Limited company help - please!

[Fabpinky]

I have just started my own limited company and have quite a few questions, I'm hoping someone can help!

How and when do I pay tax - do I NEED an accountant or can I do it myself? Is there a form to fill out and send away, when do I need to do this by?

Do I pay tax on profit only or whole turnover?

How do I claim VAT back?
Can I claim VAT back on items I buy to make products? E.g fabric, thread which I then use to make a product which I then sell
Can I claim VAT back on getting my sewing machine fixed? Buying a new machine?

Can I claim VAT back on postage costs?

As I am only making a small profit it wouldn't be worth my while getting an accountant, so I am trying to get my head around everything and do it myself

Does anyone know what it's like to be a sole trader in regards to tax etc? Can I have a company name as a sole trader? And it won't affect my tax with my full time employment ?

@fabpinky what @kittikat and @clashcityrocker said, basically. You could end up with a legal set up that doesn’t really work for you. Either in being a bit sledgehammer/nut or in not being the most efficient way for you to receive income. Get some advice as it will make your life much easier down the line!

Go and speak to an accountant. Nobody can advise you on a forum without having the full picture and discussing all the pros and cons with you

@fabpinky I am registered as self employed and employed. I carry out my self employed activity in my own name. My self employed turnover is pretty much nil at the minute, so qualify for small earnings allowance re NI as self employed which saves £145 a year. At a very basic level, your self employment and employment income get added up. Then your personal tax allowance, tax already paid through paye, allowable business expenses for self employment, other allowances get taken off. Youoay tax on the remaining profits.

I was a sole trader for over 10 years. My husband still is. I also in my full time job deal with lots of sole trader sub-contractors.

You can have a business name but legally your cheques may say R. Good t/a Crafty Bits.

With regards to tax you phone HMRC tell them you are becoming self employed. They give you a UTR number & may request self employed NI contributions (but if you're not earning much you may be exempt. Then sometime after April you will be sent a letter telling you to full in a self assessment. You work out your profit (turnover minus allowable expenses which is where an accountant comes in as they know what you can & cant offset) & you submit it & pay any tax due by 31st January.

It's pretty simple unlike being a limited company with company returns, corporation tax PAYE or dividends etc etc.

In all cases though good record keeping is invaluable.

From my list above, as a sole trader you would have to worry about point 4 only - so much simpler.

I would however strongly suggest your point 6 (separate bank account) though. Makes record keeping more transparent.

Actually, yes, I'd agree with that!

Thank you, I will definitely be reassessing! You've been really helpful

Hello OP - I am a finance director, and, in my view, you don't need a limited company at this point. It may suit in the future when the business grows.

Limited company accounts are in a specific format, some of which will not be obvious to the casual observer.

An accountant will want to charge around £750 per year minimum for a company - whereas for sole trader accounts it will be less.

As PP have said, if profits are less than £40k you will be better off as a sole trader.

Hi Well done starting am considering myself. Did you register yourself or via a company. Am considering myself. Thanks

FrNath - I registered myself but definitely look at all of the comments on this post, they've been so helpful. I am going to close it and register as a sole trader!

Fab, try my accountants, they've been excellent. I found them on google looking for the cheapest remote working accountants I could find. They specialise in limited companies. Crisp Consultants or Crisp accountants or something like that. Google them, you'll find them. They will do everything for you.

United - thank you I'll take a look

DP set up as a company as he was doing some freelance web development on the side and his brother reccommended it, something to do with paying less tax. But I think that's if you're making a lot of money.
It was a right headache! So many reminders and obligations and I didn't know what any of it meant as it didn't apply to us. We were only earning £4k ish extra alongside employed wage.
Anyway after worrying myself daft over missing deadlines for paperwork I didn't understand I filled a form in to close the ltd company and just be a sole trader. Literally just fill self assessment in once a year to work out tax owed

Denperry - was it complicated closing it down? I've had a quick look and it said about doing returns to close it down but as I only opened it last week I was hoping for a quick exit!

The HMRC website is really informative and can guide you through all the processes.
I've recently become self employed and now have two people on PAYE plus various sub contractors on CIS.
I found all of the info I needed on the HMRC website and managed to do everything myself.
I use an accounting system called QuickBooks which is brilliant for small businesses, records all of your incomings + outgoings really easily!!
It only costs around £9 per month.
Don't be too daunted by everything, just research properly, all the jnfo you need is readily available online.
Good Luck with everything!

Agree you should operate as a sole trader as the administrative burden isn't worth it to operate through a company. Also, in the nicest possible way you have demonstrated a massive lack of understanding of how different streams of income interact with each other for tax purposes and you should really concentrate on your actual business work (which I don't doubt you are excellent at!) and leave the accounting and tax to someone who knows what they are doing.

I work in tax investigations and day in and day out I see people like you 10 years down the line who have not understood what they're doing and made a massive mess and caused themselves so Mich upset. Please just engage with a competent advisor.

Thank you all - I am going to go down the sole trader route definitely

You've all been so helpful I couldn't ask for more

OP - there are forms on companies house to close a company. As your's hasn't done anything yet, you should be able to close it for a fee of £10.

Type DS10 into google and that should give you the right form.

If you have paid to set up a limited company and have no transactions you could just leave it and all you have to do is file 'dormant since inception' accounts each year and a Companies House annual confirmation. All done online and cost £13.00 pa to Companies House. This means that you still have your Limited company if you decide to use it at a later date.

I too would just leave it and file 0 in case you need it later.
It's worth looking into and discussing what is best for you.
I went Ltd because some of the larger companies I work with won't deal with sole traders so it gains more work. But that depends what you do and who you work with. It also limits liability and protects the company name - again depends how important this is to your situation.

One good advice I had with the Ltd company is set someone else up you trust as Company Secretary with access to bank etc. If something happens to you and it's a one person company then it is difficult to administer and get money out / shut down.

Definitely get an accountant to explain to you Directors responsibilities etc.

Accounting-wise Quickbooks would be good for you. If what you are doing is really small scale, the free Wave Apps program is great (I use this myself)

I agree that you've had very poor advice setting up a limited company in the first place.

I'm a sole trader and have been for 10 years. Different field, but I have done lots of tax returns. DH also completes a tax return and he's on PAYE. You don;t need a separate tax code. At the end of the tax year you get a P60 from your employer stating your gross pay and deductions - you just fill these figures in the appropriate boxes on the online form. And add your self-employed income and expenses in other boxes. Form does the calculation for you, based on what you've paid already.

If it's a small, part-time business which isn't raking in lots of money then you won't pay VAT, don't need an accountant and certainly don't need a limited company.

Quite how you dissolve your limietd company and set yourself up as a sole trader instead though I'm not sure.

Also on accountants - it really depends what sort of business you're running. I'm a freelancer, I don't buy stuff and sell it on. I write stuff for people, research, do online stuff. So don't really have expenses/purchases, and everything I earn is classed as profit.

I just keep a simple spreadsheet where I log all my payments and total at the end of the month. All payments are electronic and go into bank accounts directly so there's a trail. I don't pay an accountant to do a tax return as it's very striaghtforward. I don't use paid for accountancy software. If in the OP's case she's buying fabric/notions from the same online store all the time and selling online only so it's all electronic payments, she could easily do similar.

Agree it does get more complicated when you have several suppliers and cash/cheques come into the equation.