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.

There are lots of considerations to make, and so, naturally, it’s easy to overlook things. One thing you may have overlooked is whether or not you would benefit from hiring an accountant.

To help you decide, we’ll break down the process of becoming a sole trader, your legal responsibilities, and how an accountant might help.

What is a sole trader?

Let’s start with the basics. A sole trader is just someone who runs their own business as an individual.

There’s no legal distinction between you and the business with this type of structure, so you’re personally liable for anything that happens. This is both good and bad – depending on your circumstances.

Considerations about being a sole trader

On the one hand, your personal assets might be at risk if the business struggles because there’s no distinction beween you and your work. On the other, you get to keep any profits for yourself once you’ve paid income tax and National Insurance. But, you’ll be taxed on them even if you leave them in the business.

It’s relatively easy to get yourself set up as a sole trader, with fewer rules and paperwork than if you were to use a different business structure.

Do I need to set up as a sole trader?

It depends! If you earn less than the Trading Allowance (£1,000) in self-employed income, you might not need to tell HMRC or pay tax on this. You can claim the Trading Allowance even if you have other sources of income, too.

If you do need to set up a sole trader business, make sure you inform HMRC by 5th October in your second tax year. A tax year runs from 6th April to 5th April the following year.

How do I pay tax as a sole trader?

Right, so… You’ve set up as a sole trader and you get more than £1,000 of trading income in a tax year. Now what?

Well, you’ll need to start submitting tax returns to HMRC so you can pay income tax and National Insurance on the profit you make.

What sort of tax return do sole traders need?

This depends on how much you make in total from self-employment and/or property income in a tax year. You’ll normally start by submitting Self Assessment tax returns.

Over time, you might also need to consider Making Tax Digital (MTD) Income Tax. As it continues to roll out, MTD Income Tax will gradually replace Self Assessment for some people.

Those affected will need to keep their income tax records digitally, and share this information with HMRC on a more frequent basis using compliant software.

• You’ll use MTD to report your tax from April 2026 if you earned more than £50,000 as a sole trader and/or rental income in the 2024/25 tax year
• In April 2027, the earnings threshold to start complying reduces to £30,000 earned in the 2025/26 tax year
• From April 2028, it’s £20,000 for the previous tax year

How do I make a tax payment?

HMRC will calculate your tax bill once you submit your return. There are many methods you can use to pay, including HMRC online, Direct Debit or bank transfer. If you work for an employer and have a sole trader business on the side, you may be able to pay your self-employed tax bill through your PAYE tax code.

The deadline to pay is 31st January each year (the same as the deadline to submit your tax return for the year). If your tax bill exceeds £1,000, you’ll need to make ‘Payment on Accounts’ – which essentially splits your tax bill in two halves. The second tax payment deadline is 31st July.

What are my other responsibilities?

You want to . This will be essential in helping you fill out your tax return, and will also help you to claim tax relief without forgetting about any allowable expenses.

Do I need an accountant?

Having an accountant can be extremeley reassuring. They’ll:

• Help you set up processes for keeping clear, up-to-date financial records – known as bookkeeping
• Advise how to optimise any tax reliefs and allowances, and make sure you’re claiming any allowable expenses
• Suggest software you can use for bookkeeping, or for MTD compliance if this applies to you

There are lots of different types of accountancy services available, so take your time to understand exactly what sort of support you need, and make sure your accountant is appropriately qualified.

Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

The post Do Sole Traders Need an Accountant? 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.

While there’s no legal requirement for you to have an accountant on board when you launch your business, their experience and expertise can be a valuable source of information, guidance, and yes – reassurance. So how do you know who to choose, and what can they do to support you? Let’s take a look.

What are the benefits of having a business accountant?

There are several reasons why having an accountant can be useful, including:

• They can help you save huge amounts of time on tasks that would take you much longer, such as tax and VAT returns.
• An accountant has the experience and knowledge to help you stay compliant with Companies House and HMRC rules
• Being in the industry, they’re a good source of information about grants, funding, and allowances suitable for your business
• A professional insight of your tax efficiency. An accountant can help you limit the amount of tax you have to pay, whilst ensuring you’re fully compliant at all times. That includes claiming for any expenses you’re entitled to, but worried about claiming for!
• Help with business planning and financial forecasting, so you can be as efficient as possible

Even brand new startup businesses, or those about to get going, can benefit from their money saving expertise. Don’t let this overwhelm you though. Whilst your business is still in its infancy, you could always enlist a professional on an ad-hoc or consultancy basis.

You might even look for an accountant who charges their services as a monthly fee, helping you to spread the cost.

Writing a knockout business plan

An integral part of all solid business plans includes information about its financial situation and future projections. Any lender or investor looking at your business plan is going to want to see these details. Having a qualified accountant help out with this is a great way to ensure accuracy and authenticity.

Forming your company

An accountant will be able to guide you on what type of business structure would be best for you, such as operating as a sole trader or forming a limited company. They will even be able to help you form and register the business correctly.

Starting as you mean to go on with good bookkeeping habits

Balanced books and organised accounts are key to maintaining healthy cash flow. Having an accountant will help you stay on top of your bookkeeping. Some accountants will even provide you with access to bookkeeping software as part of their services.

Help applying for loans and funding

Accountants are incredibly useful if you’re planning on looking for cash to help your business scale or develop in some way. They’ll be able to help you present your request and supporting information, as well as spot opportunities you might not think of.

Keeping you on the right side of HMRC

Experienced accountants are well-versed in HMRC deadlines and regulations. This knowledge will help to keep your business on the straight and narrow.

Things to look out for in a great accountant

Accountants in general have a lot to offer for a business. To really get the most out of paying an accountant’s fees though, consider the following points as a rough guide to help you choose one right for you.

• Experience working in your industry or sector
• A great reputation, and positive online reviews
• Use of online accounting software or a bookkeeping service to help you keep everything up to date (and without needing to visit them in-person if that’s not a requirement for you)
• Knowledge of the various tax laws and regulations that apply to your industry
• A strong rapport with you and your staff, because things tend to run much smoother when everybody gets along
• Attention to detail and vigilant analytical thinking
• Good communication skills, so you always feel kept in the loop

 
Still unsure about taking the plunge, but need some help? Ask a tax question for free!

The post How Do I Know If an Accountant Will Be Good for My Startup Business? appeared first on The Cheap Accountants.

So what should you consider before deciding to launch into a business partnership with someone? It’s obviously a big step to take, so we’ll start with the basics.

What is a business partnership?

In simple terms, a general partnership is a type of legally recognised business structure which allows a group of people or organisations to work together while sharing all the responsibility.

Partners can be individuals, companies, other partnerships, or even some kind of combination.

One key distinction is that, unlike a Joint Venture agreement, a partnership is required to register as a legal entity.

When should I choose a business partnership?

The main difference between a partnership and, say, a limited company is the way liability works.

As the owner of a limited company, you’re considered a separate entity. This means your personal assets are protected if the business can’t pay its bills, but it also means any profit belongs to the business (and not you).

In a partnership, on the other hand, each partner is jointly liable for everything that happens, and so you share the risks, but also the profits.

The fact that the responsibility is shared in a partnership is one reason you might choose this over being a collective of sole traders with a casual agreement to work together.

It really comes down to risk vs. reward and what you’re willing to put on the line.

What taxes do partnerships pay?

Although partnerships do have to submit SA800 tax returns, they don’t actually pay tax on the profits they make.

One of the partners is nominated to register the partnership with HMRC, and also submit its tax returns, but each partner is still responsible for paying tax based on their share of the profits. Individuals will include their share when submitting their own personal tax returns.

If a partner happens to be a limited company, the directors of that company will include their share of the partnership’s profits as another source of income on the Company Tax Return.

How do I register a business partnership?

You can register your partnership online or through the post using an SA400 form.

You’ll need to use a Government Gateway account to use the online service. You might already have one, for instance because you’re already registered as a sole trader or have set up a limited company, but it’s generally considered a good idea to create a separate Gateway account for the partnership to avoid any confusion.

In order to register the partnership, you’ll be expected to provide the following:

• The partnership’s name (either your own names or a designated one)
• The nominated partner
• The nature of the business
• A business address
• The details of each partner

As well as registering the business itself, each partner must also register with HMRC separately to let them know about the arrangement.

Do I need an accountant for my business partnership?

While enlisting the services of an accountant might not strictly be necessary for running a business partnership (or any kind of business for that matter), it’s certainly advisable.

That is, if you want to make sure you’re being as thorough and tax efficient as possible.

A qualified accountant can walk you through the process of registering, and you’ll be able to call on them for help or advice once your business is up and running.

Things to consider before registering a business partnership

We’ve gone through all the technical bits, so hopefully you’re now a little bit clearer on what a business partnership actually is and how it works.

But nothing we’ve covered so far helps answer the big question: should you go it alone or join forces with at least one other person?

Let’s look at the main pros and cons of being part of a business team.

Pros

They say great minds think alike. If that’s true, why not put those minds together and share the mental burden of running a business?

Not only does this allow you to manage the workload more efficiently, but it reduces the likelihood of mistakes being made, as there will be natural checks and balances in place.

The partners in a business partnership share a responsibility to make sure the business complies with its various reporting requirements, but they must also work as a team to reach the business’s goals.

You can share resources, contacts, knowledge, funding, and more. This side of running a business can be very stressful on your own, and so it can be nice to have “partners” who are in the same boat.

Cons

Whether or not you should start a partnership ultimately comes down to one crucial factor: finding the right person/people to do it with.

Getting this wrong can prove disastrous, and you’d actually be better off by yourself.

The reason for this is that while partnership-based businesses come with a ton of benefits (as outlined above), they can also be torn apart from the inside as a result of a rift forming in the partnership.

No one plans for this, but it can and does happen.

One way to guard against this is by creating a legally binding partnership agreement which details each partner’s rights and responsibilities in a very clear way.

While this is by no means mandatory, it’s certainly recommended and can really help if worst comes to worst.

 
Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

The post Should You Go It Alone or Start a Partnership? appeared first on The Cheap Accountants.

Thankfully, most business ideas won’t actually need a million-pound startup investment but for the majority of business ideas, you will need some cash to get it up and running.

Smart financial and business planning will help you estimate your startup costs with greater accuracy – which we’ll discuss in this blog.

How much do I need for my startup?

This is one of those ‘how long is a piece of string?’ kind of questions. It really depends. For instance, a freelance copywriter will have fairly low initial costs compared to someone who manufactures kitchen units.

New research revealed that starting a business in the UK costs £22,756 on average, including things like incorporation costs, accountants’ fees, legal expenses, HR overheads, and general administration.

This is just an average though, and the real number depends on things like the type of business you want to start, whether you need employees or business premises, and other things like your budget. For example, the ballpark cost will look a lot different for someone who has secured investment or has a non-repayable business grant at their disposal.

What’s the difference between start-up costs and start-up assets?

This is important to understand, because they all play a key role in setting your business up, but each cover different types of startup expenditure. You’ll need to know how the categories differ so you can include accurate information about them in your business plan.

Start-up costs

Start-up costs cover the money you must spend to get the business to a point where it can start trading. These are non-recurring expenses that are sometimes referred to as ‘sunk costs’ because they’re ‘sunk’ into your business venture, meaning they can’t be recovered.

Typical business start-up costs include:

• Registering the business with Companies House if you’re forming a limited company
• Legal fees, including trademarks and licensing
• Business insurance
• Accounting and bookkeeping fees
• Branding and website (including web hosting and business email hosting)
• Signage
• Business rates and rent if you have premises

Start-up assets

Start-up assets describe the equipment, machinery, vehicles and inventory (or stock) required to get your business trading-ready. Start-up assets are different to start-up costs (expenses) and are treated differently when it comes to your bookkeeping and accounting.

Common examples of business start-up assets include:

• Stock if you are selling physical products
• Office furniture
• Office supplies
• Tech equipment, such as a laptop
• Vehicles

How do I estimate my startup costs?

Once you understand the various things you need to launch your business, you can then start consolidating them and listing the costs.

Having this big-picture view of your startup costs will help you plan ahead and spend more strategically, so you don’t spend all of your money before you’ve even opened for business.

Here are 3 things you can do to help estimate your startup costs.

1. Figure out what assets and resources you need

The first thing you need to do is list everything you’re going to need to get your business ready to sell, including:

• Likely start-ups costs and start-up assets
• First-year fixed expenses – all of the costs you’ll incur in your first year no matter how much money the business makes (e.g. utilities, annual fees and salaries)
• First-year variable expenses – these are the costs that will fluctuate or change depending on how sales or production changes (for example, raw materials you need to buy for products that you sell)

2. Calculate the costs of these assets and resources

Itemise everything from the list above and put costs next to them. It might not be possible to pin down precise costs for absolutely everything, especially variable expenses, but you can aim to be as accurate as possible.

3. Create a financial forecast

Use your business plan and your financial figures to create a forecast for how much you think you will make in the first 12 months of trading, breaking this down by month. This will also help you work out how much you should be charging to cover your costs!

Subtract your variable and fixed costs from these monthly forecast figures to calculate your profit or loss for each month. From here, you can then forecast how much your business needs to make in order to break even and become profitable.

Should I get an accountant?

If you’re starting a new business and looking for some support with your expenses, a qualified accountant can be a huge help. They will be able to offer you invaluable guidance when it comes to things like:

• Nailing your financial forecast
• Writing your business plan
• Loans and other funding – particularly if you need to produce financial reports as part of your loan application
• Budgeting and protecting your cash flow
• Understanding your allowable expenses
• Claiming tax relief to cut your tax bill

Although costs can vary, there are some cheap and affordable accountants out there who won’t compromise on quality of service, and their expertise can make a big difference to your business – so it’s worth considering. Just make sure you choose someone who has the right qualifications for the job!

Navigating the startup of a new business can be complicated, especially where finances are concerned. Check out our accounting support hub for more help, or to ask a tax question for free!

The post How Much Money Do I Need to Start a Business? appeared first on The Cheap Accountants.

We’ll explore the steps you can take when pricing your services and share some tips on when to increase your fees and how to communicate this to your clients without losing their business.
 

How do I price my services?

How much you charge your clients depends on various factors like:

• Your experience and skill level – the more you have to offer, the more you can charge
• The industry you’re in – some might set day rates, e.g. a wedding videographer who tends to spend a full day on a job will have a day rate while a plumber who works with multiple clients a day may use an hourly rate when quoting for work
• Your geographical location – some areas of the UK warrant higher costs than others because it’s more expensive to live and work there, for example you can expect to pay higher rates in London
• What your competitors are charging – striking the balance between ensuring you’re getting paid enough but not outpricing yourself against the competition is key
• What your target customer can realistically afford – it’s better to have some clients paying a reasonable price than no clients at all

Choosing a pricing structure

There are several ways you can go about choosing your ideal price structure. Like asking other freelancers in your network for advice, or researching the typical rates in your sector and deciding where you stand amongst them.

If you want to take a more strategic approach to how much you charge your clients, here’s what you need to do:

• 1. Figure out the annual salary you’d like to earn (research what’s typical in your sector to ensure this is a realistic number)
• 2. Calculate your general living costs
• 3. Take into account how much it’s going to cost to run your business
• 4. Look into how much tax you’ll need to pay
• 5. Decide how many days you’d like to work each year and how many hours will constitute your working day

Once you’ve thought about these things, you can begin to figure out what you need to charge per day or per hour in order to cover your costs and make a profit.

You can then use these rates as guidelines if you need to devise a full project fee. Simply calculate how many days or hours you think will go into the project to calculate your fee.
 

When should I increase my prices?

Thankfully your initial prices aren’t set in stone, and it’s extremely common for new business owners to start off charging lower fees or provide discounts on selected services. So, your clients and customers will likely be expecting a price increase at some point.

It’s good practice to look at your finances on a semi-regular basis to ensure you’re keeping up with the cost of inflation, but that isn’t the only reason you may want to increase your prices.

For instance, your pricing might change as you gain expertise and experience, employ staff due to business growth, or you’ve registered for VAT and need to add it onto your products and services.

There’s a multitude of reasons to raise your prices. If you haven’t done this in a while, you probably need to! Have a chat with your accountant to ensure you’re not accidentally underselling yourself.
 

Increasing fees without losing clients

Broaching the subject of increased costs with clients is never going to be something you look forward to. It’s always going to be a bit of an uncomfortable exchange but how you handle it will have a huge impact on the outcome.

So, how can you bump your prices up without upsetting your clients or worse, losing their custom?
 

Be honest and human about it

Business is business at the end of the day, and raising your prices is never anything personal. But it’s important to go about it in the right way.

For example, you could set up a face-to-face meeting or a video call, to explain why you’re increasing your prices. Let them know when the price change will begin, and outline any other options.

We understand this is difficult if you have a large and varied client base, for example, if you’re a beautician. In this case, post your price changes on your social media channels, your website, and send an email out to your client list if you have one.
 

Give them plenty of notice

Whatever you do, don’t let their next invoice be how your client finds out about your cost increase. That’s a sure way to lose their respect and their custom.

Communicate the price updates to your clients a few months before you plan to implement them so they can factor them into their own financial planning.

You could even offer them additional ways to pay invoices to make the process easier for them and help them feel more in control.
 

See it from their side

It’s easy to forget about your client’s feelings in the midst of all this. While it’s a stressful time for you, it’s also going to have a knock-on effect on them.

When you ask your client to pay more, you’re also inadvertently asking them to consult their budgets and check they can still afford your product or service. So, it’s important to be patient and sensitive during this process.

We’ve got lots more advice on how to raise your business rates without losing clients if you need it.
 

Can you still invoice for a project that doesn’t go ahead?

From time to time, you might spend days, weeks or even months on a project that winds up not working out. So, if plans don’t go ahead – say a new product update doesn’t end up being delivered, for example – can you still make your client pay for the work you did up to that point?

It might seem like the answer should be a straightforward ‘Yes!’. But it really depends on the specific circumstances and whether or not you had a contractual agreement in place. It also depends on why the project wasn’t delivered and whether or not you are responsible in any way.

The kind of dynamic you have with your client will also play a part in how this type of scenario unfolds, which is why it pays (sometimes literally) to nurture your customer relationships.

If you do have a contract in place, check the terms of that and stick to those. If you don’t yet have a section in your client contracts about paying for completed work, even if a project doesn’t go ahead, now’s a good time to add one.

 
Looking for more expert business support? Head over to our info hub for more news and helpful resources.

The post How Much Can I Charge? appeared first on The Cheap Accountants.

The same study also showed that only one in four sole traders would choose hybrid working, with most preferring to work exclusively from home. With the many benefits that working from home (WFH) brings, it comes as no surprise that so many business owners opt to do so.

The advantages of being a WFH business owner include:

• Reduced overheads
• Tax benefits
• Control over where and when you work
• Better work-life balance

So, whether you’re thinking about setting up a side hustle to boost your income from home or maybe you’d like to swap your current employment for full-time financial freedom. Whatever the reason, here are some ideas for businesses you can set up from home and how to handle the formalities and legalities with HMRC.

What sort of businesses can I run from home?

Whether you’re planning to set up a side hustle or looking to take the leap into launching your own business, you may already have a clear idea of what you want to do. It might be the career you’ve been employed in for many years already or a specialist skill you’ve fine-tuned ready to freelance out.

If you don’t already have a clear idea of what you want to do and you just know you want to start a business from home, here are some popular examples:

• Virtual Assistant
• Recruiter
• Ecommerce business or online store (selling products online)
• Dropship business
• Content writer/copywriter
• Video editor
• Web/app designer
• Graphic designer
• Online tutor or in-person tutor
• Nail technician
• Hairdresser
• Dog walker
• Consulting services
• Professional services (e.g. accounting and bookkeeping)

However, this really is just the tip of the iceberg. With advancements in technology, more access to business support and resources, and remote working, opportunities for home businesses are more open and diverse than ever.

As with any kind of business, it’s about honing in on your skillset and then building a brand and an offering that will help you find your niche (your USP) and stand out in the market.

What makes a good home business idea?

In order for any business idea to be a good one, it needs to be well thought out and carefully considered. Setting up a business, especially if it involves leaving employment behind, isn’t a decision that should be rushed into or taken lightly.

It’s essential to thoroughly research your business idea to validate the need for what you’re offering. It’s crucial to know that there are customers out there who will want to pay for your product and service and it’s important to know how you’re going to set yourself apart from your competitors.

Validated your business idea? Great! Here are some other qualities that make a home business idea a good one:

• Low set-up costs: The lower your start-up costs, the less you’ll be out of pocket before you start turning a profit and the less risk your initial investment will be at.
• It doesn’t require anyone else: Ideally if you’re running your business from home, you want it to be something you can handle alone or with only the bare minimum of help. If you do employ staff, a remote working option might be worth considering to minimise costs.
• Little to no training is required: You want to hit the ground running and pick a skill or product you know you’ll be able to sell without having to invest time and money into training first. Or, if training is required, for it to be well worth the cost!

When you need to tell HMRC about your business

You’ll need to tell HMRC about your home or hobby business once you start earning more than the Trading Allowance, which is currently set at £1,000.

The Trading Allowance means you can earn up to £1,000 from self-employment or miscellaneous trading each tax year without telling HMRC or paying tax on those earnings. You’ll need to register your business and start paying tax once your income tips over that threshold.

To register for tax, you will need to choose a legal structure for your business as this will inform how you report your earnings and pay your taxes.

All structures come with their unique pros and cons, so it’s about finding the one that’s more suited to you and your business type, whether that’s Sole Trader, Limited Company or something else entirely.
 

Do you get tax relief if you work from home?

You’ll be glad to know that when you set up and run a business from your home, there’s tax relief available for using where you live for business-related activities. Known as allowable expenses, the costs are knocked off your income, and you’ll pay tax on the profits left over.

Typical allowable expenses if you run a business from your home can include:

• Electric, gas, heating
• Internet and telephone costs
• Gas and heating
• Maintenance and repairs
• Water usage if it is a substantial part of your operations- for example, if you’re a hairdresser

You can only claim tax relief on costs that are directly related to the running of your business, so you can’t claim all of your household bills – just the proportion related to your business activities.
 

Calculating your home business expenses

These are the two accepted methods for working out your home-working tax relief claim:

• Simplified expenses: Using HMRC’s flat rate to claim tax relief based on the number of hours you work from home each month.
• Cost method: Working out what the precise costs of working from home are, so you can claim these expenses more accurately.

Looking for more expert business support? Check out our accounting support hub for more help, or to ask a tax question.

The post Business Ideas You Can Start from Your Own Home appeared first on The Cheap Accountants.

Some business owners choose to embrace this and absorb the responsibility of bookkeeping and accounting themselves. Others choose to hire an accountant from day one, before their business is even set up and registered.

Basically, all businesses and the internal skillsets are different. Not every business will need an accountant, while others simply couldn’t run without one.

We’re here to help you determine your particular needs and what you can expect an accountant to do for you if you decide to hire one.

The benefits of being your own accountant

If you’re an accounting aficionado and feel you’re up to the task yourself, you can run your small business without a professional accountant. As long as you’re confident that you know your stuff, it’s a great way to avoid additional outsourcing costs.

Plus, when you’re that close to your books, you’ll get to know all the numbers like the back of your hand. This means you can make better-informed business decisions and quickly spot if any problems are about to arise (although regularly reviewing your financial reports will help too!).

Doing it yourself also means you don’t have to wait for an accountant to be available for meetings or tasks – you can simply crack on at your own pace and on your own timeline.

When to hire a professional accountant

If you’re not clued up on bookkeeping and accounting, that’s perfectly okay. Your specialist area is growing a business in your niche. However, it does mean you’ll need to hire a professional to take care of your accounting for you.

Even for those who have extensive financial experience, accounting can be complicated and almost always extremely time-consuming. Hiring an expert to take the weight off is often the preferred option.

The main benefits of hiring an accountant

The three overarching advantages that working with a qualified accountant brings to the table are:

• Money-saving: They will ensure you are as tax-efficient as possible, i.e. keeping your tax bill as low as it can be by claiming allowable expenses and applying for tax relief. They’ll also help you avoid costly financial penalties for incorrect accounts or missed deadlines.
• Timesaving: Leaving things like your bookkeeping, tax returns and funding applications in an accountant’s hands means you have more time to focus on running and growing your business.
• Stress-saving: Saving you time and money and ensuring you meet deadlines and avoid errors will give you more peace of mind.

All in all, an accountant is there to make your life easier and help safeguard your business from as many financial problems as possible – even in ways which might surprise you.

Plus, you don’t have to hire them for any specific amount of time. If you only want to hire them to file your tax return for you, you can. That way, it doesn’t have to be as much of a cost commitment.

What does an accountant do?

As we touched on above, an accountant is there to make sure you’re tax-compliant but also tax-efficient. This means making sure you’re abiding by all of HMRC’s obligations and that you’re running your business in the most tax-effective way possible.

Below are some of the things an accountant can offer your business.

Help manage your cash flow

When running a small business, cash flow can be unpredictable at times. Some months you’re flying and others you’re in the red or barely breaking even. That’s the reality, but an accountant can help you find ways to keep your cash flow stable.

Support your spending strategy

When you’re as close to your business as you are, it can be hard to see the wood for the trees. An accountant offers an outside perspective that will let you know when and where you can spend versus when and where you need to cut back.

Create financial reports and forecasts for you

Generating things like profit and loss statements and cash flow forecasts—just to name two—takes time, effort and skill. An accountant can do this for you while you carry on doing what you do best. You can then use this data and information to inform your business strategy.

Liaise with HMRC on your behalf

Communicating with HMRC is daunting, we get it. That’s why it’s such a relief to know your accountant is allowed to liaise with HMRC on your behalf if need be. They know all the correct terminology and the right things to say.

Help with your business plan

An accountant will be able to help you build your business plan and stand it in good stead when it comes to things like funding, investment and loan applications.

Top tip: look for an accountant who specialises in small businesses in your sector as they will understand the landscape in your area of expertise more comprehensively.

What does an accountant charge?

Accountancy fees vary depending on who you go with, where they’re based, and what services you need from them. The answer really is “it depends”!

Check out our separate article about accounting fees for self-employed businesses.

But I already use bookkeeping software…

Great! Using bookkeeping software is the perfect way to keep all of your financial information up-to-date and accurate.

However, it isn’t a direct replacement for an accountant – accounting and bookkeeping are two different things, despite going hand-in-hand.

Joining the forces of your bookkeeping software and a skilled accountant is one of the best things you can do to set your small business up for success.

On the hunt for a new accountant? Compare accountancy packages to get started.

The post Can I Run a Small Business Without an Accountant? appeared first on The Cheap Accountants.

We’ll guide you through your initial steps to becoming self-employed, along with when and how to inform HMRC.

What are the initial steps to becoming self-employed?

What is it that you want to do? Be a self-employed graphic designer, handyperson, or fitness coach? Sell handmade items on Etsy? The possibilities of working for yourself are endless so once you’ve decided, it’s time to get started.

Step 1 – Decide on a legal structure for your business

This is a huge decision to make, largely down to the fact that the structure you choose has a massive impact on the way you pay tax as a self-employed person. While it’s normal to assume ‘self-employed’ is a business structure, it isn’t.

But don’t panic, there are plenty of business structures to choose from, that will suit your business and how it operates. Two of the most common business structures are sole traders and limited companies.

What’s the difference between a sole trader and a limited company?

Though they’re both types of business structure, operating as a sole trader usually means less paperwork but potentially higher risk compared to setting up as a limited company.

Sole traders:

If you’re a sole trader you are the business. HMRC doesn’t differentiate between you and it. This has its pros – for example, you can keep all the profits you make after you’ve paid your tax and National Insurance, but it also comes with some cons.

A good example of this is liability. Because you are the business, you’re also personally liable for any debts your business incurs. It can cause problems if the business runs into trouble.

You don’t need to register as a sole trader until you’ve exceeded your tax-free trading allowance (which is currently £1,000), and depending on how much you earn, you may not need to pay tax at all. But you’ll still need to keep HMRC in the loop on the profits you’re making!

Limited company:

If you run a limited company, you’re separate from your business (so this means it’s a legal entity in its own right). Depending on how much you earn, this could be much more tax-efficient because of the way that company owners can pay themselves from the business. It’s also good if you work in a ‘high risk’ industry, because of your ‘limited’ liability. Any debts belong to the business, so your personal assets are safer.

The cons involve more paperwork, because if you do decide to start a limited company then you’ll normally have more reporting requirements to think about too, such as:

• Submitting a Company Tax Return and paying Corporation Tax
• Sending annual accounts and confirmation statements
• Reporting income that you personally take from the business, such as reporting a salary through PAYE, or submitting a Self Assessment tax return if you receive dividends

Alternatively, there are other business structures that you could use instead, such as a business partnership. Confused? Don’t worry – we have a complete guide on how to choose a business structure for your business.

Step 2 – Choose a business name

Deciding on a business name can be tricky, so take some time to think about what you’d like your business to be called. There are different rules depending on your business structure. For example:

• Sole traders and partnership can trade under their own or a business name, as long as it’s nothing offensive, and it can’t include ‘Limited’ or ‘Ltd’
• Limited companies must register a name in their own right, because they’re separate legal entities. It can’t be too similar to another company name or trademark, or you may receive complaints! You’re also banned from using anything that suggests an official relationship with the government or another body. The name must include ‘Limited’ or ‘Ltd’ after it.

Registering as a sole trader

To set up as a sole trader you’ll need to register for Self Assessment and submit tax returns to tell HMRC about your profits and pay tax on them. You can always swap to a different structure at a later date – for example, if the business grows and you find it more tax efficient to form a limited company after a while.

Setting up a limited company

Limited companies must be registered with Companies House, who will issue a registration number within a few days. You’ll need to confirm the names of the company’s director(s) and shareholder(s).

The company will normally be registered with HMRC at the same time, so it will be set up ready for Corporation Tax – just make sure you have access to your online account, and that it’s connected to any tax services you need. You’ll also need to register for personal tax (such as Self Assessment) separately – this isn’t automatic!

Step 3 – Create a Government Gateway account

If you’ve ever needed to check anything tax-related online, such as your tax code, you would’ve done it through Government Gateway.

It’s an online government portal, home to people both employed and self-employed that want to check anything HMRC related. To access it, you’ll need to create both a Government Gateway ID and password.

If you’ve never used it before, you’ll need to set one up to register your business and submit your tax returns. It’s also great for keeping an eye on your National Insurance contributions!

Step 4 – Opening a bank account for your business

Opening a business bank account is a legal obligation for limited companies, although sole traders can use their personal account because they ‘are’ the business.

If you’re the latter, we’d recommend opening a business bank account anyway, especially when it comes to completing your bookkeeping. It makes tracking everything much easier and minimises any mistakes that could cost you in penalties!

If you ever transition to a limited company further down the line, it’ll mean you’re already fulfilling your legal obligations too.

Step 5 – Write a business plan

You’ll need a decent business plan to set you off on the right track. It’s basically used to give an overview of your business, why you’ve come up with it, and what makes it stand out from similar businesses in the market.

Included in a business plan will be things such as:

• How the business will run
• A marketing strategy
• The logistics
• Who’s involved in the business
• How you plan to raise funds, as well as other plans such as how much you plan to make over the coming year or quarter.

Step 6 – Organise your financial records

Once you start buying materials and trading, you’ll need to begin keeping a note of your expenses and profits through bookkeeping – which is a legal requirement!

The type of records you must keep includes:

• All of your sales and income
• Business expenses
• PAYE records (only if you employ people)
• Records on personal income
• Any grants

It can be daunting at first, so get yourself sorted with decent accounting software which includes features to help save you time.

If you need more help, we have tips and advice to get your started. Need an accountant? Learn more about hiring one today.

The post How Do I Become Self-Employed? appeared first on The Cheap Accountants.