Sole Trader Questions

[mike750]

Hi,

I want to open a bank account for my sole trader business i plan on starting. Do i need to register as self employed before i can open an account with Barclays?

I dont add VAT onto my invoices, Can i claim back the VAT charged on things that I have purchased? - I buy a new chair for my office for £117.50 inc VAT, can i claim back £17.50? Which figure would i put down in my Purchase Ledger system?

I have put together a simple system in Access to hold my records. How does this look?

Clients
Client Name
Address Details
Contact Details

Sales Ledger
Customer
Invoice Date
Invoice Number
Total
Paid? - Yes/No
Date Paid
Type - Different product/service
Notes

Purchase Ledger (Would i put things like 15% of my electricity bill in here and would i need to file a copy and show my workings out?)
Supplier
Invoice Number
Reference Number (For my filing)
Total Paid
Date Paid
Type - Allowable Expenses?
Notes

Supplier Details
Supplier
Account Number
Address Details

I currently pay £125 per month rent to my parents, this is to cover gas, electric + keeps etc. How would i work this out with my business? Do I count the business as a person paying rent? How would i pay the % of the main bill - too my parents and note what has been paid on my purchase ledger?

I'll be keeping everything filed on paper, referenced so I can easily relate between the system and my paper copies. I am planning on taking everything to an accountant for the first/few years so everything is done correctly.

Is there anything I have missed?


Thanks!!

[robbob]

Hi Mike

You will have to ask the bank if they need you to register first, each bank may have different rules, you have up to 3 months after you start to register with inland revenue.

Note there is very little difference between sole trader and business account other than they charge you more. You will still be personally responsible for any overdrawn/loan balances.

If you are not vat registered you do not charge vat and do not claim back vat.
If you provide standard rated services it is normally best not to vat register until you need to 67k tunover, unless you do most of your sales to vat registered companies.
If you have zero rated sales it may be worth registering anyway.

Things start to get tricky when you work from home and this is sublet. I would claim a reasonable use of home only. You cannot claim for items you do not pay or incurr costs on. Presumably your rent is mostly paid for your living so i can see very little additional cost for the business.

It will be important that your accountant/tax man can easily identify how all items have been paid eg cash/bank/credit card
and where all sales have gone eg business account/cash drawn/petty cash etc.
So keeping a petty casg log and balancing the bank account is a must if you want to make things easy at the year end.
There should not be any unkown lodgment/transfers cash receipts into any of your accounts, eg if you paid your personal credit card cash it should be identifiable exactly where this cash came from.

If you are willing to put in the effort sage is good for recording all trasactions where there are multiple control accounts, but it is only of use to an accountant if the mian things are done right. Eg bank balances,supplier ledger balances, etc.

Don't forget to put aside money as you go for the taxman, if you are making money from the start perhaps 25% of your profit before you take any drawings, note as stamp payments,tax payments are not allowable they must be funded from your drawings so don't forget to factor this into your calculations.

[mike750]

Thanks for the answers!

Been looking at a few business accounts but all ask for 'business name'. Since im not registered yet i dont know what to put here? Does anyone have a recommendation for the best business current account? I'd like an all-in-one package (public indemnity insurance etc) if possible at a reasonable price.

It'll be more of a hobby than a business, but a well paying hobby at that!

Also, im slightly concerned about house insurance. I have heard of cases where the house insurance has been cancelled because they were operating a business from home. The house insurance is in my parents name.