How an accountant can help your start-up

Understanding your finances is vital to achieving success in your new business. Good financial management is key to managing your cash flow. It helps you pay your taxes, secure funding, and plan for growth. 

Accounting can be overwhelming for new business start-ups, but accountants can be the support you and your business need. Hiring an accountant to manage your finances can help your business succeed and give you more time to run your business. 

Do start-ups need accountants?

Accountants can support you in developing your business ideas, raising finance and help in selecting your business structure. 

They will have many contacts to help you build a supportive business community. Over time, your relationship with your accountant will grow. They will become one of your trusted advisers. 

Business owners have lots of legislation to be aware of and comply with, which is where an accountant can help. A key consideration for business owners is to pay the right amount of tax and submit your accounts and tax returns on time to avoid penalties and interest. An accountant can help you do that, as well as helping with tax planning and alerting you to any tax saving opportunities.  

8 areas for start-ups to consider 

1. Business plan 

A business plan is a document that describes your business goals. It includes market potential, financial forecasts, and marketing strategies.. You need a comprehensive business plan to be successful at securing a loan or investment. 

A good accountant will understand exactly what information should be included in a business plan. They also know how to present it well. This will increase your chances of success when seeking funding for your start-up. For more information read our writing a business plan guide. 

2. Business structure and incorporation 

Choosing the right trading structure is important for taking advantage of tax saving opportunities and/or protecting yourself from the risks that can be involved in starting a new business. The main options of business structure for your start up business are: 

• Sole trader - a simple structure where the owner and business are one and the same and the sole trader can draw profits. A sole trader pays income tax and national insurance on business profits. 
• Partnership - a structure where business partners work together to run a business and share the profits based on profit sharing ratios and agreements. Partners pay income tax and national insurance on their share of partnership profits. 
• Limited Liability Partnership - a more comprehensive partnership arrangement that is also registered at Companies House and must file accounts similar to those of a company. 
• Limited company - an incorporated company structure can be a little more complicated than a sole trader. A company is registered with Companies House and required to submit accounts annually as well as record other information, such as directors on the company public registers. Limited companies must prepare accounts in line with financial reporting standards. 

You can read more about each option in our guide to Choosing the right structure for your start-up. 

Many start-ups begin as sole traders and before incorporating as a limited company further down the line. An accountant can talk you through the advantages and disadvantages and applying this to you and your business to help you make the switch. 

3. Bookkeeping 

Bookkeeping is the recording of financial transactions and it’s an essential task. 

• It helps you track how much money is coming into your start-up company and how much you’re spending 
• Enables you to monitor your cashflow, so you know you have enough money to pay for things like stock, suppliers and taxes 
• Is used to prepare your accounts and tax return 

Self-employed people and most limited company directors must report their income to HM Revenue & Customs (HMRC). They do this by using a self-assessment tax return.  

You can do your own bookkeeping, but using an external bookkeeping service can save you time and money. It lowers the chances of mistakes and helps you work more efficiently. This way, you can focus on growing your business. 

4. Tax and National Insurance

The type of tax you’ll pay depends on your business’ structure: 

• As a sole trader, you’ll pay income tax and national insurance on your personal self-assessment tax return. 
• As a company owner, you’ll pay income tax on a salary and dividend tax on any dividends you receive. The company will pay corporation tax on company profits. 
• As a partner in a business partnership, you’ll pay income tax and national insurance on your share of profits from the partnership. 

An accountant can help to ensure you comply with the appropriate tax rules and take advantage of any tax saving opportunities. 

5. Directors’ pay 

An incorporated company must have directors who run the business and shareholders who own the business. In owner-managed companies they are one and the same. 

As a director, you receive a salary payment from the company, along with bonuses and benefits.  

As a shareholder, the company can pay dividends as a reward for investment. Companies can only pay dividends from profits after tax.

Our guide to directors’ pay will be useful in deciding how to pay yourself and a conversation with your accountant should also be held to consider the tax advantages. 

6. VAT 

When your business’ turnover reaches the VAT threshold you must register for VAT. There might also be tax saving advantages for registering earlier than that. 

An accountant can advise on your best options and prepare the VAT returns that VAT-registered businesses must file. Submitting VAT returns and payments late or with errors can lead to penalties. Employing an accountant will ensure you don’t miss deadlines or make errors. 

7. Employing staff 

Your start up may need staff from the outset, or as you grow you may need more resource and need to recruit. Employers have more regulations to comply with and the obligations can be time-consuming and confusing. As accountant will free you up from the day-to-day tasks needed when employing staff by overseeing your payroll processes. 
 
Many new employers lack the knowledge to effectively navigate what can seem like a legal minefield. TaxAssist Accountants can put you in touch with the Employmentor employment law service. It provides direct contact to employment law experts and resources to help you comply with regulations. 

8. Pensions 

Under auto enrolment regulations, employers must automatically enrol certain staff into a workplace pension scheme and make contributions towards it. If you fail to comply, you may face a fine. Our guide on auto enrolment pensions can give you information to start off with and using an accountant will ensure your business meets its legal obligations. 

Date published 25 Feb 2022 | Last updated 17 Sep 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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