to discuss or share your ideas without your permission.

If you’re talking to a client or a supplier about your idea, for example, you can get them to sign an NDA to keep your plans under wraps.

Patent

Patents are most commonly used to protect inventions. A patent gives the inventor exclusive rights, granted by the government, which mean nobody else can replicate, sell, or make money from that invention.

There are two different types of patents:

• Utility patents (the way something works)
• Design patents (the way something looks)

Both types require the inventor to go through a rigorous application process to check criteria. If an invention is just a modification of something that already exists, for example, a patent cannot be granted.

Top tip: Patents are only applicable in the country which grants them, so always try to secure a Worldwide Patent wherever you can.

Trademark

Trademarks are most commonly used to protect a business’s brand. They can cover elements such as a company name and logo, and sometimes even specific words and colours. Trademarks are designed to protect your business’s unique identity by preventing others replicating it too closely.

Once you have a trademark in place, you can start using the registered (®) symbol to demonstrate that your IP is protected. As with patents, trademarks only apply in the country which grants them, so it’s vital to apply for trademark registration anywhere you plan to do business.

Copyright

Unlike trademarks and patents, you don’t actually apply for copyright. Instead, copyright applies automatically to any original works or ideas that have been expressed.

The following assets are automatically protected by copyright, meaning you don’t need to take any action:

• Original literature, drama, music, and art
• Sound and music recordings
• Film and TV recordings (including broadcasts)
• Original illustration and photography
• Original software, web content and databases
• Original layouts

You can – and should – mark your creative assets with the copyright symbol (©) to indicate the protection. This isn’t a legal requirement and not using the symbol won’t impact the copyright protection, but it is best practice.

Copyright expires after a certain period of time so make sure you do your research to ensure your ideas stay secure. Most copyright is in place for 70 years but there are some instances where this is much shorter.

You can license or sell your copyright to third parties via a legal contract that passes usage rights over to them. You can then start reaping the rewards of royalties. To do this, you’ll need to register your work with a licensing body.

Trade secret

Trade secrets conceal confidential business information from the public domain. This could be a formula, a process, a technique, or even a secret recipe that you don’t want the world to know about.

You cannot officially register a trade secret and instead they’re protected by common law under the law of confidence. However, this is where Non-Disclosure Agreements come back into play, to prevent anybody sharing your secrets unlawfully.

What to do if your Intellectual Property has been exploited

There are several actions you can take if you find your IP being used without permission.

1. Take a deep breath and sleep on it

Any correspondence you have with somebody regarding infringement can be used in legal proceedings, so be mindful about what you say or do in the heat of the moment.

2. Issue a cease-and-desist letter

This should outline the problem and how you wish for it to be resolved, as well as detailing all of your IP rights.

3. Negotiate a resolve amongst yourselves

Sending a cease-and-desist letter will, hopefully, be enough for you to come to an agreement without the need for legal support. In most cases an IP violation will be an honest mistake which you can quickly resolve. You can also ask someone to mediate on your behalf if you prefer.

4. Seek legal advice

If step 3 doesn’t solve the problem, it could be time to take further legal action. A solicitor will be able to assist you but just be aware of the potential costs before committing to anything.

Can an accountant help me with IP?

Navigating Intellectual Property protection can seem daunting so if you’re feeling overwhelmed don’t worry, you’re not alone. Whilst they might not offer legal advice per se, accountants can help you deal with the financial impact it might have on your business. They can also help you set up a limited company to offer your ideas more legal protection.

So, if you’re looking to protect your business, speak to an accountant who will be able to help guide your strategy and finances. They’ll also be able to advise you on what level of protection best suits the various elements of your business and its Intellectual Property.

 
Find more help and accounting support in our online hub, or learn more about finding an accountant.

The post How Do I Protect an Idea? appeared first on The Cheap Accountants.

Basically, yes – you can run a limited company and be a sole trader at the same time. What is crucial though, is that as well as keeping your personal and business finances separate, you’re really careful to keep the two businesses totally separate. That means two separate entities, not one business that’s been split in two.

That’s not just us being precious about the bookkeeping either, there are actually several very good reasons for keeping a clear divide between your business, including the lurking presence of HMRC.

We’ve prepared this guide to give you an idea of the basics, but it might also be worth chatting to your accountant about your business structure.

Making it clear that you’re not ‘artificially separating’ your businesses for VAT purposes

When a business approaches the VAT registration threshold (which means that turnover is getting near the magic £90,000 mark), it’s required to register for VAT.

Sole traders with multiple businesses work out their turnover for VAT on the basis of all their sole trader incomes combined, because there’s no legal separation between a sole trader and their business. Limited companies are an entity in their own right, so they work out their turnover for VAT separately.

Some business owners might feel tempted to split their business up, thus dividing the turnover, and therefore getting rid of the need to register for VAT. Don’t do it.

Avoiding tax avoidance!

If HMRC get even the slightest whiff that you’re trying to avoid VAT by splitting two businesses in order to stay below the VAT threshold, they’ll be all over you like a rash. This is particularly the case where both businesses are in similar industries.

Recording finances and claiming expenses correctly

On a very practical level – you need to make sure that any expenses you claim (bills, travel costs, broadband etc) are attributed to the right business. You could end up with one heck of an accounting headache otherwise!

For example, say you were to claim all your travel expenses through your sole trader business but use it for your limited company work half the time. HMRC could then disallow half the costs you’d claimed, and hit you with a bill for the additional tax – plus penalties.

Be clear what work each business does

In keeping the businesses separate, make sure you’re really clear what work was carried out by which business.

Perhaps all current clients will go through your sole trader business and from now on new ones will go through the limited company. Or maybe you’re a limited company providing kitchen worktops, and a sole trader who does photography.

Unless you clearly document your invoices, including making it clear which business they belong to, HMRC might decide it’s time for an audit.

Should I switch from being a sole trader to a limited company?

The only way to answer this question is to weigh up the pros and cons of being a sole trader versus incorporating the business to become a limited company.

The way you run your business, its turnover, and your personal circumstances, will all be major factors in deciding how to structure your business. You might also find it useful to chat to an accountant about choosing the most appropriate business structure first.

Operating as a limited company

When it comes to setting up as a limited company there are some distinct advantages and disadvantages to think about. One of the most common considerations is around the idea of risk.

Risk

Some businesses are more financially risky than others, so it might make more sense to register as a company because this limits the extent to which you’re personally liable for business’s debts. If the company goes belly up, you won’t start losing personal assets beyond anything you’ve already put into the company.

Tax efficiency

Depending on the level of turnover, and how you pay yourself from the business, it can sometimes be more tax efficient to operate as a company.

As a director and shareholder you can choose to pay yourself in dividends as well as a salary. The great thing about dividends is their lower tax rate, their exemption from National Insurance, and an additional dividend allowance on top of your personal tax allowance.

It all depends on what else you have going on though, so again – it’s well worth talking to your accountant!

Protecting a name

Registering a limited company is quite a formal process, and the company name must be unique. Once registered, no one else can use it so this can help protect your company’s name as a brand. The only way a sole trader can do a similar thing is if they trademark their name.

Operating as a sole trader

Some people see being a sole trader as a more attractive option because it’s simpler and faster to register the business with HMRC.

Admin

There’s also very little paperwork in setting up as a sole trader. Whereas company directors need to think about the Company Tax Return as well as their own Self Assessment, along with submitting annual accounts.

The main thing you need to do as a sole trader is your Self Assessment tax return.

Paying yourself

You won’t need a PAYE scheme to pay yourself a director’s salary, or a separate business bank account, or to go through the official process of issuing and recording dividends. As a sole trader, you can keep all your own post-tax profits yourself.

Privacy

The details of every limited company, its directors, and the people with significant control of it, must all be recorded publicly on the Companies House website. Sole traders don’t have to do this, so operating in this way can give you a little more privacy.

Liability

The downside of working as a sole trader is that you and your business are legally one and the same. That is to say, you’re personally liable for any business loans and debts the business runs up if things go pear shaped.

Your own assets, like your house, car, or any cash savings, are also at stake. That’s why being a limited company is such a draw because you quite literally have limited liability.

Funding

It’s also often more difficult to raise funding and gain investment as a sole trader, which can make growing your business tricky. Lenders – especially banks – tend to see limited liability companies as less risky and often shy away from sole traders.

Choosing the structure that’s best for your business

If there are very strong reasons for separating different business ventures (and you truly keep them separate) this is generally acceptable. Just remember that HMRC will be on the lookout for businesses who deliberately cherry-pick the best bits from each structure in order to avoid tax.

There are pros and cons to being a sole trader and for limited companies, so do your research, and don’t be afraid to ask questions!

 
Looking for an accountant to help you? Compare accountancy packages to get started.

The post Can I Be a Sole Trader and Operate a Limited Company? appeared first on The Cheap Accountants.

In this article we take you through the following topics:

• What a dormant company is (including the different definitions for Companies House and for Corporation Tax)
• Whether or not you’re allowed to make a company dormant before trading commences
• Reasons why you might want to make your company dormant before trading
• Filing accounts for a dormant company

What is a dormant company?

The main definition of a dormant company is one that doesn’t trade, and has no other additional form of income. In that respect, a company isn’t dormant if it is:

• Earning interest
• Managing investments
• Buying and/or selling goods with the intent to make a profit
• Receiving any other form of income

To complicate things slightly though, HMRC and Companies House have different definitions of what it means to be a dormant company.

What Companies House call a dormant company

Companies House defines a company as being dormant if no significant transactions take place during the accounting period. A ‘significant transaction’ is one which the company would normally record in the accounts, but doesn’t include:

• Filing fees paid to Companies House
• Penalties for late submission of accounts
• Payment for shares when the company was incorporated

It’s important to note that a dormant company is not the same as a dissolved company on Companies House. If you wish to close down the company entirely, this is a separate process.

What HMRC call a dormant company

HMRC’s definition of a dormant company is a bit different, describing it as a company which isn’t active or liable for Corporation Tax. It can be:

• A brand-new company which has yet to start trading
• An ‘off-the-shelf’ company being held by a company formation agent, preparing for it to be sold on
• An active company that has traded previously but is no longer currently trading
• A company that will never trade because it has been incorporated with the sole function of holding an asset (e.g., property)

Are you allowed to make a company dormant before it starts trading?

Yes, you are allowed to register a new company and then make it dormant before you’re ready to start trading. You can also make an active company dormant with no fees incurred. The company must meet the criteria outlined above for it to successfully qualify as legally dormant.

Do I need to submit Company Tax Returns for a dormant company?

As long as you tell HMRC that your company is dormant, you won’t need to submit a Company Tax Return or pay Corporation Tax for it. So, if you incorporate (register) your company but you’re not quite ready to start trading and filing accounts yet, making the company dormant is a bit like pressing the pause button.

Should I make my company dormant?

Whether your company has previously traded or it’s a new business that hasn’t started trading yet, there are a number of reasons why you might wish to make it dormant. We explore some of the most common motivations below.

To protect a brand name, company name or trademark

Have you come up with a strong idea for a product or service, or a great brand or business name? Business owners might find the idea of ‘securing’ the company until they’re ready to start trading to be appealing. Registering the company protects ideas, names or trademarks whilst you set up the rest of the business.

To press pause during a company restructure

This usually applies to actively trading companies which might find it extremely beneficial to become dormant during the process of a restructure.

For instance, if operations will pause during the process, dormancy means you won’t need to submit Company Tax Returns for the period it ceases to trade.

Can a dormant company hold assets?

Yes, it can! In fact, some limited companies are setup as dormant for the sole reason of holding an asset. If you’re holding assets or Intellectual Property (IP), making the company dormant before it starts trading is a great way to move things along in the background while protecting what you own. This also applies if the company doesn’t start trading at all.

In the event of extreme unforeseen business circumstances

If a business owner dies suddenly, for example, and there is no succession plan or contingency strategy in place to continue trading, making the company dormant for a period of time might be the best course of action to take.

Do you need to file accounts for a dormant company?

If you aren’t clear on the rules and regulations things can get a little complicated when it comes to accounting for a dormant company, so let us break it down for you.

• No, you do not need to file accounts for a dormant company to HMRC
• You are also not required to submit a Company Tax Return or pay Corporation Tax to HMRC if your company is currently dormant – unless, of course, you receive a request to do so
• However, even if your company is currently dormant, you will still need to submit a confirmation statement and annual accounts to Companies House

This is because all companies must submit these to Companies Houses – even if the company isn’t trading. If you fail to do so, you could find yourself facing a hefty penalty.

As with most things to do with business finances, understanding the ins and outs of dormant companies and their respective obligations can be confusing.

 
That’s why we always recommend seeking the guidance and expertise of an accountant. That way, you can be sure that you’re doing everything by the book, and in the most tax-efficient way possible!

The post Can I Make My Company Dormant Before I Start Trading? appeared first on The Cheap Accountants.

It’s a common misconception for franchises, but because they’re separate, franchisees record and pay tax just like any other business. We’ll look at how franchisees report and pay tax.

Do I need to submit tax returns if I’m a franchisee

Although you might be paying the franchisor fees to operate under their brand, HMRC treats the franchise like any other business, and expect it to pay taxes accordingly. You’re not part of their company, just paying to use their trademark and business model as if you were.

The fees you pay to the franchisor do not cover the tax you must pay on your profits as a franchisee.

Be careful around any franchise agreements which suggest they’ll take care of your tax reporting for you in case this is a potential red flag.

You’ll be operating a separate business, so you’re the one responsible! The way you pay tax on your franchising profits depends on how you register the business.

What kind of tax do franchisees pay?

Franchising describes a way of working rather than a tax structure, so you might operate your franchise as a sole trader, a limited company, or something else. This means that the taxes that you must pay as a franchisee depends on how you set up your business.

Most franchisees tend to register as a limited company, though you might also be a sole trader or in a partnership.

• A sole trader is a self-employed person who is the sole owner of the business – a professional one-person band if you like. Sole traders pay Income Tax and National Insurance on the profits they make in a tax year.
• A limited company is a separate legal entity, independent from its owner(s) or director(s), with its own unique liabilities and separate assets. They submit Company Tax Returns and pay Corporation Tax on their profits, and then individuals who pay themselves from the business will pay Income Tax on their own personal income.

Common types of tax for franchises

Once you know what type of business structure you will use to operate as a franchisee, you’ll have a better idea of the tax that you’ll need to pay, and how to pay it.

Income tax

UK taxpayers usually start to pay income tax on any money they earn above the £12,570 tax-free Personal Allowance threshold.

So, if you earn £25,000, deduct the personal allowance from it, leaving £12,430 of taxable income. The way that you pay income tax depends on how you earn the money:

• Employees pay income tax through their employers, who deduct it from their wages and pay it to HMRC on their behalf
• Sole traders pay income tax on the profits they make with their business. Because sole traders aren’t legally separate from the business, this means they pay income tax on all of the business’ taxable profits.
• The owner of a limited company is considered separate to their business, so they only pay income tax on money that the business pays to them as a salary. You might also pay yourself dividends, which are subject to dividend tax.

Corporation Tax

Limited companies pay Corporation Tax on the profits they make. So, if your franchise is set up as a limited company, the business will submit Company Tax Returns to report its income and expenses. Unlike Income Tax, there is no personal allowance relief on Corporation Tax, but there are other ways you can reduce your tax bill such as claiming expenses.

Value Added Tax (VAT)

Not all businesses need to register for VAT, though you’ll still pay VAT to your suppliers if they’re registered.

A business must register for VAT as soon as its taxable turnover reaches £90,000 in a 12 month period. This threshold takes gross sales into account – not profits.

Sometimes it’s useful for a business to register for VAT voluntarily before its taxable turnover reaches the current £90,000 threshold. For instance:

• The franchisor might require you to be VAT registered
• To get a VAT number in order to make the business look more professional
• To reclaim VAT that your business has paid on some items over the last 4 years
• If your business usually pays more VAT to suppliers than it would charge to customers (for instance if the things you sell are zero rated), then you’ll be able to reclaim the difference

Would a franchisee benefit from having an accountant?

Running a franchise can be complicated, and tax affairs can be confusing too. Anybody navigating the complexities of tax, legal regulations, and HMRC deadlines will benefit from having a tax accountant. Having a professional in your corner is a total no-brainer, franchisee or not.

They’re also an independent party! If you’re considering entering into a franchise, independent advice will help protect you, without the hard-sell of a franchisor.

 
Compare accountancy packages in our information centre.

The post Paying Tax as a Franchisee appeared first on The Cheap Accountants.

You can only deduct costs if they can be classed as an allowable expense, so lots of business owners tend to miss out because they’re not sure what they’re allowed to claim for. In this article we’ll explore what allowable expenses you can claim tax relief on, and how this impacts the amount of tax you pay.

What kind of things can I claim as a business expense?

The golden rule any accountant or online guide will tell you is that you can only claim something as an expense if it wholly and exclusively relates to your business.

If you spend money on something but some of the time you use it for personal (non-business) reasons, then you’ll need to work out the portion of the cost which relates to the business, and make sure you only claim that. We’ll go over two of the most common examples, working from hom and travel expenses, below! HMRC also have a more extensive list of allowable expenses available online.

It’s important you know what you can claim for and how to calculate your expenses. Nobody wants to miss out on tax relief they might be eligible for, or to risk HMRC finding inaccuracies in your claim! Particularly for anything on the more unusual side of an expenses claim.

Allowable expenses relating to where you work from

You can usually claim most of the costs which relate to your business premises, such as a workspace you rent, or even the cost of using part of your home for business. These types of costs might include:

• Heating
• Lighting
• Water
• Rent payments
• Business rates
• Cleaning
• Property maintenance and repair

What about if I work from home?

Working out of a space which is separate to your home makes calculating this part of your expenses a bit more straightforward. The ‘wholly and exclusively’ business expenses rule gets a bit more complicated when you work from home.

You can still claim for your business expenses, but you’ll need to make sure you only claim the proportion which relates to your business activities.

Limited companies are only allowed to use the ‘proportional’ actual costs method, but sole traders have two options:

• Simplified expenses (otherwise known as flat rate expenses)
• The proportional costs method

Simplified (flat rate) expenses if you work from home

Simplified expenses are great for those who want a simpler way to work out their expense claims. You can’t use them for everything, but you can use them for things like using part of your home for work or travel.

To be eligible to use this method, you’ll need to be a sole trader, or in a partnership which doesn’t have any companies as a partner. You’ll also need to work from home for 25 hours or more per month. You simply claim your expenses through a flat rate outlined by HMRC, depending on how many hours you work from home each month.

• 25-50 hours: Claim £10 per month
• 51-100 hours: £18 per month
• 101+ hours: £26 per month

Calculate the actual cost of running your business from home

Using the ‘costs’ method means you’ll need to calculate the portion of your expenses which relate to business rather than personal use.

For example, if you have a house with four rooms and one of those rooms is your home office, a quarter of your property is used for business activity. So, if your electricity bill for the month comes to £200, you can claim a quarter (£50) of that as an allowable expense.

Things can become more complicated if there are multiple people using the same space for work. That’s why we always recommend seeking the help of a qualified tax accountant who will be able to clarify what you can and can’t claim!

Travel and accommodation costs

With regards to travel, you are allowed to claim:

• Travel and accommodation related to business
• Vehicle running costs including fuel, tax, insurance, maintenance, and servicing

You aren’t allowed to claim:

• Travel between your home and your regular workplace (for example, if you have an office or workshop separate to your home, you can’t claim the cost of travel to it as part of your regular commute)
• Initial vehicle purchases
• Meals outside of reasonable costs

For those self-employed with a mobile business, reasonable expense claims for journeys to and from a temporary place of work are permitted. So, for somebody who has to travel to a client’s premises, such as a plumber or a hairdresser, they are able to claim the cost of this journey as an allowable expense.

There’s a limit on how long you can claim travel expenses for if you’re going to the same place

Remember how we said you can’t claim the cost of your usual commute, but you can claim your expenses for legitimate business travel? This is where the 24 month rule comes in.

The rule means you can claim the travel costs as long as the intention is that it will be for no more than 24-months. So, if you start out on a 3-year contract, the intention is that this will be longer than the allowable 24-month period, and you won’t be able to claim.

Working out travel costs

Just like working from home, you might be able to choose between using either the simplified flat-rate mileage method to claim your travel expenses, or working out the actual costs.

The flat rate is easier, and means you’ll only need to keep mileage logs of each journey.

Using the actual costs method required much more detailed tracking of things like fuel, insurance, and repairs, but it can be worth the effort if the amount you can claim for is considerably more than what you could claim using flat rates.

 
Managing your allowable expenses for Self Assessment can be complicated, especially if you’re not familiar with the dos and don’ts. Check out our accounting support hub for more help, or to ask a tax question!

The post What Are Allowable Business Expenses? appeared first on The Cheap Accountants.

What is PAYE?

PAYE stands for Pay as you Earn, and is the system used by employers to deduct income tax and National Insurance (NI) directly from employees’ and directors’ wages before paying it on to HMRC.

Some people will refer to PAYE taxes, but it’s actually the mechanism for colelcting tax, rather than a tax in its own right to HMRC. The deductions made through PAYE can include things like income tax, National Insurance (NI), Student Loans repayments, and pension contributions.

Do I need to register for PAYE?

Employers should register for PAYE if any of the following apply:

• An employee earns the Secondary Threshold for National Insurance or more. The current threshold for the 2026/27 tax year is £5,000 per year (or £96 per week).
• You provide employees with benefits or taxable expenses (known as benefits in kind)
• An employee has another job or receives a pension
• You need to pay NI

The same rules will apply to absolutely any employer, even if you’re a sole trader with staff or a larger company.

The difference between payroll and PAYE

Payroll is the process of paying employees and workers for the work they have done. It involves recording data about employees so you can calculate their pay correctly, as well as working out what needs to be paid to HMRC and other bodies for things like income tax, NI contributions, and pensions. We go over some common payroll mistakes to avoid in a separate article.

PAYE is the mechanism an employer uses to report this information to HMRC, and to pass on any deductions.

Registering as an employer for PAYE

If you’re getting ready to take on your first employee, you’ll need to register as an employer before before your first payday.

You can register for PAYE online, and can either do it yourself or ask an accountant to manage PAYE registration for you. You’ll need to confirm the number of employees (including yourself), the frequency of PAYE payments to be made, and the date of the first PAYE payment.

Set up payroll

A payroll system uses the employee’s details to calculate how much PAYE will be deducted from their payslip each month. This is where hiring an accountant comes in useful. Payroll calculations can be time consuming, and confusing!

Payslips

You’ll need to provide every employee with a payslip each time you pay them, confirming what their wages are, and how much you’ve deducted.

Pay PAYE

After you have paid employees it will be necessary to pay PAYE to HMRC. This is the amount you deduct from your employees’ wages. Failure to do so will incur hefty fines from HMRC, and all sorts of uncomfortable chats with angry employees. This is an easy transaction that can be completed online.

Make sure you report everything to HMRC on or before each payday, and send any payments to them by the 22nd of the following tax month in which they happened (a tax month is 6th to the 5th each month).

 
Check out our accounting support hub for more help and resources, or to ask a tax question.

The post A PAYE Guide for Small Businesses appeared first on The Cheap Accountants.

It’s a worrying statistic that needs addressing, so that there is awareness and support available in the workplace, whatever the hierarchy.

Whether it’s the part-time cleaner or the CEO, mental health matters

No matter what the size of the business, or the position held, looking after the emotional wellbeing of staff should be a top priority. It shouldn’t need a diagnosis for personal wellness to become a consideration.

According to mental health charity, MIND, 1 in 4 people will experience a mental health problem. Job title, salary, or level of responsibility, will not influence this. Mental wellbeing is something that unites us all.

With this in mind, we’ve put together a few pieces of key advice on what businesses can be doing today to consider the health and happiness of their staff

Feel the benefits of flexible working

You don’t need us to tell you that mental health issues don’t come with an on/off button, nor do they fit in nicely around your work and social schedule. They happen when they happen, and for this reason it’s beneficial for employers to permit a bit of slack around working hours and location.

Allowing staff to come in an hour or so later, or to work from home if they feel that they need to, is a great way to show that their wellness is being considered and accommodated.

Be transparent about the business’ ups and downs

If you own or work within a large company with multiple offices around the country (or even the world), this is more difficult to achieve, but not impossible.

Making time to keep staff – at all levels – in the loop goes a long way towards reducing anxiety, and fosters a culture of trust amongst the workforce.

Don’t stand in the way of socialising

30% of those who have a best friend at work are 7 times more engaged with their jobs. Doing what you can to stimulate social relationships improves communication. It ensures staff have somewhere to turn to if they need to talk.

Let’s get physical!

Encourage walking meetings, stand-up meetings, lunch time fitness classes and freedom of movement around the workplace.

Whatever gets staff moving without damaging productivity is a great way to capitalise on the connection between physical health and mental vitality. Getting outside at breaks, beach walks and park walks.

The post Nurturing Mental Health at Every Level appeared first on The Cheap Accountants.

But what is PAYE and how does it work? We’ve put together this article to help.

What is PAYE all about?

“PAYE” is short for Pay as You Earn. As the name partly suggests, it’s a mechanism for employees to pay their income tax and National Insurance contributions while they’re earning.

No matter how regularly you pay your staff, they’ll need to pay tax, NI, and other contributions such as pension payments, on their income.

PAYE enables employers to deduct these payments ‘at source’ – that is, from their employees’ wages, and then pay everything over to HMRC for them.

An employer’s PAYE scheme can also be used for other deductions such as car payments and student loan deductions.

In short, employers become the tax collector, so that employees don’t need to spend time on tax returns (and risk getting it wrong) to report employment income.

Making deductions through PAYE

How much you deduct depends on the employee’s tax code, what they earn, and any other contributions they need to make.

For example, a tax code shows how much an employee can earn before they have to start paying tax (an amount known as their personal allowance).

The most common tax code is 1257L. This shows that the employee can earn up to £12,570 in a year before they need to start paying tax.

An employee might also need to pay National Insurance or pension contributions, and student loan repayments too!

How do I know when to register for PAYE?

You’ll need to keep really accurate, up-to-date records of everything that you pay to or deduct from anyone in your business, but you might not need to register for PAYE straight away.

You’ll need to register if any employees or directors:

• Are paid £123 or more a week
• Receive taxable expenses or benefits
• Have another job
• Get a pension

Is registering for PAYE fairly easy?

This depends on a few things, not least if you’ve done it before. The process itself is relatively straightforward but as ever with HMRC, the information you might need can seem confusing.

It’s why many companies decide to use an accountant to register for PAYE rather than go it alone, but there’s no requirement either way.

The important thing when operating payroll is that it’s absolutely accurate.

The information you put into your payroll calculations must be correct, and the system that you use must be reliable!

It’s your responsibility to make sure everything is correct, and that both your employees and HMRC receive the right payments, at the right time.

Otherwise, you could end up with hefty fines, and some very fed-up staff.

What information do I need to set up a PAYE scheme?

Whether you decide to register for PAYE yourself or get an accountant to do it for you, there’s some information you’ll need:

• Company name (or business name if you’re a sole trader)
• The company director’s full name and NI number
• Company Registration Number (CRN)
• Nature of the business
• Company unique taxpayer reference (UTR) number
• Business address
• Number of employees
• First payday

Once you register online for the PAYE system, you should get a PAYE reference in the post along with an Accounts Office Reference.

This will be sent out to the address your business is registered to, and usually takes around 5 working days to arrive.

What are the benefits of using an accountant?

Your working day is busy and frankly, you just want to get on with what you do best. By handing over all the fiddly bits to a specialist, you can save time that’s better spent growing your business – but do you actually need an accountant for your business?

Getting the details right

Accountants have seen it all before – many, many times. They’re experts at completing and submitting tax forms and know exactly what HMRC is looking for.

There’s also far less chance of expensive errors that can hit you hard in time and money.

Cutting your tax bill down to size

When you submit your tax return, it’s not just about ticking a few boxes and checking figures. There are lots of ways you can (legally of course) reduce your tax bill through tax breaks and reliefs.

Some of them you’ll probably be aware of already, but many of them you won’t. Any accountant worth their salt will help you make sure that you don’t pay more tax than you should.

In fact, the savings you make can often cover the cost of using an accountant in the first place. You also don’t need to spend your time trying to keep up with ever-changing tax legislation.

General business advice

A decent accountant will often be in the best position to offer tailored advice that suits your growing business. They’ll likely have dealt with similar businesses before and will have in-depth knowledge of your finances.

There’s lots you can ask your accountant to do for your business. Having the chance to bounce ideas about and discuss things with your accountant is also really important.

They can offer valuable support and give the kind of objective feedback that’s hard to find elsewhere. And if you’re struggling with something that your accountant can’t help with, there’s a high chance they’ll know someone who can.

Find more tips and advice for your business on our website, or tap into our guide on hiring the right accountant.

The post Do I need an Accountant to Register for PAYE? appeared first on The Cheap Accountants.

Our guide goes through five of the most common financing options for businesses. We’ve also listed potential pros and cons of each, but these might vary from business to business.

Business bank loans

Around 30% of UK SMEs have a bank loan or overdraft, according to the British Business Bank.

The amount you can borrow, along with the terms and interest rates vary massively, so always do your homework. Like personal loans, business loans can be unsecured, or “secured” against an asset.

It’s important to remember that if you don’t keep up repayments on a secured loan, you could end up losing the asset it’s secured against.

Unsecured loans are less risky for you, but riskier for the lender, so you may need some form of payment guarantee. Interest rates on unsecured loans are also often higher.

Pros:

• Usually fairly quick to set up
• You keep full control of your business
• Fixed repayment rates so you know exactly how much you’re paying back every month

Cons:

• Late or missed payments will incur charges that increase your monthly repayment
• If you default on a secured loan, you risk losing your assets
• Banks will make checks that could affect your credit report. You could also really damage your credit report if you don’t keep up repayments.

Small business grants

There are lots of schemes run by both public and private agencies across the UK offering grants to businesses of all shapes and sizes.

The main draw of a business grant over a loan is that it doesn’t have to be paid back. But knowing exactly which grants are available, what the criteria are, and how to apply can be a bit of a challenge!

A good place to start is your local council or the Find Government Grants page of the Gov.uk website.

Pros:

• Grants don’t have to be paid back, so no debt
• Many grants come with some form of free mentorship, giving advice and support about running and growing your business
• Your credibility could get a boost as it shows potential customers and investors you have a serious business that’s worth investing in.

Cons:

• You’ll likely find there are some restrictions on what you can and can’t spend your grant on
• Many grant providers split their funding across several businesses, so you might not end up with the full amount you were hoping for. Competition for grants is always pretty stiff too.
• Some grant providers will only give you a grant if you can match it with your own money to invest.

Crowdfunding

Crowdfunding is where you pitch your business idea on a crowdfunding platform like Crowdfunder or social media and ask customers or investors to invest in you. Typically, rather than a few investors who contribute a large amount, you’ll end up with a large number of investors investing fairly small amounts each.

Pros:

• It’s a great way to start building a loyal following, where investors can get involved right from the beginning
• It’s usually very easy (and cheap) to set up
• Crowdfunding can mean you raise the funds you need really quickly, particularly if your campaign goes viral
• You can set your own funding targets and change them as needed.

Cons:

• Crowdfunding is all about effective marketing which can require a lot of time and effort to get right
• When it comes to crowdfunding there really are no guarantees. Even if you put together a super-duper campaign, it might not catch on. Plus, if you don’t hit the target, you may have to pay back any investors.

Angel investment

Think of the TV show Dragon’s Den here! Angel investors are usually successful, highly experienced investors at the top of their industry. Win them over and you could end up with a sizeable investment in your business (although yes, they tend to want to sizeable stake in it too).

Once you’ve pitched your idea to an angel investor, and the investor likes the look of what you’re offering, you can negotiate what they get in exchange. Which is where it can get a bit eyewatering.

Pros:

• An investment doesn’t normally need to be repaid like a lone does (although some investors will offer a buy-back option, where you can buy the shares back in a few years).
• Securing an angel investment doesn’t require the payment of any charges or fees
• This is the chance for some serious kudos. Angel investors are usually well known in their field which can really boost your credibility (helping to attract more investors later)
• The knowledge and experience your angel investor brings can make a huge difference to your success, particularly when it comes to plans for growth.

Cons:

• Angels expect to play an active role in your business, with a big say in how their investment will be spent
• Investment is usually made in exchange for a stake in the business, which means less for you.

Venture capital

Venture capital (VC) is similar to angel investment but instead of investing their own money into a business, venture capitalists will invest on behalf of venture capital firms. This means the money itself can come from a number of sources, including public and private pension funds, corporations, foundations, and wealthy individuals.

Venture capitalists are also looking to invest much larger amounts, often into the millions of pounds. This means they’re only really interested in businesses with extremely high growth potential in fast-paced areas.

Pros:

• As with angel investors, VCs bring with them a huge amount of knowledge and expertise to delve in to
• No need to repay the investment
• Access to a substantial amount of funding

Cons:

• Like other forms of investment, Venture Capital investment means you own less of your business
• Pitching is seriously hard work and competition is tough. Your pitch needs to be really polished with a solid business plan behind it
• Some companies can’t scale up as fast as a VC wants them to so it’s best to be market-ready with a highly tuned product or service.

Don’t forget, most funding options are a form of income, and any repayments are a liability – so you’ll need to show them in your bookkeeping! Find more tips and advice for your business on our website, or learn more about hiring an accountant.

The post What Funding Options Are Available for my Business? appeared first on The Cheap Accountants.

Sole traders, for example, submit a Self Assessment tax return to pay Income Tax on what they’ve made. Limited companies send Company Tax Returns so that they can pay Corporation Tax on their profits.

But what about when no profit is made? What happens when a business is operating at a loss? In this blog post, we’ll explain how it all works to help you remain tax-compliant at all times.

Do I need to submit a tax return even if I don’t make a profit?

Yes, even if you make a loss during a financial period, you still need to send a tax return for it so that HMRC know!

Despite their sometimes-scary sounding letters, HMRC can’t actually read minds, and will assume you have tax to pay unless you submit a tax return saying otherwise.

What if my business has stopped trading?

You won’t need to submit a tax return anymore if you cease trading and de-register the business, although you will need to submit returns up until the end date of the business. This indicates to HMRC that you have no plans to make any more taxable earnings from that business in the future.

You’ll also need to make sure you de-register the business with HMRC, so they know what time period the final return for that business should cover.

Will I get any money back if my business makes a loss?

Apart from the fact that you have to, submitting a tax return to show HMRC the loss you made still has its uses.

You might be able to carry the loss back

Businesses pay tax on the profits that they make, but this amount can change from year to year – sometimes quite a lot.

If you make a profit one year and a loss the next, you might be able to carry that loss back into the previous financial period. This is good because:

• Carrying a loss back means you can offset it against those profits.
• This reduces the amount of profit in that period, which in turn reduces the amount of tax that’s due.
• If you’ve already paid your tax bill for that period, offsetting this year’s loss against it means you can claim back the difference as a rebate.

Or maybe even carry the loss forward

Instead of carrying the loss back into a previous financial period, you may also have the option of carrying it forward into a future tax year.

The direction of time travel might be different here, but the principle remains the same. Carrying a loss forward means it can potentially be used to reduce next year’s upcoming tax bill, and with various rising costs, every little really does help.

So, in other words, submitting a tax return even when you’ve made a loss can be a nifty little cost-saving exercise, not just a legal obligation.

For more detailed information about carrying losses backward or forwards into alternative accounting periods, visit the government website. There are specific rules and regulations that you’ll need to be aware of if transferring a loss for tax benefits is something you plan to do.

Find more tips and advice for your business on our website, or tap into our guide on hiring the right accountant.

The post Do I Still Send a Tax Return if I Made a Loss? appeared first on The Cheap Accountants.