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News,May 2018

What is an Annual Return

What is an Annual Return? – A Beginner’s Guide

02/09/2021Limited Company , Tax Issues

Every year, as a registered company owner in the United Kingdom, you must file your annual return to Companies House. In this article, we’ll go over what is an annual return, what information you’ll need, and what penalties you might face if you submit it late.   Whether you’re just starting or have been in business for a while, our Chartered Accountants can help you build your business. So don’t hesitate to get in touch with us now!   What is an Annual Return? It is a document which summarises the general facts about your company, including: The nature of a company’s operations Your registered office address as well as your SAIL address Share capital Contact information Directors’ information Shareholders’ information Your annual return, as the name suggests, must be filed with Companies House every year. You have 12 months to complete your yearly return; however, you can submit your information more than once during that time. This allows you to update business information without worrying about missing deadlines. You can avoid the delay by filing the most up-to-date company information first. Then, to give correct and up-to-date information, you can file a new return with Companies House detailing the modifications or updates. Remember to keep your annual returns separate from your tax return and your company’s annual accounts. You don’t need to file the one because it’s not the same as the other.   Information to Include in the Annual Return The information that needs to be included in your annual return is as follows: Name, DOB, residence, and other details about the company secretary and directors. Your company’s contact information, If there is no other address, records will be stored at the registered address and single alternative inspection location (SAIL). The type of business you have (public or private) and the shares it issues. You must submit information to your stockholders in specific cases. Information about the most important business activity. To describe what your company does, you must choose your principal business activity from a catalogue of SIC (Standard Industrial Classification) codes.   The Formula of Annual Return The Formula of Annual Return is: Annual Return= Final Value of Investment – Initial Value of Investment / Initial Value of Investment * 100   Unable to calculate your annual returns? Let our professionals handle this!   Company Owners are Legally Obliged to File an Annual Return If you are an owner of a company, you are legally required to file an annual return on time, and in case you fail to, you may be charged with a penalty. You can see late filing penalty fees from the Government of the UK.   File your Annual Return Online  Through the Companies House WebFiling, you can easily file your annual return. It will only charge you around £13, and you can pay it through a credit card or PayPal. To use this service, first, you need to get registered with Companies House for WebFiling.   Grow your Business with CruseBurke! We hope you now have a basic knowledge of annual returns after reading this blog. Besides this, we know that you’re busy with your business and have no time to handle company accounts, taxes and reports. Let us do that! CruseBurke is one of the UK’s driving accounting firms with a group of qualified bookkeepers, chartered accountants, and tax specialists. We solve your business problems with the best possible solution and take your business to another level. We provide accounting services for small businesses, startups, sole traders, contractors, partnership & LLP, and landlords. Get an instant quote now for these services!   Disclaimer: This blog contains general information about annual returns.

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Company Tax Return

How to File Company Tax Return!

30/08/2021Limited Company , Tax Issues

All limited companies in the UK need to file a company tax return at the right time. In today’s blog, we’ll have a look at what is a company tax return, how to file it, when you need to file it, and what are the penalties for late filings. Here’s all you should know as a limited company owner.   What is a Company Tax Return? A company tax return (form CT600) is the financial information that includes spending, profits and corporation tax figures reported to HMRC annually. You can also report it to find out how much corporation tax you have to pay. It contains the following documents: Form CT600 Company’s annual accounts Calculations of the company’s tax Any supplementary documents If a company received a notice from HMRC to complete a tax return, then a company must do it as early as possible. It typically happens after the year-end. The deadline for filing a company’s tax return is a year (12 months) after the end of its accounting period.   Get inclusive accounting, bookkeeping, tax, and company formation services with our qualified accountants at an affordable rate. Get in touch today!   Filing a Company Tax Return To file a company’s tax return, you need to ensure that you have: Company’s statutory accounts (annual accounts) that are balanced means your total assets should match with your total liabilities and shareholders’ equity The government gateway ID and its password. If you don’t have one, you need to create it to use the service Your Companies House password and authentication code (in case of filing your accounts together). You can get these when you register with Companies House You can use the paper form (CT600) if: You have a valid reason for not filing online You want to file in Welsh And, you need to complete and post form WT1 to describe the reason behind using the paper form. To file your accounts with Companies House and the Company Tax return with HMRC. You need to have online account details of HMRC, Companies House online account details, and company registration number. Here is what you need to do as per your situation: If you want to file accounts and tax returns together, you can use HMRC’s online service or CruseBurke‘s services If you want to file your accounts with Companies House separately, you can send your accounts to Companies House online or Contact us to do it on your behalf If you want to file a tax return with HMRC separately, you can use HMRC’s online service or our services to do it Note: You’ll only need to prepare and file your Company Tax return yourself if you’re fully confident to do it. Otherwise, you might get in great trouble. So, taking the services of an accountant is worthwhile for the accuracy and efficacy of your return.   If you need the help of an accountant or tax expert, contact our qualified accountants at CruseBurke!    Deadlines for Completing Return To file a return and to pay taxes, you need to follow the below-mentioned deadlines: The return needs to be sent to HMRC within 12 months after the year-end Any Corporation Tax due must be paid within 9 months and a day after the end of the accounting year Suppose, a company’s accounting period is ending on 31 December 2019, it needs to pay any Corporation Tax that is due by 1st October 2020 and file the return by 31st December 2020. Generally, these are filed together. In case of filing them late, your company needs to pay financial penalties.   Penalties for Late Filing On missing the deadline of the return, you need to pay fines. If you’re: One day late, you need to pay a £100 penalty Late for three months, you need to pay another £100 penalty Late for six months, you need to pay an additional/extra penalty of 10% on your corporation tax bill. A year late, you’re levied another 10% penalty on your estimated corporation tax bill On filing a return consecutively late for three times, the £100 penalty will increase to £500.   Quick Sum Up So after reading this post, you have understood: what is a company tax return, how to file them, when you need to file them, and what penalties you need to pay in case you file them late. Bear in mind that only limited companies need to submit it. If your company is dormant for corporation tax, you don’t need to submit it. Moreover, sole traders and partnerships also don’t need to submit a return but their earnings are reported to HMRC.   Turn to CruseBurke for preparing and submitting the return and save your time, money, and stress. We have a team of skilled accountants who will handle everything with HMRC and Companies House on your behalf. Contact us right away!   Get an instant quote for a tailored offer at a fixed fee!   Disclaimer: This blog is written for general information on the company’s tax return.  

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How to Read a Balance Sheet of a UK Company?

How to Read a Balance Sheet of a UK Company?

16/08/2021Business , Limited Company , LLP

Whether you’re an investor, business owner or an individual based in the UK- who’s keen to learn about the company’s accounts – you need to know what is a balance sheet? How it will help you to operate your business efficiently? How you can work out the worth of your business through it? To get all answers, you need to know How to Read a Balance Sheet of a UK Company. Let’s dive in! Get the help of an accountant to prepare, manage and maintain your accounts properly. Get in touch with us now! What is a Balance Sheet? A balance sheet is a document that provides an overview of the financial status of your business in a certain period. It indicates the stability of your business. This sheet shows what a business owns and what is owed at a given period. By analysing a balance sheet and matching it with other financial documents, you can make a realistic estimation of the financial health of your business. Importance of Balance Sheet Along with the financial assessment, a balance sheet has a lot of other benefits for your business. It can be a wonderful tool to attract investors. By analysing a balance sheet, you can find out the past, current and future performance of your business. This document is equally important for investors, stakeholders and lenders. A balance sheet – along with an income statement – can attract people to invest in your business. As investors can review it to know how your business is managing its dues, how it has turned its assets into revenue, how your business is generating returns against its investment and how much leverage your business contains. Contrarily, without this statement, you can’t impress investors and lenders for investments and loans. How Does a Balance Sheet Work? A balance sheet serves as a tool to measure the financial health of a business, typically at the end of each quarter. It uses the basic formula of: Assets = Liabilities + Shareholder’s Equity You or your accountant will keep track of everything that a business owns, like cash, machinery, etc under the asset section of the balance sheet. In the liabilities section, there’d be a record of what the business owes like taxes, loans. And in the equity, there’d be an account for retained earnings and common stock. Evident by the name, the total assets of the balance sheet need to be equal to liabilities plus the shareholder’s equity. In case, if this value is not equal, it means there is a mistake in your accounting system or there is a serious cash flow issue that can take the business to insolvency. In search of accountants for limited companies? We provide a wide range of tailored accounting and taxation services for limited companies in the UK! Contact now! How to Read Balance Sheet in the UK? A balance sheet comprises three components: assets, liabilities, and shareholder’s equity. Without the information of these terms, you can’t read a balance sheet. Let’s see what are they and how you can read a balance sheet in the UK using these terms: Assets Assets are the things (tangible and intangible) that a company owns. They’re recorded in the first column of the balance sheet. Current assets are those assets that are easily turned into cash within a year or less. These assets would be recorded in the balance sheet as: Account receivable: Money that you’re going to receive Inventory: Things you sell to get profit Marketable securities: Investments that can easily be traded, bought and sold Prepaid expenses: Expenses you paid in advance. Unlike current assets, non-current assets are those assets that can’t be turned into cash within a single year. Tangible assets like building, land, machinery, etc can be called non-current assets. These also include intangible assets like licenses, patents or intellectual property only if they are acquired not developed. Liabilities The money that you need to pay to outsiders like suppliers, or creditors is known as liability. Liabilities are recorded in the second column of your balance sheet, after assets. Alike assets liabilities are also current and long-term. Current liabilities are payable within a year and long-term liabilities are those liabilities that can’t be payable with a year like long term debts, bonds, etc. Shareholder’s Equity It is also called shareholder’s equity on a balance sheet. It includes two things, the amount invested by the owner or shareholder for the initial startup of a business and includes the money attributed to the business owner after paying liabilities. To put it simply, it is the value left after deducting liabilities from the assets. After liabilities equity will be recorded and it includes: Common Stock: It shows a share of ownership in a company Additional Paid-in Capital: It is the value of the company’s shares above the value at which they’re issued Retained Earnings: Net income left after paying dividends to the shareholders. Quick Sum Up To sum up, you have got enough information on how to read the balance sheet of a UK company. The balance sheet is important to document as it indicates the financial health of your company against the investments. By analysing a balance sheet you could know how a business is performing or is it worth investing or not. By measuring your company’s performance, you can work on the areas to take your business to the next level. Need professional help? CruseBurke has a team of accountants and bookkeepers to save your time and hassle of preparing, managing and balancing your statement. Contact us today! Disclaimer: This blog provides general information on how to read a Balance Sheet of a UK Company.

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changing from a limited company to a sole trader

Changing from a Limited Company to a Sole Trader: What You Need to Know

16/07/2021Limited Company , Sole Trader

There are many reasons for changing from a limited company to a sole trader. Company owners believe that sole proprietorship is a simple and convenient option to go for. No doubt it is. In this way, they’d save a considerable amount of money – which they are losing as a limited company owner – by becoming a sole trader. There are many other businesses that are going after this option. But there are a few crucial points that you need to consider if you are changing from a limited company to a sole trader. Important Points to Consider Here are a few important points that you to consider before changing your business structure. Firstly, you need to know that sole tradership doesn’t require any registration. You can start your business right away, just by informing HMRC. Secondly, note that sole traders do not have limited liability which means you’re not protected in case of loss or insolvency. It depends on your business type and how much you’re at risk of potential liabilities and insolvency. Thirdly, winding up a limited company needs a proper legal procedure to follow. You need to submit final accounts to HMRC along with taxes. In addition, this process requires more paperwork like you need to file paperwork for capital distribution and so on. After getting through this complex and time-taking process, your company can be struck off from the register. Fourthly, if a limited company has suffered a loss previously, it needs accounting. So, you need to consult this matter with an accountant as after closure, the company’s tax loss history will be erased. The accountant will bring them forward to offset against a future profit of a company. Remember, you’d lost the opportunity to offset the losses when your company is closed. Obviously, it is not possible to use the company’s losses against the profit made from the sole trading activity. Finally, after changing from a limited company to a sole trader, you need to inform your customers and suppliers about becoming a sole trader. So that you may sign new contracts with the new people. Moreover, you will also change your company account to a business account. Why Did You Become a Limited Company? After considering the above points, you need to ask this yourself before making the final decision. You opted for a limited company to get liability protection, credibility, save tax and so on. Though the situation has been better after the vaccination of more than 52% of the UK’s population. This doesn’t mean that everything will revert instantly as it was before the arrival of the pandemic. According to the government scientists of the UK, the third wave is going to arrive that would leave the same impact as the previous ones. So, the complete revert will take time, so changing your business structure might be a good option if you can’t wait for an unexpected time. However, if you think that your business is going well and will be in the future, you should not go for this option. Looking for a qualified accountant, bookkeeper or tax expert at a reasonable price? Get in touch with us right now! Our Advice We recommend clients to wait for 6 months before changing their business status. Within six months, the situation would be expected better due to the continuous vaccination. So waiting for this time wouldn’t hurt your business a lot. Still, if your business is constantly declining, then turning to a sole proprietorship is worth considering. Final Thoughts Finally, if you are changing from a limited company to a sole trader. It is important to consider both the short-term advantages and long-term consequences. Before making the move, make sure to: Talk to our limited company accountant to review your accounts to utilise the losses before becoming a sole trader Extract all your money from the limited company by seeking advice from our accountants Pay the due taxes and outstanding bills to HMRC before closing your bank account Get advice to know the impact of financial support by the government during the current pandemic To sum up, you need to get advice from an accountant to make the final decision. If you are looking for an accountant to review the financial affairs of a business, look no further than CruseBurke. We have a team of expert accountants for your assistance. Don’t hesitate to get in touch with us. Get an instant quote right away! Disclaimer: This blog changing from a limited company to a sole trader provides general information on the above topic.

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Pros and Cons of Trading as a Limited Company in the UK

The Pros and Cons of Trading as a Limited Company in the UK

16/07/2021Limited Company

Due to numerous tax incentives, many businesses prefer to be limited companies in the UK. In fact, trading as a limited company helps you to manage your tax liabilities more effectively. However, along with a lot of advantages, there are also some downsides that you can’t overlook. So, let’s look at the pros and cons of trading as a limited company in the UK. Want to incorporate a limited company! Feel free to contact our limited company accountants to incorporate a company within no time! Pros of Trading as a Limited Company in the UK Following are some of the pros of working as a limited company in the UK: 1) Works as a Separate Entity from its Owner One of the foremost benefits of trading as a limited company is its separation from the owner. It means that if a limited company is issued, it’s responsible solely and this will not impact the owner. As there might be many instances where a limited company may be sued. For this reason, it is preferable to do business as a limited company. 2) It has a Limited Liability It means that the liability of the business owner/ shareholders is limited to the amount they have invested in the business. In case of loss or insolvency, the creditors can not demand the shareholders to provide additional funds for paying off those debts. 3) Easier to get Bank Loans and Overdrafts If you are a limited company owner, you can easily get bank loans or overdrafts against the business’s securities. This increases the borrowing power of the limited company and provides extra security to the bank. 4) Easy to Transfer Ownership A limited company owner can easily transfer the ownership of a company by selling its shares. Before transferring, you need to be careful about the tax implications that may arise afterwards. 5) Planning for Retirement Running a business as a limited company allows you more flexibility at the time of getting pensions. 6) Perception Other than sole tradership or partnership, a limited company is considered more established and reliable.     Cons of Trading as a Limited Company Along with the mentioned benefits, there are also some downsides of the limited company that you need to consider before starting your business: 1) Incorporation A limited company is difficult to incorporate as it needs to be registered with Companies House which can be a difficult and time taking process. 2) Costly to Set Up Generally, a limited company requires more money to set up than other types of businesses. 3) More Chances of Losses As a separate entity, the losses made by a limited company are set off by the profits earned in the previous years or which the company may earn in the future. It’s a great disadvantage, as many new businesses might suffer losses at the beginning stage. 4) Accounting and Administration It requires complex, time-taking accounting and administration responsibilities. It includes filing annual returns to companies houses, preparing dividend tax vouchers, etc. Looking for a qualified accountant, bookkeeper or tax expert at a reasonable price? Get in touch with us right now! 5) Expenses You can only get tax relief, as a company director, on expenses that are crucial for performing duties as a director. 6) Personal Guarantees Whilst getting loans and overdrafts from the banks is easier but it requires the personal guarantee of the director. As in the case of insolvency, the director will responsible to repay the borrowings. In addition, some suppliers also require the personal guarantee of the director that reduce the directors’ limited liability to a great extent. Summing Up Many of the legal requirements of a limited company will incur penalties if they are not dealt properly within time. Hopefully, this post has provided some useful information to you about the pros and cons of trading as a limited company in the UK. If you are looking for an accountant or bookkeeper to record, manage and monitor the financial affairs of a business, look no further other than CruseBurke. We have a team of expert bookkeepers and accountants for your assistance. Don’t hesitate to get in touch with us. Find out our limited company packages and get an instant quote! Disclaimer: This blog is intended just for general information on the above topic.

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How to Read Company Accounts?

How to Read Company Accounts?

13/07/2021Limited Company , Tax Issues

Whether you want to establish a company, want to do research, or just trying to understand the financial terminologies of the accounts. Reading and understanding those accounts can be daunting if you lack a financial background. For this reason, we’re here to explore how to read company accounts as a beginner. The details and terminologies on the accounts might not be as straightforward as you think. This information is necessary to know how we’ll business is performing at a certain time. By reading this post till the end, you’ll be able to read and understand these complex terminologies to assess the performance of your business. Let’s delve into it! It is advisable to get the help of an accountant to prepare, manage and maintain your accounts properly. Get in touch with us now! Understanding the Company’s Annual Account? The company’s accounts are the overview of the financial activities of an organisation over one year. These accounts are made for HMRC and Companies House in a tax year. They comprise: Balance Sheet Profit and Loss Statement Cash Flow Statement What is a Balance sheet? A balance sheet is a financial statement that will provide quick details of your business’s assets, liabilities and the shareholder’s equity at a single point in time. It shows the financial health of your company in a particular period. Moreover, it compares what is possessed and what is owed. It deals with assets and liabilities. An asset is something that is owned by business to generate profit. Typically, they can be divided into two types: fixed assets, current assets. Fixed assets are the long term assets like land, factories, vehicles etc. Whereas, current assets are the things that have a limited lifespan like stock items, petty cash, and cash in the bank, etc. Liability is the obligation, often as a debt that needs to be repaid. There are two common types of liabilities. A current liability is some that are due to be repaid within the timeframe of one year. On the other hand, long term liabilities are not de to be repaid within the timeframe of one year. Liquidity Ratio It is a ratio that determines the ability of a business to pay its short term liabilities. This metric helps companies to determine whether they can use their current assets to cover their current liabilities. We can calculate it as: Liquidity ratio = Current Assets / Current Liabilities If this ratio is less than one, then it could be bad news for your business. Curious to know the value of your business? Find out its net asset value. Net Asset Value Net asset value represents the net value of a company and you can calculate it by subtracting the company’s total assets from its total liabilities. Net Asset Value = (Fixed and Current assets) – (Total liabilities)   On the lookout for accountants for limited companies? Reach out to us today! We provide a wide range of tailored accounting and taxation services to solo entrepreneurs all the way to small and medium-sized businesses. Profit and Loss Statement The P & L statement records a performance of a company in a certain period. In fact, this statement provides the total revenue and expenses of the business in a financial year. How to calculate P & L statement? You can easily work out the gross profit of a company. The turnover figure of this statement shows the value of your sales. You need to subtract the cost of sales from the total turnover to find out the profit and loss statement. Gross profit = turnover – cost of sales To get a better view of your business profit, you can compare this figure with the previous year’s gross profit. Right below this statement you’ll find earnings before interest, tax, depreciation and amortisation (EBITDA). To work out EBITDA, you need to subtract administrative expenses from the gross profit. Administrative expenses include: Building’s rent The cost of utilities Employees’ salaries A positive figure will provide you with a fair picture of your company’s future. EBITDA = gross profit – administrative expenses   Depreciation and Amortisation Depreciation is the decreasing value of the fixed assets like machinery, equipment and buildings. In accounting, it provides an estimate of how much asset’s value is used in a certain time. Whereas amortisation works the same as depreciation but it’s applied on intangible assets like copyright, patents, intellectual property, etc. The Cash Flow Statement A cash flow statement shows the movement of the cash that goes and comes in your business in a certain period. This statement breaks cash into three categories: Operating activities show how much cash comes from selling goods and services less than the amount required to manufacture and sell the product or services. Investing activities indicate how cash has been used on capital expenditures like buying new machinery. Financing activities shows the spending of outside financing activities like cash generated through selling stock etc. If a company is making a lot of cash, it’s favourable. However, negative cash flow isn’t always a bad thing but if your company is showing a bad cash flow for a consecutive time period, you need to go for an investigation. Quick Wrap Up To sum up, after reading this post you’ve got a clear idea of how to read company accounts. With the help of this information, you can better comprehend your company’s account to determine where your business stands. Moreover, this information will let you know how a business is performing. Finally, this will help you make tailored business decisions for the long-term success of your business. Looking for professional help? CruseBurke is there to handle all of your financial worries. We provide you with professional advice for the growth of your business. Moreover, you can get accounting and taxation services for your business at an affordable rate. Need further guidance Contact us today! Disclaimer: This blog provides general information on the above topic, how-to-read-company-accounts.

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Limited Company with HMRC

How to Set Up a Limited Company with HMRC as a Non-UK Resident?

10/06/2021Limited Company

Want to find out how to set up a limited company with HMRC as a non-UK resident? Don’t worry, the process is pretty simple, even if you’re a non-UK resident. As application process and legalities are the same for both UK and Non-UK residents. Follow the below steps to set up your Limited Company? Want to set up your Limited Company within few hours? Provide us with the details and we’ll get it done for only £120. Contact us now!   Registering a Limited Company with HMRC as a Non-UK Resident You first need to register your Limited company at Companies House in England, Wales, Scotland or Ireland. You’ll form your limited company in these jurisdictions. However, you have the choice to trade across the UK and overseas. You need to follow these requirements for forming a limited company with HMRC as a non-UK resident: 1) Name of the Company For registering a company, you need to have a unique name for it. But bear in mind that it must not contain any sensitive words. 2) Director You must have at least one director for forming a limited company. There is no standard limit for the number of directors. You can’t be a company director if: You’re below 16 Undischarged bankrupt Disqualified for becoming a company director 3) Shareholder Alike a director, one shareholder is necessary for setting up a limited company. You can appoint more than one shareholder as per your choice. An entity or individual can be a director or shareholder. While registering your company, you need to provide a certain number of shares to the shareholders. 4) Registered Address Your limited company address needs to be in the UK that will appear in the public register. All the posts from the Companies House and HMRC will be sent to the registered office address of the LTD. 5) Director’s Office Address Whether you are a director, secretary or PSB, you need to provide your service address for Companies House. This information can be on the public records. Any legal documents to the directors will be sent to this address. 6) Filings and Reporting After registration, you are required to submit annual accounts and confirmation statement on annual basis. Need help with filing or reporting or taxes? Reach out to our certified accountants! 7) Corporation Tax Your company needs to register to HMRC for paying corporation tax after it starts trading.   Ways to Incorporate a Limited Company: You can incorporate your limited company by: By taking services of an approved company formation agent like CruseBurke Online through Companies House for the incorporation process You can also apply by post to Companies House We will set up your company within 3 to 6 hours online if the information provided before 12:00 noon. Visit our website for further details on company formation packages.   How We can Help CruseBurke has a team of Limited Company Accountants in Croydon, they will help you to establish a limited company in the UK with compliance to the HMRC and Companies House. Our company formation packages start from just £120 and we’ll cover the following services: 3 hour Online Formation- if the information provided before 12:00 Noon Full Trading Company – Limited by Shares Barclays Bank Account – For UK Residents Digital Documents by Email Includes Incorporation Certificate Memorandum & Articles of Association Companies House £15 Fee included in price Free Online Company Name Search Free Accountancy Consultation by our experts Web Filing Authentication Code Our Gold and Premium packages provide additional services including: Registered Office – London SM4 or Chelsea Address Bound Memorandum & Articles of Association Maintenance of Statutory Books & Annual Return Company Register Now, without any hustle, you can easily set up your limited company with HMRC as a non-UK resident with us. So, set up your limited company now with CruseBurke. OR Talk to our accountants for further queries.   Disclaimer: This blog provides general information on company formation.

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Personal Mortgage

Can I Use Company Money to Pay my Personal Mortgage?

24/05/2021Accountants for Contractors , Limited Company

People, who’re in the contracting business, often ask us ‘Can I use Company’s money to pay my personal mortgage?’ The answer is no! Read on to find out the reason. Those contractors who work outside IR35 prefer to keep their money in the company’s bank account to pay future tax bills or keep it in the shareholder fund to cope with any unfavourable situation. While the money doesn’t make a sufficient interest there, therefore, contractors wonder if they can better utilize their company’s money by paying off their personal mortgage. However, they can’t use the company’s money to pay their private mortgages. Let’s find out the reasons behind it.   Why Can’t I Use My Company’s Money? The main hurdle to use your company money is the bank, as it doesn’t allow you to attach your company’s account directly to offset mortgage. Secondly, you should keep this thing in your mind that, unlike a sole proprietorship, a limited company is a separate entity. Hence, the money that is there in the business bank account is the ownership of the business, not yours. Later, if you transfer it to your personal account, you can use it for your personal expenses. While transferring, remember to withdraw your money as a dividend, salary or director’s loan. Otherwise, you may have to pay taxes that will surpass the benefit you’re going to get on paying off mortgages. Want to save your taxes, contact us right now!   Cost-friendly Options to Withdraw Money from the Limited Company: There are many options available to take out the money from your limited company, but the most cost-friendly options are to get money as salary, dividend or a director’s loan. Dividends: Many contracting businesses keep their money in the company’s bank account for future use. You can take a dividend from that money and can use your future earnings to pay tax liabilities. You need to be careful while investing as you may have the money in the business’s bank account, but it doesn’t mean you’d always get a dividend on the profit earned by the company. If your company has not enough profit to pay you a dividend, it’d be called an illegal dividend. Illegal dividend distribution may be claimed as a salary by HMRC. Consequently, you are liable to pay National Insurance and Income Tax on it. Want to withdraw money from your limited company, get professional advice from a contractor accountant to avoid extra charges. The second option to take money out from the company can be a director’s loan.   Director’s Loan: HMRC defines a director’s loan as the money taken from the company that isn’t dividend, salary or expense payment and that has been paid previously or loaned to the company. In a director’s loan, you can receive a loan of up to £10,000 that will not be considered a benefit in kind. In case, if you withdraw more than the threshold, you’d be liable to pay 2.5% interest to the limited company. If you won’t repay the full amount that you borrowed within the time limit of nine months and one day at the end of your company’s accounting year, you’d be liable to pay an extra corporation tax at 32.5% on the outstanding value. Luckily, this additional 32.5% rate is repayable by HMRC after you pay off your loan. You need to keep track of all the loans you have taken from your limited company to provide evidence to HMRC when asked. For more details contact the HMRC website. Find out our inclusive packages for contractors!   Quick Sum-Up: Summing up, you can’t directly take the money out from the limited company to pay off your personal mortgage. However, there are some cost-affordable options to withdraw your money. You can take out your money as dividend, director’s loan or salary, whereby you can use it for your personal expenses. Still confused! Talk to our contractor accountant to solve your issues.   Disclaimer: This blog post provides general information on using your company’s money to offset mortgages.

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can a sole trader have employees

Can a Sole Trader have Employees?

19/05/2021Limited Company , self-employed accountant

Wondering can a sole trader have employees! Of course, if a person wants to expand his business, he/she can hire more people for his business growth. In this short blog, we’ll explore how hiring new employees in sole proprietorship can affect its status and whether your business would be entitled as a limited company after hiring the staff. Let’s explore!   Do you need to form a limited company to hire employees? Luckily, No! You don’t need to change your business structure for employing new people. If you’re not willing to change your business from a sole proprietorship to a limited company, you don’t need to. We’re aware of the fact that sole traders run the business on their own, but it doesn’t mean that you need to work alone. Sole Proprietorship means that you are running your business with your name. You can hire people on a freelance or part-time basis and permanent basis according to your need. However, you need to set up everything correctly. We’re providing complete accounting and taxation package only at £25 a month and you can make your own custom package here. Get an instant quote right now!   Things to do after employing new people: If you’re managing your accounting affairs yourself as a sole trader, it’d be a bit of a hassle for you to consider another person in your tax affairs. Though it might be a bit difficult to do it. However, if you want to save your time and money, feel free to contact us! After hiring new people into your business, you need to be concerned about the payroll, employer’s NIC and the benefits of employees like sick or maternity pay. The first things you need to do is to register as an employer to HMRC. You also need to start working on PAYE. By doing this you can deduct the National Insurance and Income tax from the pay of the employees who’re eligible. You need to pay these liabilities on behalf of your employees. You should make sure to do all the things mentioned to avoid extra charges or penalties from the tax authorities.   Quick Sum Up: Hopefully, you have got your answer to can a sole trader have employees. If your business is expanding rapidly, it’d be best to upgrade it to a limited company. This is because of the limited liability. You can save a large amount of your money in case of any mishappening and fraudulence by operating a limited company. Although, a limited company needs more recordkeeping and accounting, yet, it’s hard to be dissolved than a sole proprietorship. As it is crucial to protect your business for the long term. Want low-cost accounting services, contact our professional accountants anytime! Get an instant quote right now!   Disclaimer: This blog provides general information about the topic.

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