I get a lot of phone calls from people who’ve been trading for six months, sometimes even a year, and they’re suddenly panicking because they’ve got no idea what they owe HMRC or whether they’ve been doing things correctly. I never make anyone feel bad about it, because starting a business comes with enough challenges as it is. But I always find myself thinking the same thing, I wish they’d called me on day one.
Speaking to an accountant isn’t just about tax returns or deadlines. Getting advice before you start, or in those early days of trading, can help you make the right decisions from the outset, giving you confidence that your business is set up correctly and saving you time, money and stress further down the line.
Starting a business is exciting. You’ve got a brilliant idea, you’re ready to make it happen, and the last thing you want to think about is tax returns, bookkeeping and record keeping. I completely understand that. But here’s the thing, the decisions you make right at the very beginning can affect your business for years to come. Getting the right advice early on doesn’t just save time; it can save you money, reduce stress and help you avoid costly mistakes that are often much harder to put right later.
One of the first questions people ask me is whether they should set up as a sole trader or a limited company. There’s no one-size-fits-all answer, which is exactly why it’s worth having a proper conversation about your individual circumstances before making a decision. The right option depends on your business, your future plans and your financial goals.
Being a sole trader is generally the simplest way to start. There’s less paperwork involved, it’s straightforward to set up and it can be ideal if you’re just testing the waters or starting a small business. You’ll keep the profits you make after paying tax, and if your circumstances change, it’s relatively easy to stop trading. The downside is that there’s no legal separation between you and your business, meaning you’re personally responsible for any debts. As your income grows, it may also become less tax-efficient than operating as a limited company.
A limited company offers greater separation between your personal finances and your business, which can provide valuable protection depending on the type of work you do. It may also become more tax-efficient once your business reaches a certain level of profitability, as directors often have flexibility over how they receive income through salary and dividends. However, it also brings additional responsibilities, including annual accounts, Companies House filing requirements and more administration. For some businesses, becoming a limited company from day one is the right decision. For others, it makes more sense to start as a sole trader and review things as the business grows.
Another important consideration is VAT registration. Currently, businesses must register for VAT once their taxable turnover exceeds £90,000, although voluntary registration can be beneficial in certain circumstances. If most of your customers are other VAT-registered businesses, registering early may allow you to reclaim VAT on purchases and business expenses. On the other hand, if you’re mainly selling directly to the public, voluntarily adding VAT to your prices may not always be the best option. Every business is different, which is why it’s always worth discussing your circumstances before making a decision.
One thing I always encourage new business owners to do is develop good habits from day one. Keeping your bookkeeping organised, storing receipts safely and regularly recording your income and expenses will save you countless hours later on. Whether you choose accounting software or even start with a well-maintained spreadsheet, having a simple system in place will make managing your finances much easier. An accountant can also help recommend the right software and processes for your business, giving you confidence that you’re recording everything correctly from the outset.
Many people worry that they can’t justify the cost of an accountant when they’re first starting out. In reality, having professional advice early on often saves far more than it costs. Avoiding unnecessary tax, claiming all of the expenses you’re entitled to and staying on top of your legal responsibilities can prevent expensive mistakes and unnecessary penalties. More importantly, it gives you peace of mind, allowing you to focus on growing your business instead of worrying whether you’ve overlooked something important.
Starting a business takes courage, and I genuinely enjoy seeing local people take that step. Whether you’re launching a trade business, opening a shop, becoming self-employed or turning a hobby into a business, you don’t have to figure everything out on your own. A good accountant is there to support you from the beginning, explain things in plain English and help you make informed decisions as your business grows. If you’re thinking about starting a business, I’d always recommend having a conversation before you begin. It could be one of the most valuable investments you make in your business’s future.