Chadwick Accountants & Bookkeepers Ltd
Starting a business is exciting - but it can also feel like there’s a never-ending list of things to figure out. And plan ahead for.
At Chadwick Accountants, we often get asked about the “right” way to set things up from day one, to ensure long-term benefits. And while it’s natural to want a clear answer, the reality is that most decisions depend on your business’s stage of growth.
Here are some of the most common questions we hear from new business owners, along with the key considerations behind each one.
How should I save for retirement as a director?
It might be some way off, especially when you’re only just staring out, but it’s a key consideration. One of the most tax-efficient ways for directors to save for retirement is through company pension contributions. These are deductible against corporation tax and can be paid into a new or existing pension scheme - provided it accepts employer contributions.
The annual pension allowance is currently £60,000, with the option to carry forward unused allowances from the past three years. While we can advise on the tax side, it’s worth speaking to a financial adviser for investment advice and long-term planning.
Should I register for VAT?
VAT registration is a key early decision. You’ll usually be choosing between:
- The standard VAT scheme - which allows you to reclaim VAT on purchases OR
- The flat rate scheme - potentially more efficient for consultants and service-based businesses with low VATable expenses, but limits reclaims.
Even if you delay registering, you may still be able to reclaim VAT on business purchases made up to six months prior.
Whether you register depends on your industry, level of expenses, and what your clients expect.
What’s the best mix of salary and dividends?
The old rule of “low salary, high dividends” isn’t always the best approach anymore. The optimal split depends on:
- Whether your company qualifies for the Employment Allowance
- Profit levels and corporation tax band (19%, 25%, or marginal relief)
- Family income and how personal allowances can be used
This is an area where tailored advice and regular tax planning can make a real difference.
How do I handle expenses?
Most business expenses should go directly through the company account. For directors using their personal cars, the approved current mileage rates still apply:
- 45p per mile for the first 10,000 miles each year
- 25p per mile thereafter
Subcontractors can usually add mileage to their invoices, which keeps things clear and simple.
How do I avoid IR35 issues?
IR35 is a common concern for businesses working with subcontractors. To demonstrate genuine self-employment and reduce the risk of reclassification you need to:
- Have clear project scopes and defined deliverables
- Ensure associates use their own tools or equipment
- Include a right of substitution in contracts
Keeping good records is essential if HMRC ever reviews your arrangements.
Do I need an accounting system straight away?
Not necessarily. In the early days, a company bank account and a well-organised folder of receipts are often enough. When the business grows - or if you need regular reports or cash flow forecasting - then it’s time to look at software like Xero or QuickBooks.
What insurance should I have?
It depends on your industry, but common cover includes professional indemnity, public liability and employer’s liability (if you have staff). A good insurance broker can guide you through what’s necessary and what’s optional.
What are my growth options later on?
As your business develops, you’ll naturally start to think about the next stage.
Winning bigger contracts usually involves VAT registration, due diligence checks and more robust systems.
Hiring staff brings payroll, pensions and HR responsibilities, but also opens up new tax reliefs.
If you’re planning to sell, good preparation helps. Clean books, IR35 compliance and a solid operations setup can all make a big difference. If conditions are met, Business Asset Disposal Relief could reduce capital gains tax to 10%.
Final thoughts
The key is to start simple: set up a proper bank account, track your expenses, and get the right registrations in place. As your business grows, so will your needs: and that’s where regular reviews and good advice really add value.
If you'd like to talk through your plans or get help with setting up the financial side of your business, give us a call on 01789 773 182 or email [email protected]
