What is the sugar tax?

The sugar tax – or the Soft Drinks Industry Levy (SDIL) to use its proper name – is a tax on pre-packaged drinks that contain added sugar.

It aims to function as a kind of deterrent, encouraging drink manufacturers to reformulate high-sugar beverages in order to avoid paying the tax.

What does the sugar tax apply to?
There are also certain exemptions to be aware of though, so the sugar tax won’t apply to:

• Drinks with less than 5g of total sugar per 100ml
• Pure fruit and vegetable juices
• Alcohol-free beer and wine
• Powdered drinks

Pre-packaged milk-based drinks like bottled milkshakes and coffees are technically exempt for now, but this is also set to change from January 2028, including for plant-based alternatives (such as oat milk) with added sugar.

What this doesn’t include, however, are “open cup” milkshakes and coffees prepared in places like cafés, bars or restaurants.

Who pays the Soft Drinks Industry Levy?

The sugar tax applies to manufacturers and importers of pre-packaged sugary drinks, meaning retailers don’t pay the tax directly. That doesn’t mean they won’t feel the effects though, and any business selling sugary drinks is likely to deal with higher costs from their suppliers as a result.

Smaller manufacturers (who produce less than one million litres of drinks above the threshold per year) are exempt from having to pay the tax.

How much is the sugar tax?

The tax basically works on a two-tier system, with the rate of tax depending on the exact amount of sugar contained within each drink.

The levy currently applies to drinks with added sugar that contain more than 5g of total sugar per 100ml. For 2026/27 the sugar tax rate is:

• £1.94 per 10 litres of any drink which has between 5g and 8g of sugar per 100ml
• £2.59 per 10 litres of any drink which has 8g or more of sugar per 100ml

From January 2028, though, the minimum threshold for the lower rate of sugar tax will be lowered from 5g of total sugar per 100ml to 4.5g of total sugar per 100ml. Manufacturers will need to reduce sugar levels by this date if they wish to avoid paying the tax.

How will the changes impact my business?

If you’re a manufacturer the you pretty much have two options: reformulate your product so its sugar content is below the lower threshold, or accept that you’ll have to pay the tax. Either way, the cost is high, and so you’ll likely have to pass it on to customers by way of higher prices.

Companies that choose to pay the tax could spend up to £259,000 a year depending on what tier they’re in.

Sugar tax and smaller retailers

If you’re a small business that sells pre-packaged sugary drinks, you could find yourself being charged a lot more by your supplier. This means you may find yourself having to raise prices in order to try and offset the cost without eating into your own profits.

A bigger chain like Starbucks or Costa is more equipped to deal with higher taxes, whereas independent operators with a select number of locations are more likely to struggle with tighter cashflow.

It’s well worth chatting to an accountant about this. They’ll walk you through the process and also ensure you’re operating in the most tax-efficient way possible, claiming everything you’re entitled to.

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

The post How Will the Sugar Tax Impact My Business? appeared first on The Cheap Accountants.

This rupture certainly isn’t helped by the many misconceptions surrounding the concept of outsourcing.

In this article, we want to clear a few things up by presenting some of the most common myths about outsourcing, then busting them with the facts so you can decide how outsourcing might help your business.

The myth: Outsourcing means you lose control of project management

Some people find the idea of working with external parties who aren’t part of the in-house team overwhelming.

You can see your colleagues sitting right in front of you. Why would you outsource to someone who might not even be working the same timezone?

For some, this suggests nothing but a loss of control.

The truth

Often, one of the most productive things you can do for your business as an owner or manager is open the door to others more proficiently skilled. Even if they are working six hours ahead or behind, from the comfort of their own home.

With technology working its magic, remote project management and collaboration between geographically distant teams in and external to the business has never been easier.

With the right systems in place, great communication, and the odd tool to help you out here and there, those you’re outsourcing to will simply become an extension of the team.

The myth: Outsourcing is something only big companies can afford

Plenty of business owners see outsourcing as a luxury that only big companies with lots of resources can afford. They see the cost of outsourced work as an added expense on top of the regular salaries and overheads – but what about ditching tradition?

The truth

Outsourcing skills or services can actually be a great way to spend more sensibly and help budgets stretch further.

For example: rather than employing a full-time marketing social media exec to write a couple of social media posts per week, dissolve the role in favour of a freelancer or agency who can do the same, for a fraction of the cost. Plus, you don’t need to pay any employer’s contributions for them.

The myth: Outsourcing causes risks with data and cyber security

Far too often we see businesses shying away from outsourcing due to fears around cyber-attacks and data breaching. We hear you, and you’re right to be concerned about the online security of your business, especially when working with external parties. Just don’t let that be what puts you off outsourcing.

The truth

Sure, if you’re not careful, working with external parties can compromise your data, but this is why contracts are useful. A freelancer or contractor is no more likely to result in a data protection breach than an employee.

The myth: Outsourced work isn’t as high quality as in-house work

Some believe that the best work can only be done by those operating from inside the business. Employers can find it difficult to process the idea that external professionals can do just as good a job as an employee.

The truth

Recruitment is important! This is how you hire, or use the services of, good people who are dedicated to doing the job well. People are motivated in different ways, so one employee might be just as switched on as the next freelancer.

When you outsource to somebody, you’re buying into a specific, fine-tuned skillet that’s been honed. Their expertise can take you to the next level.

Sometimes, full-time employees can become generalists spread thinly, with fingers in a number of pies. The experts you outsource to, however, are masters of their craft. Plus, they’re well-versed in getting to know a business’s brand, tone of voice, culture and identity at super-speed.

Wondering how outsourcing skills might impact your business finances? Use our handy tool to ask a tax-related question for free and let our experts give you a (generous) nudge in the right direction.

The post Dispelling Common Myths About Outsourcing appeared first on The Cheap Accountants.

In some cases this can be where Debtor Protection Insurance swoops in to save the day. In this article we explain what this type of insurance covers, and who might benefit.

What is Debtor Protection Insurance?

Debtor Protection Insurance is a type of insurance cover designed to safeguard a business against customers who don’t pay their debts, or who cease to trade before they’ve settled an outstanding balance.

It enables businesses to insure themselves against the non-payment of invoices but more importantly, protect against the consequences they would otherwise have to face at the hands of customers who won’t – or can’t – cough up the cash.

It also offers reassurance in a situation where your business has to spend money on services or materials upfront in order to carry out work for a customer. If the customer ceases to trade before the work has been carried out, you run the risk of losing a lot of cash and swallowing up valuable finances for nothing.

The benefits of this type of insurance cover

So, why do so many businesses choose to fork out for Debtor Protection cover? Well, because:

• It helps maintain cash flow when customers fail to pay money owed, or cease to trade
• It helps support business-as-usual, even when you are struggling with late payments
• Generally, it tends to be a low-cost, affordable service (so well worth the investment)
• Many services cover both UK and overseas debts
• Gives you reassurance and peace of mind so you can concentrate on more important things

How does it work?

If you invoiced a customer and they fail to pay you, Debtor Protection Insurance means any financial loss can be absorbed by your provider. You won’t have to suffer the fallout of the financial blow yourself.

In terms of how payments are made, how long it takes to fulfil a claim and other granular details of the process, you’ll need to ask each individual insurance provider as this can vary from policy to policy.

Who needs this type of cover?

Debtor Protection Insurance is something businesses of all shapes and sizes can benefit from. It’s particularly useful for small businesses and start-ups who need to keep an eye on every single penny that goes in and out of the accounts.

For larger, established businesses with a more solid cash flow, late payments might not be such a pressing matter, so insuring debtors may not be top of the priority list. It’s still best practice if budgets permit.

How much does Debtor Protection Insurance cost?

You won’t need us to tell you that the cost of business insurance can vary quite significantly from provider to provider. That makes answering this particular question a little tricky and for that reason, we suggest doing your own research to find out.

How much you pay for your Debtor Protection Insurance cover will depend on a number of variable factors such as how old your business is, your typical monthly turnover, how much is owed to you in invoices, your history of bad debt, as well as any information you provide about outstanding aged debtors.

As with any insurance cover, it’s always a good idea to do your homework and shop around before signing your name on any dotted lines.

Get a few quotes and go through all of the small print with a magnifying glass to ensure you’re working with a reputable provider who will be able to protect your business when it comes to the crunch.

 
Looking for more support with your business finances? Use our resource centre to find cheap accountants and more business support.

The post Should I Get Debtor Protection Insurance for my Business? appeared first on The Cheap Accountants.

From April 2026 the hourly rate for over-21s will rise by 50p to £12.71, with workers aged 18-20 seeing an 85p rise to £10.85, and under-18s and apprentices getting 45p more – going up to £8.00 an hour.

While these changes are undoubtedly positive for employees, leading to a better work environment – they can put a strain on small businesses with tight profit margins, significantly increasing their expenses.

In this article, we’ll explain the key differences between the National Minimum Wage and the National Living Wage and also look at some strategies to help you cope with employment costs in your business.

What is the National Minimum Wage?

The National Minimum Wage is the legal minimum rate of pay UK employers must pay most workers. It applies from the compulsory school leaving age and is set at different levels depending on age and employment status, including apprentices.

Employers are legally required to ensure eligible staff are paid at least the applicable minimum wage rate for their category of work.

The specific rate a worker is entitled to depends on their age group and whether they are an apprentice or not.

What is the National Living Wage?

The National Living Wage is the highest rate within the UK minimum wage system. Despite its name, it’s not directly linked to the actual cost of living. Instead, it’s set as a proportion of median earnings across the UK workforce.

The National Living Wage currently applies to workers aged 21 and over, but it doesn’t apply to those in the first year of an apprenticeship.

Minimum wage vs National Living Wage

In short, you have to pay workers at least the National Minimum Wage or the National Living Wage.

How do you know which one, though?

Again, it depends on the age of the employee and whether they are an apprentice (as different age bands apply). This article explains the differences and what rate applies in more detail.

There’s also the Living Wage (or Real Living Wage) to be aware of. Not to be confused with the National Living Wage, this is voluntary and based on the actual cost of living at the time, reflecting what people need to cover the essentials.

Around 16,000+ UK employers are currently accredited as Real Living Wage employers, benefitting over 490,000 employees. It also benefits businesses too – with 94% of accredited employers stating this.

How are small businesses affected?

A minimum wage rise often hits small businesses first through higher labour costs. Even a small hourly increase quickly adds up, pushing up monthly overheads.

For example, a café with six staff working 30 hours a week would pay about £90 more weekly after a 50p per hour rise – that’s nearly £4,700 a year before extra costs like National Insurance and pensions going through PAYE. For businesses with tight margins, that can make the difference between making a profit or a loss.

Labour-heavy sectors like hospitality, retail, and care feel it most. Businesses may cut overtime, rethink staffing during quiet periods, or raise prices. Over time, the pressure can also affect hiring plans, expansion, and overall growth.

What can small businesses do to adapt?

Like any external factor affecting your small business, identifying issues and adapting to them early on can create more breathing room.

Restructuring is perhaps the most obvious approach, and this involves things like consolidating roles and streamlining processes in an attempt to cut back on spending. It’s not always the most appropriate course of action though, especially if the type of work you’re involved in demands a minimum number of staff on duty.

Alternatively, you could consider outsourcing, which is where you delegate certain tasks to professionals outside the business (e.g. freelancers or an agency). This approach could even be paired with the introduction of new automations to help offset the impact of increased labour costs.

Are there other ways to save money?

Thankfully, there are!

Some employers can use the Employment Allowance to reduce their National Insurance bill by £10,500 each year.

In order to qualify, you need to have at least one employee earning more than the £5,000 Secondary Threshold for National Insurance (or at least 2 directors if you don’t have any employees).

What’s more, you don’t need to be paying more than £10,500 to qualify, either.

If you’re unsure about any of this, an accountant can walk you through the process and also ensure you’re operating in the most tax-efficient way possible, and claiming everything you’re entitled to.

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

The post Minimum Wage Rises: What Can My Businesses Do to Stay Afloat? appeared first on The Cheap Accountants.

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.

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.

Outsourcing can do more more than just save you money, though. In this article we’ll look at the benefits of outsourcing tasks, and how to find freelancers to do the work.

What is outsourcing?

Outsourcing work means specific business tasks or functions are given to external service providers (usually freelancers) to handle, rather than the work being completed in-house.

It often gives you more choice and flexibility, allowing access to specialist skills if and when you need them.

Different types of outsourcing

There are actually a few different types of outsourcing to be aware of, such as:

• Outsourcing key business-related functions like marketing
• Business Process Outsourcing (BPO) (for example, payroll or customer support)
• Information Technology Outsourcing (ITO)
• Knowledge Process Outsourcing (KPO) – usually highly specialised functions such as accounting or research

Why outsource?

Like anything, there are pros and cons to outsourcing. It can be more cost-effective than hiring a full-time employee, particularly if it’s only for a short-term project.

You won’t need to worry about additional costs or responsibilities (like making pension payments and National Insurance contributions, or arranging Employer’s Liability Insurance).

It can also be faster. Outsourcing a task to someone who specialises in that specific function is likely to mean they’re highly experienced and able to be very efficient.

More broadly, outsourcing gives you access to a large range of skills, many – or even most – of which may not be available to you in-house.

Can I outsource for long-term projects?

Lots of businesses outsource tasks on a long-term basis – such as accounting or legal services, or you might have longer projects which you need help with. Just be careful around the IR35 rules if you do hire a freelancer who comes to sit in your office every day as if they were a regular employee. It can muddy the waters around disguised employment, and that can have tax implications for both of you!

How do I find freelancers?

Most online job sites will simply let you advertise for freelancers, but there’s always the option of looking on freelance marketplaces..

For example, if you’re looking for project-based services you can check out Fiverr, or if you’re looking for a few freelancers that work in a wide range of fields, you might look at Upwork.

These can be a great resource, providing access to hundreds – if not thousands – of available freelancers looking for work.

Most freelance marketplaces even allow you to filter for the exact skills and experience level you’re looking for.

How do I choose a freelancer?

Even once you’ve found some potential options, you still have to make a choice between them. Generally speaking, it’s important to consider things like cost and flexibility.

The idea of selecting the right expert to work with can be daunting if it’s not an area you’re familiar with. After all, that might be why you’re hiring them! It’s usually worth looking at their portfolio or other examples of clients and work, and asking for any testimonials.

Check their portfolio

If you’re struggling to decide whether or not to hire a particular freelancer, previous examples of their work can be very helpful, giving you a tangible idea of what they’d bring to the table.

While a more generalised approach to freelancing may work for those with a diverse set of skills, you typically want to pick someone who specialises in exactly the kind of work you’re asking them to do.

In other words, you want a specialist, not a generalist.

A solid portfolio serves as proof that a freelancer knows what they’re doing, whereas an absent one may be a sign that they’re relatively new (and therefore lack experience).

Look at their track record

In a similar way, testimonials from previous clients are a good sign a freelancer can be trusted to follow through and get the job done.

Hiring someone obviously comes with a high degree of risk, and so any reassurance you can get is vital. If a freelancer is able and willing to give you past case studies to look over, that’s an even better sign.

Get in contact with them

This is a good way to test how responsive they are. Simply shoot them an e-mail and see how long it takes for them go get back to you.

If they take a while, that could be a sign they’re either too busy or don’t see freelance work as a priority. But be fair – they might be away, or this might be a one-off! Either way, it’s a window into how your communication could go if you were to hire them.

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

The post How Outsourcing Can Help Your Small Business 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.

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!

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