This is my first post on the forum, despite being a regular visitor for the last couple of months!
I am new to bookkeeping and due to invoice my first client tomorrow. I have a Ltd company set up from the last four years when i worked in a different industry. I have been advised by my accountant to keep this going, and to charge VAT (as I am already set up), but I am aware that for my first year my income will be very low, as a lot of the work I will do will be unpaid whilst I build my confidence up, and at the moment I have not even begun marketing myself for any new clients (am planning on doing this in the new year)
Any advise anyone can give me on the best way I should set myself up would be great!
I would say that if it is just the bookkeeping business then there is no need to be Limited company or VAT registered if you are working from home. If you have premises that you pay rent on may be beneficial to be Limited Company and VAT registered if you pay VAT on your rent.
I was sole trader bookkeeper working from home for just over 3 years then got premises and started other business revenues and became Limited Company and VAT registered because of that.
We are in a position that we cannot afford an accountant and the accounts and returns are more complicated as a Limited Company compared to a sole trader so that is something you will need to consider whether you have the confidence to do your own Limited company accounts and returns or can afford to pay an accountant.
Thanks for the advice. With regards to wrting things off, my accountant said that due to the increased amount of NI you pay as a sole trader, it balances out with their fees. Would you agree with this? I guess it would depend on how much I can earn in my first year. I really cant afford to be paying an extra 500 pounds each year in accountancy fees if I am not saving that money elsewhere.
With the NI as a sole trader earning roughly £12,000 per year I was paying the NI amount monthly of £9.50 - £11.00 per month and tax and NI was around £440.
As a Limited Company paying myself £420 a month meant got NI stamp for free.
Would say it all depends on how much you are likely to be able to earn to justify the accountancy fees. If you are new starter to bookkeeping and starting when the economic climate is at the moment would say unless you are really lucky will take time to build up a client base and earn an income that could justify paying £500 in accountancy fees.
I have got to my first year end and have to July to get accounts done for companies house and Inland Revenue and CT600 form, and with 15 years experience including working for chartered accountants the thought of doing these accounts frightens me.
I don't think that as a owner managed buisness you would see an increase of £500 should you convert to a limited company. As a bookkeeper I am assuming that your presentation of records would be of high standard, and reconciled, so a reasonable fee for this would be in the region of £500/£600, whereas you would be paying a sum up to £400 for sole trade accounts / tax return.
With reegards to VAt, that decision should be made on your client base, if they are mainly VAT registered businesses then register for VAT for your reclaims without additional expense to them. If you are working for small, non VAT registered traders then don't register for VAT as you will be more expensive to them.
Finally, in addition to the tax considerations, when deciding on ltd co -v- sole tade also consider the limitation of liability aspect. We are currently going through the worst recession in 50 years, HMRC have imposed new penalty regime and are also keen to recover as much tax as possible. All pointers as to how bookkeepers could find themselves up agaisnt some claims where business owners get stung for tax and try to point the finger and seek to recover from their bookkeeper(s).
Regards, Jason
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