FINANCE
Attraction – Baines Jewitt director Don Adams says setting up a limited company can bring tax benefits .
According to government statistics there were 753,168 new companies incorporated in the UK in the tax year ending March 2022 .
New limited companies are a significant aspect of the UK economy . According to government statistics there were 753,168 new companies incorporated in the UK in the tax year ending March 2022 .
These figures demonstrate the dynamic nature of the country ’ s business landscape , with a significant number of new limited companies formed every year . Despite fluctuations , the trend highlights the attractiveness of the limited company structure to entrepreneurs .
How to start a limited company Starting a limited company is an exciting endeavour , but it requires thorough planning . For example , you need to : > Choose the right company name and address to establish brand identity and ensure compliance .
> Choose trusted advisers to help with financial and legal responsibilities as a director . Expert assistance from an accountant means you are more likely to benefit from tax efficiencies and help from a lawyer means you can futureproof your business too .
> Incorporate your company – although it is possible to do online , it is worth investing in professional advice at this early stage .
> Register with HMRC – shortly after you have incorporated , HMRC will send your company ’ s Unique Taxpayer Reference ( UTR ) and form CT41G , providing information on Corporation Tax for new companies . If your taxable sales are likely to be above a qualifying threshold ( currently £ 85,000 ), you must register for VAT . Similarly , if you plan to pay yourself a salary and employ other people , you need to register as an employer to obtain a Pay As You Earn ( PAYE ) reference number to run your first payroll .
> Set up a business bank account to manage operational expenses .
> Have good accounting software to maintain accurate books and records and make financial management easier . > Establish company shares and ensure different classes , especially when investors are involved , to allocate ownership and control within the company . You might also need a shareholders ’ agreement which , although not necessary , is advisable if there is more than one shareholder .
> Create a memorandum and articles of association to outline the rules and regulations that govern company operations .
> Understand insurance options to protect personal assets and manage potential risks .
Mastering finances and navigating business taxation Whether you ’ re a new entrepreneur or an experienced business owner , making informed financial decisions and understanding taxation when running a limited company will help with long-term success . For example , taxes that apply to limited companies include : > Dividend Tax – which is crucial for limited company owners who receive income through dividends .
> Value Added Tax ( VAT ) – which involves getting to grips with thresholds , VAT schemes or obligations to manage VAT effectively and minimise potential liabilities .
> Corporation Tax – which is applicable to limited companies and where it is paramount to identify relevant deductions and allowances and ensure compliance with HMRC requirements .
> Income Tax and Capital Gains Tax – which are important in terms of personal income and capital gains for a limited company owner .
The importance of professional advice “ Professional advice is crucial for business owners to provide guidance on complexities such as financial management and business structuring ,” explains Don . “ This expertise can help avoid costly mistakes , minimise risks , maximise profits and ensure the business operates within the law .
“ Taxation is a critical aspect of this . By staying informed and understanding key considerations , you can navigate the tax landscape effectively and optimise your business ’ s financial position , make informed decisions and ensure compliance .”
If you would like to chat about setting up a limited company or would like a FREE copy of Baines Jewitt ’ s Running a Limited Company Guide , email info @ bainesjewitt . co . uk or call 01642 632032 .
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