Around four million limited companies are registered in the UK. In Tyne and Wear, latest figures show that 7,838 companies were formed last year – with the most being incorporated in Newcastle upon Tyne.
Of all the companies that were formed, 96% were private limited companies. With an increase of almost 5% over the previous year, it shows that launching your own limited company is increasingly popular.
And if you’re thinking of joining the thousands who set up their own business last year, then there are a few things you need to know. First of all, find out all you need to know about whether to become a sole trader or limited company in one of our earlier blogs.
If you’ve decided to become start a limited company, then these accounting tips for small limited companies will help.
Accounting tips for small limited companies
Open a company bank account
Limited companies must legally have a separate bank as it’s a separate legal entity to the directors – even if there’s only one director! We advise setting up your account as soon as you register the limited company with Companies House.
We don’t recommend a particular bank. You may want to approach the bank you use for your personal accounts. Or you can check out the Small Business website that lists the UK’s business accounts.
Some have longer free banking periods while others waive fees if you keep a certain balance in the account. Others have other requirements, such as turnover limits.
Keep personal and business separate
When setting up, it can be easy to slip into a habit of using your own debit or credit card for business transactions and vice versa. But this is something to avoid!
It not only means bookkeeping will be quicker and easier – and costs less – but paying for goods and services for yourself can create tax problems.
Remember, you need to account for all business expenditure and mixing it up can end up being costly in the long run.
Don’t use your own money for company goods
Being a director means you must remember you are working for the business. And that’s even if you’re the only director. There’s nothing illegal about buying goods and services for your company and then claiming the expenses back. But using a business debit card keeps records separate and is less confusing.
If you really need to use your own money (for example, if you forget your business debit card if buying in person) then make a detailed note and keep any receipts. Failing to keep records means you may be unable to claim an expense against your company’s Corporation Tax bill.
Also, don’t use company credit cards for personal use. Like using your own money for your business, it can complicate matters. That will cost time and cash to sort issues out.
Understand tax rules
- It’s important to know what taxes your company will have to pay. Asking an accountant to help means you will not miss any deadlines, which can lead to penalties. Some of the taxes you may need to pay include:
- National Insurance
- Corporation tax
- Income tax
- Business rates
Find out all you need to know about taxes small businesses need to pay.
Stick to tax deadlines
You may read or hear about small business owners that take a relaxed approach to paying tax. But being late with filing and payment deadlines costs you in the long run. You need to keep every pound possible in your business, so don’t end up with penalties.
Your accountant will remind you of deadlines, but it’s better to be ahead and make a note in your schedule. HMRC penalises any business that misses deadlines, so do what you can to remember those that matter to you.
Our final tip is if you’re unsure, ask. You can find small business advisers in your local area that usually give free advice because they are funded by your local authority.
Speaking to an experienced accountant is also advisable. Accountants not only understand business finances, they have knowledge of all the legal requirements of running a company.
We offer free initial consultations, so contact our team today.