My ‘To-Do’ list is growing every day as I think of more ideas and basic tasks on setting up Manylion Bach | Little Details Design. There are tasks which I should try get done sooner rather than later otherwise I might land up in trouble with the taxman, land up short on cash or the business will become a shambolic mess.
Currently on my to do list:
- Open a Business bank account
- Get advice about Tax
- Organise all my receipts and invoices and start bookkeeping
1. Open a business account with a bank – my experience with HSBC
I have been spending a good chunk of my disposable income towards getting materials like card stock, tools, ribbons and other bits and pieces for MB|LD projects in the last month, and I’ve come to the point where my personal bank account statement is getting a bit confusing. How many orders have I placed with Amazon? What have I bought from B&Q?
The only solution would be to open a business account. I plan to move around £100 of my wages every month into this account to cover for business expenses and keep my personal account for going out, clothes, lunches, makeup and other girly bits. Also, it would be easier to do my own tax return, if I ever get to that position!
I’ve decided to approach HSBC as I already bank with them, already a loyal customer (been a customer since I was 14 years old!) and they have several locations in Cardiff that is convenient to my home and workplace. Thought it would be fairly straight forwards to request an appointment with an business advisor.
I was wrong.
I’ve been trying to make an appointment for two weeks now but I haven’t had much luck. The first time I attempted to make an appointment in a branch, I was told I would have to ring a number and arrange it via a call centre. Tried the number, I didn’t get much sense with the operator and gave up. I don’t think the poor Indian guy understood my Welsh accent.
The next time I passed my local branch, I popped in again and demanded for an appointment there and then. Finally, a staff member took my details and pulled up the financial advisor’s diary. HSBC only offer appointments during business hours and guess what, last appointment is at 3pm, 1.30pm on a Friday! So much for longer opening hours on weekdays and Saturdays HSBC.
Gutted. I was hoping to pop in after work but it looks like I’ll have to use some of my precious annual leave to speak to them, only to be told they won’t allow me to open a business account.
If I wanted a loan or mortgage, they would have been more than willing to arrange an appointment to see me after work to try the hard sell. Asking for financial guidance, only between 9am and 3pm, pffft! Hence why my Twitter rants about HSBC the other day.
HSBC have knocked my confidence a bit – my first hit from the ‘you can’t start a business’ stick. I won’t let this stop me or get me down, I won’t get beaten that easily!
The worse thing is I know which business account I want from HSBC, I’ve done my research online, worked out the costs etc but I’m not 100% sure of the terminology used on the website. All I want is to have a chat with someone in HSBC for some clarification and reassurance. I’m not asking for much.
2. Get advice about Tax
I have so much questions and worries about tax – I’ll probably need to spend at least an afternoon speaking with a tax advisor or an accountant to go through all of my questions. My biggest fear while trying to set up MB|LD is getting stung financially by the tax man or upsetting the HMRC in anyway.
I shouldn’t worry or be scared of the HMRC – while researching into setting up a business, I have found that they offer a number of online guideline and webinars for businesses and self employed www.hmrc.gov.uk/webinars. Maybe the HMRC are not that bad?
Business Wales did try explain as much as they could about different taxes when I attended ‘Taking the Plunge: Starting a business’ workshop last month but there’s only so much they can advice they can give. As everyone’s financial situation and business set up is different and unique, there’s a few questions that can only be answered by an accountant or a tax advisor.
So this week, I’ve spoke with a local accountant, TaxAssist Accountants for a free consultation on personal tax allowance and starting up a new business. I didn’t have to take any time off work – I managed to get an after work appointment and within days of enquiring.
I wasn’t sure what to expect with a meeting with an accountant so I prepared myself with a list of questions, a draft business plan and a few rough figures how much I could potentially earn from my sideline. I was mentally prepared for the second hit from the ‘you can’t start a business’ stick as well. I didn’t want to be caught out as I was when I spoke with HSBC.
What a productive half an hour! I walked out of the accountant’s office feeling relieved from my tax worries and reassured. A similar feeling I experienced after attending Business Wales’ workshop last month. I managed to get all of my tax questions answered and I’ve learnt a lot more.
What I have learned from the accountant:
If I’m advertising MB|LD in anyway (i.e wedding fayres, Facebook, Twitter, notonthehighstreet.com, etsy.com, business cards), I need to register with HMRC as self employed as soon as possible. If the HMRC sees that I’m advertising anywhere but haven’t notified them, I could be fined! Yikes!
As I already work full time, I have used up my personal tax allowance of £9,440 for 2013/14, and £10,000 for 2014/15 (taken from HMRC Income Tax and allowances website). Or in other words, I’ve reached the limit on how much I can earn without paying tax. Any income I make from MB|LD, regardless if I invest it back into the business, has to be declared to HMRC and it is taxable.
My current tax code will change (once I do my paperwork with HMRC) but the tax rate will remain the same. To stick to the same tax rate, I have to ensure my total earnings does not exceed £40,000pa. Total earnings = my annual salary with my current employer plus earnings from MD|LD.
My contribution towards National Insurance and Student loan payments will increase as well as I’ll be potentially earning more. I suppose I might be able to pay off my student loan off faster.
I can receive tax relief on expenses for MB|LD such as the iMac, printer, software, business cards, stationery, broadband, mobile phone bill and anything else classed as ‘allowable expenses’ my business. A quick overview can be seen on the HMRC website.
I can also receive tax relief on travel expenses for business use such as attending wedding fayres, business workshops, craft & hobby fairs, visiting clients and suppliers. That’s train tickets, bus tickets and making a note of how many miles driven by car!
I don’t have to open a business bank account for MD|LD. As long as I can keep a record of my outgoings and income and able to show this to HMRC, it doesn’t matter if it comes in/out via personal or a business bank account. I can do this myself or with an accountant. Phew – no need to see the bank after all and save myself from banking fees!
I don’t need to register with Companies House if I’m a sole trader. Phew! I must have missed this when attending a workshop with Business Wales. Saved myself a few hundred quid there and stress.
Yes, I learn’t a lot in half an hour!
This was a successful and positive experience with the accountant and I glad I pushed myself to arrange this meeting, especially after my poor experience with the bank. I’ve managed to tick off a lot of items I need to investigate while setting up a business, saved some money and refocus my attention on other tasks, such as bookkeeping!
No wonder there are so many new art, craft and handmade business start ups recently, if it’s this easy!
3. Organise all my receipts and invoices and start bookkeeping
This is going to be fun – Collecting and arranging all the bits of paper that get stuffed in with Amazon and eBay parcels and in my purse after random shops in IKEA, B&Q and pound shops.
When I started thinking about setting up MB|LD, I made a conscience note to keep hold of all the receipts and paperwork that is business related, just in case I’ll need to do a tax return.
The thought of doing a tax return may come sooner than planned!
I’ve started creating an ‘organised pile’ of all the paperwork I’ve received from suppliers on my desk but no form of filing system. So, my next task is getting a dedicated folder in the studio to hold all the receipts, invoices and any bits of paper from the suppliers by month and start logging all of my outgoings and incomes on a spreadsheet. Excel here we come!
In addition to this, I need to make sure I keep hold of any train tickets and keep a log of miles clocked when driving for business related journeys. I knew those random notebooks will come in handy one day!
All of this for submitting my tax return next year. One of the joys of being self employed!
I’ve scrapped and ‘To-Do’ list and rewritten it with my new tasks:
- Open a Business bank account
- Enquire at Companies House
- Organise all my receipts and invoices and start bookkeeping
- File and organise all my receipts and invoices on a weekly basis
- Build a bookkeeping spreadsheet and update on a monthly basis
- Get a notebook to keep in the car and not business miles
- Get a plastic pocket to keep hold of any receipts and train tickets for business use
- Register with HMRC as self-employed.
- Watch a few HMRC webinars for further tax research
Upwards and onwards – I’m back on track!