4 • Finance & legal


Take control of your finances


Becci Knowles speaks to the founders of Blue Tomato Accounting on what rules the newly self-employed need to follow


B


ased in Kent, Blue Tomato Accounting, founded by Wendy Paisley and Rosie


Croucher, supports clients in finding solutions that allow the self-employed to work smarter, save money and plan better. If you’re considering a career as a freelancer or getting ready to launch your own business, here’s everything you should know before getting started.


WHAT DO I NEED TO KNOW BEFORE SETTING UP ON MY OWN? Wendy Paisley: First, you need to register yourself as self-employed with HMRC. You also need to know what you’ve got to file and when; be aware of the tax and National Insurance rates for the self -employed and put money aside throughout the year. It seems obvious; however, many people make the same mistake at the beginning: they become self- employed, they register with HMRC,


they start earning money and at the end of the tax year they’re surprised by the amount they owe. They’re always aware of the tax, they know that it’s around 20%, but they need to remember that Class 2 and Class 4 National Insurance may apply. If you’re self-employed, you’ll be taxed on all your trading profit for the year, whether you’ve withdrawn it or not.


HOW AND WHEN SHOULD I FILE MY TAX RETURN? Rosie Croucher: Digital tax returns are due by 31 January, following the end of the tax year. For example, the current tax year is 6 April 2022 to 5 April 2023, so your 2022-23 tax return needs to be submitted by 31 January 2024. This is also when any tax and National Insurance is due to credit with HMRC. Accounting soſtware such as Quickbooks or Xero can make tax returns much simpler.


Business Guide - brought to you by APL Media • Wednesday 15 February 2023


FINANCIAL PLANNING IS KEY FOR THE SELF-EMPLOYED/GETTY


HOW DO I MAKE SURE I GET PAID ON TIME? RC: The previously mentioned accounting soſtware allows you to create invoices and run a debtor list so you can see who owes you what. Set your payment terms so people you deal with know what you expect, but be mindful of cash flow when doing this. Do you want payment before the job finishes, or do you want to take part payment to cover costs? Always make sure your customer is aware of your


payment terms and be mindful that sometimes you do get people who don’t pay on time. If you’re working with a larger business, ask for a Purchase Order (PO) number when you prepare your quote. We recommend setting some time aside each week to do your bookkeeping.


ARE THERE ANY REGULATIONS I NEED TO BE AWARE OF? WP: Making tax digital for self- assessment has been pushed back, but be aware you may need to keep


digital records in the near future.


ANYTHING ELSE I SHOULD KNOW? WP: If you’re self-employed there are several tax legislations that will affect what you pay. Just because you buy something, it doesn’t necessarily mean you can claim the expense in full. It’s also common for people to miss allowable expenses — if you speak to an accountant, they should be able to assist you with this, and help you save money in the long run.


ADVERTISEMENT FEATURE What’s next for your business?


When an entrepreneur launches a business, their immediate goal often isn’t to sell it or pass it on. Nevertheless, as they reach different stages of their life, many business owners start to consider their plans for an exit as they seek out new opportunities or plan their retirement


gains tax (CGT) purposes and therefore careful consideration of the 20% CGT rate and business asset disposal relief, which can reduce the effective rate of tax to 10%, is essential. The interaction with IHT and business property relief, which can reduce the tax cost to zero, is a further consideration for the tax advisers at Knights Lowe. Shares in private trading companies


are eligible for many reliefs, so the tax position is beneficial — but the moment you make a disposal, the interaction of CGT and IHT become key to the overall tax liability incurred by the entrepreneur and their family. By having a succession plan in place well ahead of a sale or transfer, Knights Lowe can minimise tax and maximise value to the family. Knights Lowe already supports


JAMES KNIGHTS (LEFT) AND KIRK VAUGHAN (RIGHT) ARE HAPPY TO ADVISE ON SUCCESSION PLANNING


When it comes to planning for succession, there are many options to consider for your business, including outright sale, trade sale, management buyout or passing it on to the next generation. Each of these options has


different tax implications that need to be planned for. Knights Lowe structures your


business and your tax position to maximise your options and minimise your tax. The disposal of a business


may trigger inheritance tax (IHT) liabilities and therefore your future plans needed to be considered at all stages of business life. Passing a business on to the next generation is a disposal for capital


a range of businesses across East Anglia with their succession planning and has recently expanded its reach through a merger with Ipswich-based accounting firm Ballams. If you’re planning to exit your


business in the next few years, now is the time to seek effective, long-term tax advice.


Knights Lowe structures your business and your tax position to maximise your options and minimise your tax


To find out how Knights Lowe can help


Please call 01284 701300 or visit knightslowe.co.uk


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