FAQ's
Frequently asked questions about sole trader and partnership accounting
If you’re self-employed and running your own business as an individual, then you should be registered with HMRC as a sole trader. Being a sole trader means there’s no legal distinction between the individual and the business they own.
Sole traders work in many industries and trades, including electricians, plumbers, management consultants, designers, and more.
A partnership is a business owned by two or more people. The profits at the end of the year are shared between them, depending on the percentages each holds, and money can be taken at any time.
As a sole trader or partnership, there’s no law that requires you to have an accountant, but an accountant can help you stay on top of your business finances, manage your legal obligations as a small business owner, and help with your statutory filings and tax returns.
An accountant is especially helpful where your sole trade or partnership business is starting out and needs assistance with areas such as VAT, CIS, and employing others.
Tax returns sole traders are required to file include VAT (if your business is VAT registered), and your annual Self Assessment, which covers your personal Income Tax and National Insurance liabilities.
Partnerships must file a tax return with HMRC stating the income and expenditure and resulting profit over the year, but they aren’t obliged to pay tax on the profits, as these are divided to the partners.
The owners will pay tax as if they are self-employed.
Your annual Self Assessment must be filed with HMRC before 31st January each year.
As a sole trader, all of your business profit is taxable to you personally, and legally there is no difference between you and your business. But unless you want to pay more tax than necessary, you’ll usually want to claim sole trader business expenses when it comes to submitting your annual Self Assessment tax return. You need to be able to prove your business expenses are allowable. Having your business and personal expenses in the same bank account can cause all sorts of headaches and means getting your accounts ready takes longer than necessary.
If your business is a general partnership, then you are not legally required to set up a business account.
However, if your business is either a limited partnership (LP) or a limited liability partnership (LLP), you must set up a business bank account. This is because they are legally separate entities, and must be managed as such.
We advise to open a separate account for your partnership so you can distinguish between your personal expenses and business expenses, plus it means getting your accounts ready faster.
Frequently asked questions about Limited Company accounting
There’s no legal obligation for a limited company to have an accountant, but given the legal responsibilities you’ll have as a limited company director, as well as the various taxes your company will need to pay, an accountant is a vital ally.
A good accountant can help you stay on top of your business finances, submit your tax returns, and free up your time so you can do what you do best – run your business!
You must file your company’s accounts with Companies House nine months after the company’s accounting period ends. The company’s Corporation Tax return and accounts must be submitted to HMRC within 12 months after the accounting period ends to which it relates.
Limited company directors may be required to pay a number of different taxes: some limited company taxes are mandatory for all directors, while others will depend on factors such as whether your company has employees.
Some of the taxes you may be required to pay include Corporation Tax, National Insurance, and VAT.
If your limited company has made a profit, it can pay a dividend to shareholders. It’s important to remember that dividends aren’t a business expense when calculating your Corporation Tax, and that it’s illegal to pay a dividend if your company doesn’t have sufficient profit after tax available to cover the dividend amount.
There are complex rules surrounding the type of company which must have an audit. You can find out more if you check HMRC’s website.
In general terms, if your company’s turnover is below £10.2 million, and its assets are below £5.1 million, you do not need to have an audit. However, some companies with turnover and assets below these amounts elect to have an audit to comply with financial covenants.
You must keep records for six years from the end of the last company financial year they relate to, or longer, if:
– they show a transaction that covers more than one of the company’s accounting periods
– the company has bought something that it expects to last more than six years, like equipment or machinery
– you submitted your Company Tax Return late
– HMRC has started a compliance check into your Company Tax Return.
Frequently asked questions about Small Business accounting
There’s no legal obligation for a limited company to have an accountant, but given the legal responsibilities you’ll have as a limited company director, as well as the various taxes your company will need to pay, an accountant is a vital ally.
A good accountant can help you stay on top of your business finances, submit your tax returns, and free up your time so you can do what you do best – run your business!
You must file your company’s accounts with Companies House nine months after the company’s accounting period ends. The company’s Corporation Tax return and accounts must be submitted to HMRC within 12 months after the accounting period ends to which it relates.
Limited company directors may be required to pay a number of different taxes: some limited company taxes are mandatory for all directors, while others will depend on factors such as whether your company has employees.
Some of the taxes you may be required to pay include Corporation Tax, National Insurance, and VAT.
If your limited company has made a profit, it can pay a dividend to shareholders. It’s important to remember that dividends aren’t a business expense when calculating your Corporation Tax, and that it’s illegal to pay a dividend if your company doesn’t have sufficient profit after tax available to cover the dividend amount.
There are complex rules surrounding the type of company which must have an audit. You can find out more if you check HMRC’s website.
In general terms, if your company’s turnover is below £10.2 million, and its assets are below £5.1 million, you do not need to have an audit. However, some companies with turnover and assets below these amounts elect to have an audit to comply with financial covenants.
You must keep records for six years from the end of the last company financial year they relate to, or longer, if:
– they show a transaction that covers more than one of the company’s accounting periods
– the company has bought something that it expects to last more than six years, like equipment or machinery
– you submitted your Company Tax Return late
– HMRC has started a compliance check into your Company Tax Return.