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Whatever business you're in, dns are here to support you as a
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Our specialist team of business experts offer a full range of services for all your accountancy, tax and business support needs.
All your accounting needs in one place. Online accounting & bookkeeping software and in person with our friendly team.
Helping you navigate the complex rules around IR35
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If you are a new business, we hope you will have read the DNS small business start up kit. If you are an existing business operating as a sole trader, we hope this table will help you see the benefits of working through a limited company.
Below are the average returns you can expect to see working as a sole trader or through a limited company.
|Profit £||Ltd company tax £||Sole trader tax £|
The benefits of working through a limited company are obvious.
The director of a company is required by law to produce accounts and file them with HMRC and Companies House. DNS will take care of the preparation and the filing of your accounts on time so that you’re never charged a penalty for late filing
Proper records must be maintained as defined by the Companies Act and HMRC. DNS will guide you on how to keep and maintain your records, and ensure that you’re always on the right side of the law.
A director of a company is responsible for filing the company’s Annual Return to Companies House. An Annual Return is a list of officers of the company and the shareholders of the company as of a particular date. Non-compliance results in the company’s name being struck off from the Companies’ Register. DNS will ensure that your Annual Returns are always filed on time.
DNS will ensure that you never miss a payment by reminding you when it is due. We encourage all our clients to use the DNS online accounting portal, which will be available for small businesses very soon. Meanwhile your account manager at DNS will remind you of all your due dates and tell you how much you owe and when.
Late payments and late filing of statutory paperwork results in penalties and so, obviously, a responsible and organised approach to your business is desirable; it is also important that you set aside the funds in the company account to pay your tax bills.
With DNS everything is taken care off without fail: yes, by everything, DNS means everything, and no hidden surprises.
VAT Registration is optional if your turnover is less than £85,000. If your Turnover exceeds £85,000 then VAT registration is mandatory. The key to whether you should register or not lies in your customer base: if your customers are mainly businesses and VAT registered you should go for VAT registration, but if your customers are mainly VAT registered customers, you may lose clients to competition.
Example 1 – Registering for VAT can be advantageous
John started his plumbing business and supplies services mainly to industrial customers that are all VAT registered. John should register for VAT and recover his Input VAT (VAT on supplies). Even better, John has the option to register for the VAT Flat Rate scheme.
Small businesses with a turnover of less than £150,000 can join the VAT Flat Rate scheme. This means that you can collect VAT at the full standard rate, while paying at a lesser rate.
For Example if you make sales of £10,000 and collect VAT of £2,000, you could save around £300 to £400 depending on your trade classification. Go to the HMRC Ready Reckoner to check what rate you would pay.
Example 2 – Registering for VAT can be disadvantageous
John decides to expand his business to include household customers. He goes to Mrs Jones’ house to quote for a job and submits a quote to her for £100 plus 20% VAT. Mrs Jones had requested quotes from two of John’s competitors, one of whom does not charge VAT and, therefore, quoted £100. Mrs Jones went for the quote for £100 as, because she’s not VAT registered she can’t recover the VAT. For household customers, Input VAT is an irrecoverable cost.
So John lost out on the job because he was VAT registered, and if you’re VAT registered, you MUST charge VAT.
Registering for VAT is compulsory if your turnover exceeds £85K. However, if your business is turning over £85K it will have a sufficient customer base, financial rigour and inbuilt efficiency to compete with non-VAT registered businesses. So VAT registration can be advantageous and save you some money. BUT be warned if you register too early and you’re client base is mainly domestic, it may work against you, so make sure you get it right.
In order to manage your operations efficiently and to save on taxes, you as a small business owner can try and inculcate following practices in their business operations to gain maximum tax benefit:
To ensure that you don’t end up overpaying on taxes, it is very important to know and understand your industry you are dealing with/in and in order to do, you must have a improvise a well-thought method to have continuous engagement with your trade body or association. You must also try to attend all the events and programs organized by the association. The best way to keep you updated about all the recent happenings of your trade body is to subscribe to its newsletter. Allowances like uniform allowance and several other dispensations are approved by HMRC which you can use depending on the industry you are in. And last but not the least, your trade body is on your side so must make most out of it to understand your industry better.
This is second step after you have attained a thorough knowledge of your industry because if only you have understood your industry well enough, you can utilize the applicable allowances. The size, type and structure of your business will decide which parts of tax legislation you need to consider. Lot many small business owners are clueless about allowances like annual investment allowance, personal allowance, dividend allowance, marriage allowance etc and thus miss out on taking their benefit. For example. HMRC has approved marriage allowance for married couples and civil partners and if eligible, you can save tax upto £230. Also the personal allowance i.e. the tax free limit for each individual before income tax is deducted is £11,500. UK government also allows the basic taxpayers to earn upto £1,000 as interest and pay no tax whereas the amount is half for those who fall in the higher rate tax slab. The annual investment allowance and dividend allowance is £23,000 and £5,000 annually. The full value of your expenses on qualifying plant and machinery upto the annual investment allowance limit is deducted from your profit and you pay tax only on the balance amount and thus can save considerable amount of money, because the balance amount might qualify for the capital allowance upto a certain extent. However, before you start to claim the annual investment allowance, it is important to know the applicable rates because every asset has got its own and different rate from other assets.
A small business owner has a lot on his plate and thus he needs to be very prudent regarding his time allocation. Spending more than required time on tasks such as bookkeeping and accounting will not only take the fair share of your productive time but also make you jack of all trades and master of none, which for sure is not a desired characteristic for success. Your business will benefit from you if you are spending time working on it while hiring competent professionals for tasks such as bookkeeping and accounting. Also you must try and not get into the feeling of “ I know it all” because chances are high that in situations where you may thing that you are saving on money, you are actually losing out by not claiming allowances and deductions you are eligible and entitled for.
For most of the small business owners, dealing with VAT in the right manner has been a sore area for years because while majority of them have no idea if they are paying the right amount or not, lot of small business owners don’t even know if a scheme called as Flat Rate Scheme even exists on the planet earth, which could otherwise be an unexpected source of profit. As the name hints, under Flat Rate Scheme, you have to pay a single, flat rate of VAT on your annual turnover and HMRC has its own list of flat VAT rate for different industries. Thus, you can choose the flat rate as per your industry and pay accordingly. Also, where HMRC refrain you from claiming any VAT on the purchases made, you can keep the difference between the VAT you charge to your customers, which is usually 20%. Thus, having a regular VAT health check could prove quite beneficial for your business.
HMRC has allowed generous tax savings for those who are self-employed and work from home and if you are a small business owner, you are a self-employed in the eyes of HMRC, so you must be aware of tax-saving schemes. Being a self-employed, you can claim either all or a certain percentage of following expenses:
In order to avail tax benefits, you as a small business owner must ensure that you are paying your subscriptions with the HMRC and Companies House well within the deadline. Meeting all deadlines become a lot trickier when things are not going as smooth as you would like them to be, but even then you have to make sure that you deal with the situation as soon as possible because doing so will give you and your advisor, if any, buffer time to liaise and reduce the penalties or late payment interest.
You have hired and paying your accountant to keep the company’s or business’s account in order but it doesn’t mean that your task gets over. At the end of the day it is your business so it is your duty to have a periodical meeting with your accountant to see if things are as they should be and address areas of concern, if any. Doing so, will also keep your accountant under check and prevent him from going haywire and if you don’t talk to your accountant or if he is very busy to give you the time, change the accountant.
In order to save on tax, HMRC allows you to transfer some of your assets, savings and investments to your spouse or civil partner or to someone from your family who works in your business. Although you must be careful here so that you end up creating problem for those involved with regard to control or capital gains tax.
HMRC encourages everyone to save on their taxes by doing an advanced planning and as a small business owner; you need to assess your profits in advance in order to claim any deductions well within time before it is too late to do so. For example, if you have calculated your profits, you can see if buying any qualifying plant or machinery or adding to pension contributions has any positive effect to reduce your taxable profits.
As a small business owner, you must have a well-planned exit strategy in place because having so will not only increase your chances of realizing the best value from your business but will also allow you to have a tax efficient exit and thus reduces the burden of income, capital and inheritance tax, if applicable.
Our main aim at dns Associates is to provide a proactive service to our clients, whilst ensuring that they are making the most of any potential accountancy savings and tax relief. We also work closely with our clients to help them maximise their profits and business growth, by offering the following benefits:
We take great pride in the work we carry out for our clients, as we always strive to build a strong relationship and provide the most pro-active service. Find out what our clients are saying about us here.
We offer a free consultation to any business or individual who feels that they may be missing out on potential savings, or paying too much for their accountancy, outsourcing or tax advisory services.
The decision of changing an accountant is a critical one and should be taken with utmost care. If you believe that you are not getting value for money from your accountant, it’s the right time to choose a new accountant. DNS provides you experienced, trusted and dedicated professional accountants who not only manages your accounts in compliance with tax legislation but also helps you in finding tax saving opportunities. Our accountants will cater to each and every need of yours and provide you with cloud accounting solution. DNS accountants help small businesses in over achieving the goals which they are desired of.
At the meeting, discuss your requirements and any business issues or concerns you may have. Don’t hold back.
Once you have decided to switch, your new accountants need your permission in writing to obtain a copy of your accounting and tax records. This is done by signing a simple authorisation letter, which they should be able to provide. They will then do what is necessary to obtain your records.
Your new accountants will write to your current accountant notifying them of your intention to change. They will also provide you with a letter of engagement setting out your requirements and their duties as your new accountant. Make sure that all fees and charges are clearly spelled out in your agreement, too, to protect you from unpleasant surprises.
For any questions, clarifications or further information don’t hesitate to get in touch. Contact us or schedule an appointment at your convenience.