FAQs

As well as some potential tax advantages, the main difference is that your Limited company is a separate legal entity to you as an individual. This means in the unfortunate event that your business gets into financial difficulties, the liabilities remain with the company unless you have signed personal guarantees. Get our free further guide here

Corporation tax is payable annually and is based on a percentage of your taxable profits each year. Once your accountant has prepared your annual accounts, they will make some adjustments for any allowances or disallowed expenses. This “taxable” profit is then used to calculate your tax at the prevailing rate, currently 19%. This tax is then payable to HMRC 9 months and 1 day after your accounts year end date. 

Your accountant would need to look at your overall financial situation to advise the most tax efficient way of drawing income from your business, but assuming you have no other sources of income, and you have retained profits within your business, it is usually tax efficient to draw a salary equivalent to the current personal tax allowance, currently £12,750, and the remainder of your income in dividends. Get our free further guide here

As a director of a Limited Company you have responsibilities to file relevant forms and information with Companies House, of course your accountant can help you with these commitments. You also have other General duties as set out by the Companies Act 2006. Full details can be found here – https://www.gov.uk/guidance/being-a-company-director

It can be of benefit to have your partner and children involved in the business. If your family take an active role in the business then an appointment as Director can ease some of the administrative burden on one person. By issuing or gifting your family shares there can be some tax benefits to be achieved, but also this can help with succession planning in future. This however is not always a straight-forward decision and you must take full advice.

Employees can be gifted shares in your company to reward performance or loyalty but there are a lot of potential pitfalls. If this is something you think may be appropriate for your business it needs to be planned carefully with your accountant to ensure the objectives are met in the most tax efficient way for all parties.  Get our free further guide here

Usually it is not tax efficient to purchase your own car through your business. However currently there are some very significant tax breaks on fully electric vehicles. Commercial vehicles can also be bought tax efficiently by the business. Get our free further guide here

From a tax point of view it makes little difference over the life of the asset, although some tax breaks are accelerated when buying outright. Usually the decision will be based around cashflow and borrowing rates. Get our free further guide here

It is important that any borrowing requirements are planned in advance alongside any tax planning, as your borrowing ability will usually be based on your earnings from your annual self-assessment tax return.  You should discuss any likely moves or remortgaging needs in detail with your accountant. Get our free further guide here 

The overall rule is that you can only claim for expenses you incur wholly and exclusively for business purposes. However, there are some areas where this is not clear cut (uniforms, prescription spectacles and mobile telephones being some exceptions). Your accountant should work with you to identify all expenses that you can claim (and also those that you legally cannot!) Get our free further guide here

At any one time there can be plenty of government and other support available for businesses. At FAB we feel the best way to look into this for your business is via some of the online databases such as https://www.grantfinder.co.uk/, https://www.capalona.co.uk/business-services/business-grants/, or https://www.gov.uk/business-finance-support

At FAB we do not have any ties to any one bank. Banking in the UK does seem to be becoming over-regulated to the point that opening a simple account can take over a month, not ideal when you have a hot business idea to get started with! The traditional High Street banks are usually better when it comes to funding your business, but for a quick start, easy application online banks would be your best option. Quite often it will be easiest to open a business account with your current personal bank as they should already have your ID etc.

The bigger they are the harder they fall, this saying very much applies in business. As your business grows it is more and more important to keep on top of your finances. Management accounts play a vital role in regular reviewing of your figures to ensure you are making the most of opportunities and minimising any threats. They will help you and your accountant measure performance, control cashflow and ensure you are maximising profitability.

Your accountant should always be looking for ways to help you grow your business and increase your personal wealth in the most tax efficient way. Tax avoidance has become a dirty phrase in recent years, but there are still government approved ways such as ISA’s, Company pensions and Capital Allowances which provide opportunities for effective tax planning. Get our free further guide here

You can voluntarily register for VAT when you know your business is going to begin trading, this is usually beneficial if your business sells to other VAT registered businesses. You legally have to register for VAT once your business reaches a turnover of £85,000 in any rolling 12 month period. Get our free further guide here

Xero enables you and your accountant to work more closely together as everyone is looking at the same live figures. It is linked in directly to your bank account and things like sales invoicing and credit control can be automated. It enables you to decide how much, or how little of the day to day accounting you want to control yourself, and how much you want your accountant to deal with. We include a suitable Xero subscription in all of our quotes. – www.xero.com

Absolutely you can – as long as it is all declared through the PAYE system! Whilst no one particularly likes paying tax it is your duty as the business Director to ensure the Company maintains high standards of business conduct, this includes declaring all taxable income and benefits. We can advise on other ways that you may be able to offer incentives or gifts to your staff without incurring any tax liabilities such as Annual parties, Trivial benefits and Cycle to work schemes. 

As a Director working from home you can claim either a flat rate allowance of up to £6 per week or calculate your actual costs of working from home. This is done by working out the proportion of space you use and proportion of time you spend working from home and multiplying that by your allowable costs such as light, heat, power, telephone and broadband, insurance, repairs and cleaning. 

Yes, quite often a Directors family will take an active role in the family business. It is quite appropriate for them to receive a reasonable salary for this work.

Whilst we can advise in some areas, our advice is to research the available tools for your requirements. Lots of software “talks” to Xero via its API, and whilst this can sometimes be beneficial, we always advise to pick the software that is best at carrying out its primary function in your business. See the Xero app marketplace here: https://apps.xero.com/uk