In this article we look at what financial support is available to self-employed business owners who work from home.

Types of tax relief to claim when working from home as a self-employed worker

There is a whole array of tax relief available for self-employed workers, including part of the running costs of your home if that’s where you work from. Claiming can help keep cash flow healthy as well as your stress levels at bay.

What’s absolutely crucial when claiming any expenses is that you only claim the portion which relates wholly to your business. We cover this further in our article about claiming allowable expenses!

Typical examples of costs you can claim when working from home

• A portion of mortgage interest on your home (not including capital repayments)
• A portion of your rent, if you rent your property from a landlord
• Gas and electricity costs (heat and light) for the rooms which you use when working for your business
• Telephone and internet connection (based on a split between business and personal use)
• Repair or maintenance of a room that you use specifically for your job, such as a home office. You might also be able to claim for a portion of repairs or maintenance on the whole property, such as the roof. You can’t claim on a room which you don’t use for your work at all (e.g. the bathroom).

Claiming for water bills when working from home

Unfortunately claims for working from home don’t include water bills if your usage is only on a minor day-to-day basis.

Some businesses, such as a car washing service or home-working hairdresser, do require significant water usage. In this case you’ll need to apply to your provider for a separate charge, and then claim back the cost.

Calculating expenses for working from home

There are two methods to choose from when it comes to working out your self-employed WFH expenses:

• Simplified expenses: Use HMRC’s flat rate to claim tax relief based on how many hours you work from home per month
• Cost method: Work out what it actually costs you to work from home, so you can claim your business expenses accurately

Let’s break each of these methods down in more detail so you can make an informed choice on how you want to calculate and record your working from home expenses.

Simplified expenses

This is often the quickest and easiest way to calculate your claim for business expenses if you work from home. HMRC set flat rates based on how many hours you work from home:

• 25-50 hours of business use per month: Claim £10 flat rate per month
• 51-100 hours per month: £18
• 101+ hours: £26

The number of hours of business use might vary from month to the next – so be sure to keep records! For example, if you worked 30 hours from home one month (£10 flat rate) but 60 hours another month (£18 flat rate), you could claim a total of £28 for those two months.

The downside is that the simplified expenses method can only be used by those who work more than 25 hours per month from home. So, if you run a side hustle in your spare time and spend fewer than 25 hours WFH, this might not be the best option for you.

Plus, it’s important to note that the flat rate scheme used for the simplified expenses method doesn’t include telephone or internet expenses. You’ll need to calculate your actual usage using the cost method in order to claim these.

It’s also worth working out your actual costs anyway. HMRC’s flat rates may not be enough to cover your actual costs, so check which method if most appropriate for your business!

Cost method

The cost method can seem a bit more complicated, because you’ll need to figure out what part of your household bills are incurred as a result of your business operations. This method is a good option if:

• You work from home less than 25 hours per month
• You want a more accurate representation of your actual WFH costs
• You need to work out and claim a portion of telephone or internet expenses (as these costs cannot be recorded using the simplified expenses method)
• Simplified expenses flat rates aren’t enough to cover the costs incurred

This method of calculation also helps you understand where the costs are in your business, which is always good news for budgeting and cash flow.

An example of the cost method in action

If you have a house with 4 rooms and one of them is your home office, 25% of your home qualifies as being directly related to the running of your business.

So, if your gas bill for the month is £100, you could claim 25% of this as an allowable WFH expense – £25.

If more than one person uses the space, you will need to divide any allowable expenses between you – you won’t be allowed to each claim the full amount!

Looking for further support for your business? Head over to our info hub where you’ll find a whole host of helpful resources.

The post How Do Self-Employed People Claim Expenses for Working from Home? appeared first on The Cheap Accountants.

Known as ‘appointing a paid agent’, it basically means delegating to a professional who will then liaise directly with HMRC about your finance and tax-related matters.

Who can be an agent for me?

Paid agents can be tax advisors, solicitors, or accountants, but you can authorise almost anybody to act on your behalf when it comes to dealing with HMRC, including family members and friends.

This type of agent is known as a ‘trusted helper’.

Although you have a number of options when it comes to who you can appoint as your agent to deal with HMRC, there are advantages to selecting your accountant for the role.

What can my accountant do as an HMRC agent?

An appointed agent can act on the taxpayer’s behalf for different types of tax, such as Corporation Tax, VAT, PAYE and Self Assessment – you might even have different agents for each one.

Simplifying processes and communication

Communication with HMRC can involve anything from queries and requests for information, to payment notices and deadline reminders. Appointing your accountant as your agent means the majority of this correspondence can be filtered through them.

This can make life a lot easier, leaving your agent to relay information to you as needed (and translated into plain terms, rather than scary-sounding HMRC speak).

Audit representation

If HMRC decide to audit your accounts or launch an inspection, your accountant will be able to make sure everything is in order, and talk you through what’s happening. An HMRC audit can be a daunting prospect, so having a professional in your corner can be a valuable source of confidence and support.

Compliance and strategy

As well as helping you stay on top of all your deadlines, your accountant will make sure you remain fully compliant with HMRC at all times.

They’ll also be able to help you optimise your tax efficiency, improve your financial reporting systems and save costs in line with all of the necessary rules and regulations.

Save yourself some time

As well as the tools of the trade that an accountant can bring to the table as your paid agent, there is also the overall benefit of significant time-saving – gold dust for business owners, right?

Having a professional at the helm of any back-and-forth with HMRC means you can focus on other things, like growing your empire. It also reduces the risk of any errors or confusion along the way, which, again, buys you back invaluable time and fends off financial penalties.

Keep stress to a minimum

All the above benefits combined make for a far less stressful relationship with your taxes and HMRC. Entrusting your accountant takes the pressure off you in exchange for peace of mind that your tax affairs are being dealt with by those who know what they’re doing.

How to appoint an accountant as an agent

The first thing to do is check your accountant meet HMRC’s standards for agents.

If you’re satisfied these standards are met, the next thing you need to do is provide your chosen agent with permission by appointing them through one of HMRC’s official authorisation processes.

Your agent will be able to guide you through whichever method is best for you.

Authorising your agent with a 64-8 paper form

A 64-8 form can be used to authorise an agent to deal with Self Assessment, partnerships, trusts, tax credits and people being paid via the PAYE system. It’s also used for VAT and for Corporation Tax.

You and your accountant can work together to make sure all the necessary fields are filled in before you send it back to HMRC to process.

Authorise access to your accounts online

Your accountant can apply for access to your tax accounts through their own HMRC Agent account.

This process will generate an agent code for each tax type they’re dealing with for you, which will be sent to your registered business address. Share these codes with your accountant so they can complete the authorisation on their end and start acting on your behalf.

Grant access through your tax account

If you’d prefer to grant your accountant access to act as your paid agent yourself, you can do this through your business tax account by signing in using your Government Gateway or One Login.

Note: You will need to be set up and registered for HMRC Online Services for this method of agent authorisation.

A ‘digital handshake’

This is where your agent sends a link for you to click that will digitally authorise them to deal with HMRC on your behalf.

What happens after I appoint an agent?

Once somebody, such as an accountant, has been appointed as an agent ready to act on your behalf, you can arrange for them to receive most of your correspondence with HMRC. There are a few exceptions to this, including your tax bills and any refunds you’re eligible for.

Removing an agent’s access

If you no longer wish for somebody to have access to your accounts or act on your behalf as an agent, there are two ways you can undo this:

• Go to your HMRC business tax account (if you have access to this) and remove or swap the agent
• Contact HMRC over the phone or via post, and they will be able to guide you through the agent removal or replacement process from there

Your responsibilities as a taxpayer

Appointing a representative agent is useful but you (the taxpayer) are still ultimately responsible for reporting and paying your own taxes.

That’s why it’s so critically important to have a communicative relationship with your trusted agent(s) and provide them with honest, detailed, and up-to-date information.

It’s also essential to review all documents and tax returns that are shared with HMRC on your behalf to ensure that your records are accurate and compliant. If they aren’t, you’ll be the one dealing with the repercussions, such as financial penalties, not your agent!

 
Looking for more business support? Head over to our info hub for the latest news and handy resources.

The post Can My Accountant Deal with HMRC for Me? appeared first on The Cheap Accountants.

Tracking these costs is a crucial (albeit sometimes complicated) part of running and growing your business – not least because it enables you to take advantage of tax relief on allowable expenses, so you only have to pay tax on your actual profits.

You might be wondering the best way to go about calculating and managing your business expenses and the good news is that you’ve got options if you’re a sole trader, and can work them out either based on the actual cost, or using a flat rate. The one we put under the spotlight here is the flat rate method.

Are flat rate expenses and simplified expenses the same thing?

Yes! The terms are sometimes used interchangeably, but they both refer to the same method of working out your expense claim. The name ‘simplified expenses’ was given to this method because it is, quite literally, a simpler way of doing things thanks to the easy flat rates that are applied.

How flat rate expenses are different to working out actual costs

Flat rate expenses are designed to streamline the process of submitting tax relief claims for a set amount of business-related costs each year. A good example of this is if you need to work out the cost of using a personal vehicle for work trips.

Using the ‘actual cost’ method means taking into account every cost you want to claim for, such fuel, insurance, and so on. Claiming a flat rate means you can multiply the number of miles you travel on your business trip by the flat rate which is set by HMRC for mileage.

Can anyone use the flat rate method?

Simplified flat rate expenses can only be used by sole traders or business partnerships that don’t have any limited companies as partners.

What can I use flat rate expenses to claim for?

There are three specific categories of business costs that flat rates can be used for if you’re self-employed:

• Living at a place of work
• Vehicle costs
• Working from home

We go into more detail about the rates and how to apply them below.

Flat rates for living at a place of work

If your business premises are also where you live, you can claim flat rate expenses based on how many people live at the property. The current rates are set at:

• 1 person: £350 per month
• 2 people: £500
• 3+ people: £650

Driving a business vehicle

If you have a vehicle that you use for business purposes (for example, you’re a mobile hairdresser who travels to meet clients), you can claim flat rate expenses on the miles you travel each year for work.

The flat rates for driving a business vehicle are currently:

• Cars and vans: 45p per mile for the first 10,000 miles you travel in the year, and then 25p per mile after that
• Motorcycles: 24p per mile

If you employ staff, they may also be able to claim these flat rate expenses, providing they meet the necessary criteria.

Working from home

Flat rate expenses are particularly handy for those who work from home for more than 25 hours a month. You can simply apply one of HMRC’s flat rates according to how much you use your home for work purposes or business-related activity.

The current flat rates for working from home are:

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

It is important to note, however, that flat rates don’t cover internet or telephone costs when calculating expenses for working from home.

What are the benefits of using simplified expenses if I’m self-employed?

You have up to four years to apply for flat rate tax relief, so if there are any periods you’ve missed, go back and make sure you’re claiming all the relief you’re entitled to!

Using simplified expenses to work out your claim for tax relief does have some advantages:

• Less time and effort spent calculating and recording expenses means more time to focus on growing your business and striking a healthy work-life balance
• When the process is quicker and easier, there’s less chance of making mistakes – which is good news for the accuracy of your tax return!

Is it the best method for you?

Although there are many benefits, it’s important to consider whether claiming expenses using the flat rate method is the most financially efficient option for you.

It might be quicker and easier, but if your actual costs are considerably higher, then applying this method could mean you lose out on tax relief you’re entitled to.

The government has a handy calculator that can help you check whether or not flat rate (simplified) expenses will help save your business money.

Other ways to calculate expenses

When you don’t want to use a blanket flat rate method, or when you can’t, you can use what’s called the ‘costs method’, or ‘actual costs’.

When working from home, for instance, it means you have to divide your household expenses by the proportion which relates to your business so that you only claim expenses relating directly to work use.

For example, if you have a property with five rooms and one of those is your home office, a fifth of your property is used for business-related activity. So, if your electricity bill for the month comes to £500, you can only claim £100 (a fifth) as an allowable expense.

That said, it may be the case that using actual costs allows you to claim the most tax relief and operate your business in the most tax-efficient way.

We’d always recommend asking an accountant to help you figure out what the recommended course of action is for you.

 
Managing expenses can be tricky, especially if you’re new to running your own business. Check out our accounting support hub for more help, or to ask a tax question!

The post What Are Flat Rate Expenses? appeared first on The Cheap Accountants.

We’ve spoken many times before about the benefits of hiring an accountant to help your business be as tax-compliant and tax-efficient as possible. That said, affording the cost of an accountant is another kettle of fish, especially if you’re just starting out or hitting some financial struggles.

So, if you can’t afford to add an accountant to your outgoings, what are your options? After all, your tax returns are still going to roll around each year regardless.

In this article we explore your options if you can’t currently pay to hire an accountant. Don’t worry, there’s still plenty of help out there to keep you on top of your taxes with as little stress as possible.

Reach out to HRMC if you have tax questions

If you have any simple queries, you can contact HMRC online or call them to see if they can guide you.

HMRC also provides a whole host of different online resources to help taxpayers of all shapes and sizes. On the website, you’ll find things like free webinars and videos, tax return guides and handy tax calculators, all designed to support you.

Explore HMRC’s Tax Help hub.

Get in touch with TaxAid

If HMRC can’t help you out, your next stop should be TaxAid. It might also be your first stop if you’ve ever tried to look at one of HMRC’s tax manuals! TaxAid gives free, independent and confidential advice to low-income UK taxpayers aged under 60 or who are self-employed. It aims to make all things tax easier to follow and understand as a business owner who can’t afford the cost of leaving it all to the professionals.

It also supports those who:

• Have physical or mental health issues
• Struggle with addiction
• Have undergone traumatic or life-altering events
• Have poor communication, numeracy and/or literacy skills

You can call TaxAid’s dedicated helpline if you need some assistance: 0345 120 3779.

Use free online guides, templates and tutorials

The internet is full of free resources you can use to navigate your self-employed tax and accounting responsibilities. It can also be a bit too full of advice, at times. Do your homework and only use resources and guidance from sources you know are reliable. It’s also important to make sure you consult resources from the correct country! The tax rules in the UK are different to those in the US, for example.

Take advantage of free accounting advice

Even if you can’t afford to hire an expert, Google has got your back. Or rather, the fantastic accounting firms out there that are open to sharing free advice and resources online to help people in your situation.

A great example of this is the Ask an Accountant feature offered by The Accountancy Partnership, where you can ask a qualified accountant a tax question for free.

Some firms will offer things like consultations to support you without having to commit to paying for the full service.

Take a course in accounting basics

If you think you may not be able to afford an accountant for the foreseeable future, it could be worth equipping yourself with the basic accounting skills you might need.

There are dedicated course websites like Coursera, the Open University, Udemy and edX but YouTube is also a great place to browse for free but valuable learning content.

A course may require an initial investment as some will be paid but there are plenty of free versions available. Even if it does come with a price tag, it could save you a lot of money in the long run. You might be able to claim the cost as a business expense, by deducting the amount from your total income when you submit your tax return to HMRC.

Use free bookkeeping software

Good bookkeeping habits are the foundations of accurate, timely and low-stress accounting, so finding free bookkeeping software will make your life a whole lot easier.

Don’t be afraid to ask for help

If you are in a position where you can’t currently afford the cost of an accountant, don’t be nervous about reaching out for help. There are so many other business owners in exactly the same boat, which is why there are so many brilliant free resources out there!

Don’t be afraid to speak to other business owners you trust about general advice or help with specific tax-related topics. They may be able to show you how to do something, help you understand something you’re confused about, or point you in the direction of some other great tools and resources they rely on themselves.

If you don’t have a trusted network of like-minded business owners, you could consider joining a business support group or look on social media platforms like Facebook or LinkedIn. There you’ll find communities of people just like you, with questions just like yours.

 
Managing your taxes yourself can be tricky, especially if you’re not familiar with the rules! Check out our accounting support hub for more help, or to ask a tax question for free.

The post What Can I Do if I Can’t Afford an Accountant? appeared first on The Cheap Accountants.

Taking money from the business as a sole trader versus as a limited company

As a sole trader, your business and personal finances are effectively one and the same. That means that any profits the business makes are simply yours to keep, so withdrawing money from the business is pretty straightforward in terms of accounting.

With limited companies it’s different. The business is a separate legal entity, so you can’t just take money out without following a set process. Normally you would take money out of the company:

• As a salary
• In the form of dividends
• To reimburse business expenses that you paid from your personal account
• As a director’s loan

As you can see, taking cash isn’t illegal, but it’s crucial that you have clear cut audit trails. Otherwise, mixing up personal and business transactions can easily get you in a muddle. In this quick guide, we’ll briefly look at why and how you might take money out of your business for personal use.

Drawing a salary from your business

Paying yourself a salary a common way to take money out of your limited company regularly. It’s up to you how much you pay yourself, but lots of directors tend to pay themselves a tax-efficient combination of a lower salary and then dividend payments.

As a sole trader you can still pay yourself a regular salary, but it’s usually not necessary to set up payroll if you’re the only person in the business. Instead, you could just take the money on a regular basis. You’ll still pay tax and National Insurance on all of the business’s profits, even if you don’t ‘withdraw’ them from the business.

Director’s loans in limited companies

As the name implies, director’s loans are just that; a loan the director makes to the company, or vice versa, which is recorded in their director’s loan account. It’s not a facility that’s available to sole traders, but sole traders can simply keep the profits from the business anyway. There’s no need to account for taking money in this way.

Directors might borrow money from the company for unexpected personal bills, loan money to the company to fund growth, or move funds back and forth for all sorts of other reasons. What’s important is that there are accounting and tax implications for using your director’s loan account, so it’s essential you record everything to show why money is moving between the company account and your personal bank account.

You should try to repay your director’s loan prior to the end of your financial year. If not, it may be seen as additional income, so you’ll pay extra tax, known as S455, on any balance still outstanding.

Receiving dividends

Another way to withdraw money from a limited company is with dividend payments. For a tax-efficient way of taking money out of your business, you’d be hard pressed to do better than dividends.

Dividends are paid from any profit left over after Corporation Tax and are often paid in addition to a salary. They’re usually taken at the end of the company’s financial year (so that you know for sure how much is available to take safely).

There aren’t any rules which prevent you taking them more frequently, but it’s a good idea to pay them at regular intervals. It reassures HMRC that you’re managing the company’s finances appropriately!

If the company has other shareholders, they should receive dividends at the same time. The amount everyone receives is based on the proportion of the company they own. This means there may be less for you to withdraw than it first appears.

Withdrawing cash for personal expenses

If you want to take money from your limited company, via cash or cheque for instance, to be spent on personal items, make sure you keep absolutely accurate, watertight records. You should be able to see at a glance when the cash was taken out, and how much was withdrawn.

At the end of the financial year, any outstanding amounts could well be deemed as income by HMRC, which will mean paying tax and NI on it.

Business expenses reimbursement

Any business expenditure should really be paid from your business bank account wherever possible. However, you might decide to pay for certain incidentals from your own account. For example, train tickets or a coffee, but you don’t have a company credit card.

As long as the expenditure is entirely for business purposes, you’re well within your rights to claim back the cost. It’s not new personal income and will mean you’re not out of pocket when the payment was for something business-related.

As long as you make it very clear what the expense is for, and record everything meticulously in your accounts, it will be fine!

Keeping things simple

At this point there are a few tips we wanted to point out around keeping your accounting straightforward.

Firstly, bear in mind that if you make withdrawals pretty frequently from your business account to your personal account, you or your accountant will probably end up spending more time on record keeping. This is why we really recommend only withdrawing cash if you absolutely have to.

Plus, don’t forget that banks and accountants must, by law, inform the National Crime Agency if they think any transactions are suspicious. It’s part of their duty to help prevent money laundering or fraud.

Withdrawing cash regularly can also make it trickier to get an accurate idea of your cash flow. Understanding exactly what cash you’ve got where makes it easier to meet your commitments to creditors and suppliers.

As a final point, it’s possible that any money you do withdraw from your business for personal reasons will attract certain interest charges or penalties for late payment on business expenditure.

Benefitting from personal liability protection

Setting yourself up as a limited company means protecting yourself against your company’s debts. In other words, you’ll never have to sell your own assets like your home should your business end up in financial hot water.

However, it’s worth pointing out that if your company does unfortunately start to struggle, avoiding any legal action could prove difficult if too much cash has been withdrawn for personal spending, and therefore funds aren’t available.

Presenting a clear, accurate financial picture

Healthy businesses grow, but financing that growth can be difficult unless you’re able to show a clear financial picture. Potential lenders and investors will always want to examine the business accounts very closely indeed. Too many personal withdrawals may make them uncomfortable, and suggest that the business’s finances aren’t be managed correctly.

Potential clients may also want to see financial stability when assessing suppliers – for instance if you tender for a larger contract. Again, this makes it well worth keeping personal withdrawals to a minimum, so your cash flow is accurately presented.

 
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 Move Money from a Business Account to A Personal Account? appeared first on The Cheap Accountants.

It’s crucial that you keep separate detailed records for each business so you can keep track of the income, expenses and profitability of each one.

We explore the essentials of claiming expenses to ensure you remain tax-compliant and efficient when running multiple businesses.

Claiming expenses from one business in another

The golden rule for claiming expenses is that they must be incurred ‘wholly and exclusively’ by the business. If you run multiple, separate businesses, you can charge costs between them – for example if one provides goods or services to the other.

Limited companies are separate legal entities in their own right, but even if you operate as a sole trader then it’s still best practice to keep the accounting records – and therefore expenses – separate for each business, even though there isn’t (technically) a legal distinction between each one.

Be very careful to make sure you don’t claim the same expenses twice!

It’s crucial you only claim the proportion of an expense which relates to the specific business activity if you’re dealing with any expenses relating to both personal and business usage, or across multiple businesses. For instance, if you’re claiming expenses because you work from home, you’ll need to make sure you only claim the bit which relates to your business activities, and that each business only claims the portion which relates to itself.

How do I move an expense from one business to another?

The idea of charging an expense from one business to another can be confusing when you own both, but think about them as if they were two totally separate businesses, with different owners.

With that in mind, you’ll just need to charge the other business as if it were any other customer that you provide goods and services to – usually by creating an invoice.

Treating each business separately

Along with keeping accurate records of every transaction and expense in each business, you’ll also need to justify why you’re claiming expenses between businesses. In short, you can’t just move money from one place to the other without keeping a record of why, and what for.

Failing to follow this process correctly could trigger alarm bells for HMRC because it could be seen as a way to reduce the amount of tax you pay overall, by moving expenses into the business where claiming them would have the most benefit. It can cause a lot of hassle and stress, and could even lead to a full audit of your financial records.

No matter which legal structure you use for your businesses, it’s important to treat each one individually, and keep their records separate.

Separate bank accounts

Having separate bank accounts for each business is a requirement for limited companies, but it will help any business structure make sure all expenses are tracked in the right place and avoid cross-contaminating funds.

Separate records

Each company’s expenses should be documented, categorised, and recorded separately to avoid confusion and overlapping information (e.g. transactions incoming and outgoing). That way, you can be certain that both businesses are operating compliantly.

Bookkeeping software

Look for accounting software that allows you to manage multiple businesses from one system. This streamlines the process of tracking and managing expenses for each business so there’s far less chance of error, omission, or overlap.

Fewer errors also mean less chance of overpaying tax by accident, so investing in great booking software is also a good way to protect your cash flow.

How an accountant can help you

To reduce your stress levels and the risk of mistakes, we’d recommend enlisting the expertise of a qualified accountant who can help you claim expenses for multiple businesses.

A skilled accountant will be able to help you understand which allowable expenses are deductible for each business and help make sure you’re maintaining proper documentation to support this.

Plus, they’ll make sure you’re operating in the most tax-efficient way possible, which includes ensuring you’re taking advantage of all applicable tax relief.

They will also familiarise you with the tax implications of each business structure (sole trader, limited company, partnership, etc.) if that applies to you. Different legal business structures have their own tax requirements, so it’s important to stay up to speed.

Find more resources and advice for your business on our website, or check out our guide to hiring the right accountant for you.

The post Can I Claim Expenses from one Business in a Different Business? appeared first on The Cheap Accountants.

Don’t focus on a franchise which needs minimal investment

As the old saying goes, you get what you pay for. The more well-established a brand is, the more likely you are to be successful promoting the business, but that does come at a cost.

The flipside of this is that smaller franchises might be able to offer more support. Every business is different so shop around for the set up which is most likely to fit your needs, rather than simply on price alone.

Missing out on support and mentorship isn’t really ideal as it’s one of the pros of opening a franchise in the first place.

Relying on your instincts

There will be a lot of people out there, successful entrepreneurs included, who will tell you to trust your gut and listen to your instincts.

While your instincts might be great, that doesn’t mean they should be your only basis for measuring a business decision. That’s a sure way to make a mistake and leave you disheartened with a failing franchise. Instead, base any business decisions on solid research and comb through the data available.

Poor choice of location

Just because a brand is doing spectacularly well in one place, it sadly doesn’t mean it brand will do well everywhere. Different areas might have different tastes, needs, and income profiles, so factor this isn’t your decision making.

Location is also an important part of your service and marketing. A retail store selling childrens toys might struggle in the middle of a business park. A garden centre specialising in fruit trees will probably need a car park rather than a city centre location.

Having a building in an obscure business park isn’t going to get you much business if you rely on passing traffic, though it might be fine for an online-based business.

In order to pick the right location you’re going to need to do a lot of research. It’s not a simple case of the place feeling right or having good facilities (although that’s important). You need to look at every possible angle, for example:

• What is passing traffic like?
• What are the other businesses around doing well/not so well?
• Is there enough parking space?
• Is it easy to get to via public transport?
• What’s the local recruitment pool like if you need to hire staff?

Going it alone

You started a franchise for a reason; so that the company had your back. Ignoring their advice or procedures when you don’t agree is unlikely to be in your best interests! You could end up harming the reputation of the brand, but you’re also missing out on their experience. Treat the relationship as a conversation, rather than simply following orders or going off-plan.

Being the first franchisee can be risky

Every organisation is different of course, but it’s often more risky to be the one who goes first. If you’re going to be the guinea pig franchisee for a brand, then it’s more likely you’ll both have a steep learning curve to deal with.

They won’t have the experience of supporting another business owner meet their expectations, and might not be prepared for the level of guidance they need to provide. Likewise, you won’t have other franchisees within that brand, so they’ll be your only contact. This isn’t necessarily an issue depending on what they’re like to work with, but it’s certainly something to be wary of.

Underestimating costs

Franchises can be expensive business, because you’re partially paying for the element of safety and support and also for the brand’s reputation. There may also be more than the franchise fee alone, including legal costs of getting the whole thing set up. You could end up with a nasty surprise if you don’t prepare for these.

Like with any business venture it’s important to have an emergency fund that you can fall back on should an unexpected cost or repair threaten to slow you down.

 
Running your own business as a franchise means you’re responsible for recording, reporting, and paying tax on your profits. Learn more about tax for franchisees in our article.

The post Common Franchising Mistakes to Avoid appeared first on The Cheap Accountants.

What are the advantages of using more than one accountant?

Why might a business owner choose to work with more than one accountancy firm at the same time? There are lots of reasons, such as needing specialist support in one area of the business, or to keep different businesses separate.

Tap into specific skillsets where you need them

Perhaps you operate one business as a sole trader, and also own and operate a limited company. You might want to delegate each of your accounts to experts in these areas.

For some businesses it can be more complicated than that. For example, you might need an accountant who deals with Capital Gains Tax to help you with one particular income stream, or someone who specialises in R&D claims.

Keeping your accounting and bookkeeping separate

Accountants and bookkeepers carry out different roles – some business owners prefer to assign these responsibilities to multiple firms or contractors.

Making the transition

Some business owners will overlap the firms they work with for a period of time, as they transition from one to another.

The benefits of sticking to one accounting firm

Looking at the situation from the other side of the fence, let’s now explore why using one accounting firm at a time might be the preferred option. These are only general points though. Every business is different so your needs might not fit neatly into any of these!

More well-rounded knowledge of your business

When an accountant has full access to every part of your businesses, they have a much more comprehensive picture. This, in turn, allows them to advise you on ways to be more tax efficient across the board, and help you make more savvy decisions around things like spending, cost-saving, investments and recruitment.

You can avoid paying double fees

When you only work with one firm at a time, you only have one invoice to worry about paying. Your accountant might charge you for each business (because they’re doing more than one set of accounts), but may also offer discounts if you sign up multiple businesses for their services. Accountancy fees can vary, so do your research!

A more streamlined process

As with most processes in life, when everything is all in one place, things seem to run a whole lot more smoothly. Sticking to one accountancy firm at a time will lighten both your cognitive and admin-based loads.

Stronger relationship-building

Investing all your time and energy into one accountancy firm or accountant will bolster your professional bond with them. That’s not to say, of course, that you can’t have great relationships with multiple service providers.

How to find the right accountant for your business

Whether you’re looking to use multiple accountancy firms or put all your eggs in one basket, it’s essential to do your homework before making any final decisions.

Here are just a few of our top tips for finding the right accountant for you and your business:

• Read plenty of reviews online: There’s nothing quite like reading through client-generated reviews (rather than company-created case studies) to see real opinions.
• Set up an intro meeting: If you come across a firm or accountant that you like the sound of, set up a call to get a better idea of whether you’re going to get along.
• Check out their client base: Investigating which customers a firm or accountant typically works with will give you more insight as to whether they’re the right fit for you. If they work with other businesses in your sector, for example, you’ll know they have plenty of relevant experience and transferable knowledge.

 
Compare accountancy packages, or ask a tax question for free!

The post Can I Use More Than One Accounting Firm at a Time? appeared first on The Cheap Accountants.

The cost-saving benefits of an either/or approach needs no clarification – only having to pay for one resource reduces your outgoings. It’s that simple, and it’s easy to see why this might seem like an attractive solution. But to make a good decision for your business, it’s useful to understand how bookkeeping and accounting are different, and what purpose each serves.

What is the difference between accountancy and bookkeeping?

Although bookkeeping and accounting both deal with a business’s finances, they do so in different ways. A simple way to look at it is like this: bookkeeping is just that – keeping the books up to date. Accountancy is about analysing, understanding, and reporting on this data.

What a bookkeeper does

Bookkeeping is the process of recording financial transactions and maintaining accurate business accounts. These are the cold, hard, numerical facts about what comes in and goes out of your business. It’s essentially the preliminary admin necessary for an accountant to do their job.

What an accountant does

An accountant will use the information which the bookkeeper records to improve the tax-efficiency of a business and support its financial health. They can help business owners make more money-savvy decisions, whilst ensuring everything is compliant for HMRC.

Can bookkeeping software replace an accountant?

The answer to this question largely depends on what you rely on your accountant to do for you. If you only enlist them to carry out financial admin and prepare your annual tax return then yes, in theory, you could do it all yourself using bookkeeping software.

However, if you were to really wring all possible potential out of your accountant’s expertise, you might find the answer to this question is a hard no.

Make no mistake, using bookkeeping software has an enormous number of benefits, including:

• Keeping all of your financial information in one place, improving access and organisation
• Remote access for multiple users when you choose a cloud-based bookkeeping software
• Using software that includes active error detection reduces the risk of mistakes in your records
• Save time on data-entry by connecting payment feeds directly to the software
• Automated reminders so you’re less likely to miss a deadline
• Minimising the risk of omission and human error

But bookkeeping software doesn’t have an accountant’s ability to spot areas where you can become more efficient in the way you run your business, or in the way that you pay tax. If you were truly working effectively with your accountant, you wouldn’t even consider sidestepping them for software alone.

If you can afford it, tapping into both resources simultaneously can help you more effectively as a business owner.

The benefits of having an accountant and bookkeeping software

We’ve touched on a few of the most common benefits of investing in great bookkeeping software above. But why do we recommend you still consider using an accountant as well? Ideally, the bookkeeping software you use will complement the work an accountant does for you.

Professional data analysis and insights

With access to accurate financial records (courtesy of excellent bookkeeping), an accountant will be able to dig into the data of your business accounts and offer insights accordingly.

Good bookkeeping software will have a range of comprehensive reports included, but if you’re not very experienced then you might find an accountant can help make sense of it all. These types of insights could be the difference between making your first million or operating at a loss for the next five years.

Better business decisions

An accountant will be able to provide you with valuable decision-making guidance by applying their expert risk analysis, financial forecasting and budget advice. Remember too, they see behind the scenes of a lot of other businesses!

Improved cash flow health

When you have professional data analysis, audits, risk analysis, and forecasting on your side, it stands your cash flow in great stead. Not only will this positively impact your current cash flow situation, you can also work with your accountant to plan ahead, mitigate pitfalls, and grow stronger as a business.

A buffer between you and HMRC

As well as insight into your financial profile, a good accountant will also offer representation in front of HM Revenue & Customs, if and when you might require it. It helps reduce some of the stress!

Our verdict?

When used in conjunction, bookkeeping software and the services of a terrific accountant are a force to reckoned with.

Without robust bookkeeping down to the decimal point, an accountant can’t possibly do their best work. Without an accountant on the receiving end of the information, there’s a ceiling on how useful even the most meticulous bookkeeping can be if you really want to maximise efficiency in your business.

 
Looking for some more support with your business finances? Compare accountants and learn more about bookkeeping software.

The post Do I Still Need an Accountant if I Use Bookkeeping Software? appeared first on The Cheap Accountants.

From selling the odd jumper that doesn’t fit you anymore, to running a business selling goods online, a whole spectrum of different scenarios might apply. Your unique circumstances will dictate whether you need to register with HMRC to pay tax.

We’ll go over the various rules and regulations around online selling so you can work out which compliance boxes to tick off.

What are the tax reporting rules if I sell on online marketplaces?

Due to the number of people using online marketplaces like Vinted, Depop, eBay, Etsy, and beyond to sell online, the marketplaces are legally obligated to tell HMRC about what you earn from selling through their platforms if you’re classed as an online trader.

These regulations don’t just deal with the sale of physical items. Providing services or renting out accommodation are also covered, so you might also be affected if you supply anything through the likes of Fiverr, Uber and Airbnb.

Am I classed as an online trader?

Online trading generally applies to those who sell with the intention of making a profit through selling things online.

This also includes those who buy items with the specific intention of reselling them on platforms like Vinted, Depop, eBay, and Etsy at a higher price. In HMRC terms you’re classed as an online seller if you:

• Make more than 30 sales
• Receive more than €2,000 (equal to around £1,700)

Being classed as an online trader doesn’t necessarily mean you’ll have a tax bill

Meeting the criteria above simply means you’ve hit the threshold for a marketplace to pass your details on to HMRC based on the sales you make through that platform.

It doesn’t necessarily mean you’ll need to pay tax on them. Likewise, being under the criteria doesn’t mean you won’t have to pay tax on your earnings! We’ll explain this next.

Do I need to register with HMRC as an online seller and pay tax?

You will need to register with HMRC and report what you get as an online seller if the total income you receive from self-employment or other miscellaneous activities is more than the £1,000 trading allowance.

This means you can earn up to the sum of £1,000 from self-employment or miscellaneous trading each tax year without telling HMRC, or paying tax on those earnings.

You can benefit from this allowance even if you earn money from other sources, such as employment. You could earn wages from a part-time job, for instance, and still use the trading allowance against the income you generate from a self-employment side hustle selling things online.

So, if you make 35 online sales, you might not necessarily need to pay tax on anything if the total amount you receive from them is less than £1,000.

What happens if I earn more than the trading allowance?

If the money you make is more than the £1,000 trading allowance, then you’ll need to register for self-employment and submit tax returns to HMRC.

It’s really important that you keep records of your sales so that you know when it’s time to register. And remember, you only get the allowance once in a year, not a separate allowance for each platform!

Keeping good records will also help you stay on top of your ecommerce expenses – that way you’ll be able to offset them against your tax bill.

Whatever your circumstances, you must make sure you’re doing everything by the book. Even if it’s just an honest mistake, missing deadlines or holding information back from HMRC can lead to serious trouble and hefty fines!

 
Understanding the rules and regulations around when to tell HMRC if you’re selling things online can be complicated. Check out our accounting support hub for more help, or to ask a tax question.

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