Starting a limited company can feel daunting. So, we’ve put together this ‘checklist’ to give you a few ideas of some of the things to consider.
1) Speak to your accountant about your personal situation, e.g. tax free childcare and child benefit, need to account for any student loan repayments if applicable, usefulness of company pension contributions if you are near the age of 55 years old, your monthly personal cash flow requirements and income tax projections based on this, etc?
2) Speak to your accountant about setting up your company tax efficiently, e.g. is your spouse a shareholder of the company?
3) Speak to your accountant about ways to reduce your VAT liability, i.e. to reclaim VAT on expenses incurred before VAT registration on the flat rate scheme when you submit your first VAT return and planning the purchase of capital assets (computer, phone, table, chair, printer) totalling more than £2,000 on a single receipt in order to reclaim VAT?
4) Are you setting aside 7.5% dividends tax based on the dividends that you will take from the company if your contract is outside of IR35?
5) Are you taking the right mix of salary and dividends and does this need to be adjusted based on other personal income received during the tax year?
6) Have you discussed with your accountant about the possibility of employing a family member to help you with the process of running your limited company, e.g. bookkeeping, looking for contracts, reviewing contracts, updating CV/Linkedin profile, helping you with research, helping you to file away and organise your receipts?
7) Have you discussed with your accountant your statutory responsibilities, e.g. taking photos or filing your physical receipts in case of a HMRC investigation, all the tax return submission deadlines to avoid HMRC fines, all the tax payment deadlines to avoid HMRC fines, etc?
8) Have you discussed with your accountant the benefits of the flat rate scheme for VAT versus the standard scheme for VAT?
9) Have you discussed with your accountant the possibility of a 10% entrepreneur’s relief claim when you close the company and how to qualify for the 10% entrepreneur’s relief tax rate?
10) Are you aware of the rules around IR35 and IR35 liability insurance, and the rules around claiming travel and subsistence?
11) Has your accountant made you aware of the expenses that you can claim via a limited company, e.g. cycle to work scheme, pension contributions, relevant life cover, use of home as an office charge, Christmas party, trivial gift benefits, staff training, pre-trading expenses, etc.
12) Are you aware of taking a director’s loan, making pension contributions, investing in EIS, VCT, or SEIS shares?
13) Do you understand how salary and dividends are taxed personally, and how the personal tax payments vary depending on whether or not you receive child benefit and/or whether or not you go above the £100k threshold for gross personal income?
14) Are tax estimates for corporation tax, VAT, PAYE and income tax all visible within your online portal and are these correct and up to date? Has your accountant conducted a health check of your online portal yet to ensure that you are recording all your business expenses?
15) Has your accountant confirmed that there are no additional charges for personal tax return, £13 confirmation statement, and references for income/employment/mortgage verification purposes, etc.
16) Has your accountant sent you pay slips for a tax efficient salary in order to save you corporation tax if your contract is outside of IR35? Have you received your dividend vouchers as well for your dividend payments and understand how to pay yourself dividends taking into account profit, personal tax, and company shareholdings?
17) Has your accountant confirmed that they have registered your company for all the taxes, e.g. PAYE for tax efficient salary and VAT for the flat rate scheme profit, and registered you personally for self assessment so that you can declare your personal income and apply for mortgages, etc. Have they passed on all your company tax certificates and do you know all your tax reference numbers for future reference for tax payments?
18) Has your accountant confirmed that you are using a professional 3rd party online accounting system that can be moved around from accountant to accountant? This could potentially save a lot of headache down the line should you wish to change accountants in the future?
19) Does the income that you are withdrawing from the company match the projection that they provided when you signed up?
20) If you get paid and spend in a foreign currency, can you save on bank charges and fees by using a digital or online bank such as TransferWise or Revolut?