A HouseBeautiful Home Business. Emma Jones
or by using a company creation agent.
As well as registering with Companies House, you also need to let HMRC know you are operating as a limited company. You can do this by completing form CT41G.
You will also need to set up and register a PAYE scheme as you are an employee of the company.
Register PAYE scheme | www.hmrc.gov.uk/newemployers
New employer’s helpline | 0845 60 70 143
In terms of filing requirements, you must complete a self-assessment company tax return at the end of the accounting period. The return will show the company’s taxable profits and whether any corporation tax is owed, and can be filed online at www.hmrc.gov.uk/ct. The return should also be filed with Companies House to comply with the Companies Act 2006. This can be done free of charge, using their online WebFiling: ewf.companieshouse.gov.uk
On your returns, you can claim wear-and-tear allowances (capital allowances) on any work-related equipment you buy, and also an element of your expenses for working from home. You can also claim travelling expenses, subsistence and a proportion of your phone calls.
Visit the ‘Claim Income Tax reliefs’ section on the GOV.UK website to view the tax allowances, deductions and reliefs you can claim: www.gov.uk/income-tax-reliefs
Company tax returns must be filed within 12 months of the end of your company’s corporation tax accounting period. More details on these deadlines can be found at: www.hmrc.gov.uk/ct/getting-started/deadlines.htm
In good order
Keep records of your business dealings – this will make it much easier to complete tax returns when the time comes. Keep hold of:
receipts of business-related purchases
copies of invoices to customers
bank statements (especially if you don’t have a separate account for the business)
utility bills (if you are starting the business from home and using part of the house for business); they can be claimed as a business expense and so reduce your tax bill.
For advice from HMRC on good record keeping, visit: www.hmrc.gov.uk/startingup/keeprecs.htm
If you plan to do your tax returns yourself rather than using an accountant, consider taking a workshop which will help with your understanding of the process: www.hmrc.gov.uk/bst/advice-team-events/work1.htm
VAT
Whichever tax status you choose, if your business turns over more than a certain amount (always check the latest level), or you think your turnover will soon exceed this amount, you must also register for value added tax (VAT).
You can voluntarily register at any time. Being VAT-registered can bring credibility with certain customers, but adding VAT to your invoices may make you more expensive than competitors and you will have to file a VAT return four times a year.
How and when to register for VAT | www.hmrc.gov.uk/vat/start/register
Accountant accompaniment
Talk to a qualified accountant about the structure that is best for your business. And consider employing their services to complete your tax returns. Even if your accounts are very simple, it is well worth seeking professional advice, particularly as the rules and regulations can change frequently and without warning.
Find an accountant by visiting:
ICAEW (Institute of Chartered Accountants in England and Wales) | www.icaew.com
List of Sage-accredited professionals | www.sage.co.uk/partner
Accountant partners of online software tool FreeAgent | www.freeagentcentral.com/partners
Enterprise Nation has an online marketplace of business service providers: www.enterprisenation.com/directory
Useful links
Starting a Business | www.hmrc.gov.uk/startingup
GOV.UK on business tax | www.gov.uk/browse/business/business-tax
Business rates
The final form of tax to bear in mind is business rates. If you have applied for planning permission or your local authority is aware you are running a business from home, they may try to charge you business rates as opposed to council tax on the part of the house being used for business purposes. Business rates are different in each area and something that should be discussed with your local authority.
GOV.UK on business rates | www.gov.uk/introduction-to-business-rates
Household admin
With a business plan prepared and the regulatory bodies informed, it’s time to take care of the household admin and make friends with the neighbours!
Over 60% of businesses are started from home on account of the low costs and lack of commute. When you start and grow your business from home, you may have a few questions about who you need to inform. Here are the answers.
Q: Do I need planning permission?
A: You’ll need planning permission to base the business at home if you answer ‘yes’ to any of these questions:
will your home no longer be used mainly as a private residence?
will your business result in a marked rise in traffic or people calling?
will your business involve any activities that are unusual in a residential area?
will your business disturb the neighbours at unreasonable hours or create other forms of nuisance such as noise or smells?
If your house is pretty much going to remain a house, with your business quietly accommodated within it, then permission shouldn’t be required. If you’re unsure, contact your local council (www.planningportal.gov.uk) to seek their views.
Q: Do I need to tell the local authority I’m working from home?
A: This depends on whether you pass the planning test. If you need planning permission, you’ll have to inform your local authority. If you don’t, then the only benefit of telling them is that they’ll charge you business rates (rather than council tax) on the part of the house being used for business purposes. Business rates are different in each area