8 helpful financial checks when starting your own business

September 13, 2016

You’ve only gone and done it. You’ve quit your job, you’re making your escape from the cubicle for the last time and you’re going it alone. Let us make the transition from corporate clone to business mogul a bit easier with our must-read financial checklist.

  1. Get yourself a decent accountant

Frankly, you don’t know what you don’t know. If you’re new to self-employment, getting yourself a good accountant can help to avoid pitfalls and start off on the right track.

  1. Make sure you have a savings cushion

Things might be tight for a while until your business (hopefully!) takes off so if you’ve already quit your day job, consider some contract work to build up that nest egg while you start to build your business. If you haven’t already handed in your notice, can you stick it out for a few more months while reducing your spending so you have money to cover your bills?

  1. Decide how you’ll be funding your new business

If you’re simply going freelance, you may need very little outlay. If you’re planning to take on Starbucks in the coffee market, you’ll need a lot more. If you’re seeking funding, you’ll need a detailed business plan, preferably with market research that shows there is a demand for your product or service. Then you can share it with banks, angel investors (who provide funds for a small stake in your business) or venture capitalists (who may expect a much larger percentage of your business).

  1. Understand your new tax implications

Register as self-employed with HM Revenue & Customs as soon as possible or you can be penalised. You’ll then have to complete an annual self-assessment tax return which will tell you how much tax you need to pay. On the plus side, you’ll be able to offset expenses such as travel and phone calls against your tax bill. You will also need to make National Insurance contributions so factor this into any budgets.

If you earn £83,000 or more, you’ll need to register for VAT, which is payable on the majority of business transactions that involve the transfer of goods or services. Tax complications can really put people off the idea of starting their own business but if you’ve got a good financial adviser, it doesn’t have to be a road block. Our best advice is to keep good records – don’t throw anything away!

  1. Consider opening a business bank account

If you’re a sole trader, you can use your personal account for your business. However, opening a business bank account is the simplest way to keep your finances separate, provide transparency and potentially improve your credibility, which will be useful if you want to apply for a business loan.

  1. Decide whether to register as a limited company

Most small businesses start as a sole trader and some never need to change. But there are advantages to setting up a private limited company, including protecting your personal assets and possessions if the company goes into debt. It may improve your prospects – some large organisations will only deal with limited companies. And it may reduce your tax bill as limited companies pay corporation tax only on profits. If you decide to take this route, you’ll need to register with Companies House which costs between £12 and £40.

  1. Check your insurance

Many self-employed people choose to take out income protection insurance and critical illness cover in case they are unable to work. Life insurance is also important for people who have dependents. Private medical insurance may be a luxury you can’t afford when you’re starting out but once you can afford the premiums, it may be worth considering.

If you are working from home, talk to your home insurance company to find out if there are any additional requirements. For example, does having clients visit you at home affect your terms of cover?

  1. Sort out a private pension

This topic could fill many pages of this blog so for now, we’ll simply say – if you’re no longer in an employer’s pension scheme, you’ll need to arrange your own. And if you have any other people working for you, you’ll also need to provide a workplace pension scheme for them (by 2018). Your financial adviser can help you navigate this thorny, but important area.

Need financial advice on starting your own business? Greensky Wealth are only a call away.


This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice. The value of your investments can go down as well as up, so you could get back less than you invested.  

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