Business Costs: What you should know when starting a new business
Starting a new business is an exciting time in any entrepreneur’s life; you have an innovative idea and are taking the leap into business ownership in order to make your dreams happen and your idea come to life. With that said, there are countless small details that one has to factor in when starting a new business, things that you may not have considered in the rush to get started on design and production.
If you are in the process of starting a new company (no matter how big or how small) in the UK, you simply must consider the following business costs in order to ensure that your dream does not go bust due to avoidable factors. Planning ahead for business costs is a smart and savvy thing to do – and it could mean the difference between failure and success.
Here are some of the most common business costs that entrepreneurs incur in the UK.
- Office Space – Even if you plan to do most of your work from home or the local coffee shop, unless you are comfortable making your address visible to the general public you will need a registered office address. This can either be a traditional office space (which can get pricey very quickly) or desk space at a start up hub or co-working space, which while affordable does not offer privacy.
- Business rates – If you do plan to rent a traditional office space, you will be required to pay annual business rates on your property. This is comparable to council tax – business rates ensure that you to contribute taxes to your local area for the services and amenities that you use. These rates are calculated based on the overall value of your business – in order to estimate what this will be, you can use the government business rates estimation tool, found here.
- Employee wages – You might be a solo act for a little while, or you might need to hire immediately – but remember: the better the talent you hire, the more you will have to pay them, as top candidates often demand higher salaries. There is a lot to be said for hiring young, affordable employees who can learn your preferred ways of running a business, but ultimately these seemingly cheaper hires may cost you money as you struggle to mend their mistakes and spend time training them from scratch. Before determining your employee salaries, you will have to put some thought into what you value – and what you can afford.
- NICs – If you are just starting up, you are probably not yet familiar with the intricacies of the taxation system and how to pay taxes as a self employed individual. Here is an excellent link that can help you sort out your National Insurance Contributions (NICs – budget 2.80 a week), personal income tax rate and your year end paperwork. Do not let this get away from you – taxation fees and penalties can add up, and the legal cost of ignoring your taxes is far too high to pay.
- Accountant/ bookkeeping fees – Does the above point make you want to break out into hives? That is a sign that you should be working with an accountant or bookkeeper right from the start. By hiring a skilled accountancy professional you can alleviate the stresses that come from number crunching, taxation codes, payroll and paperwork, but they come at a cost. With that said, if you can afford to outsource this work, it is a very wise investment in your future success.
- Workplace pension – No matter how small your firm, you must enrol your employees in workplace pension scheme upon hiring. This is a rather simple process, and the amounts you are required to contribute will be dependent on the salaries of your staff. Failure to enrol employees in a timely fashion will result in hefty fines – don’t risk it!
- Domain Registration and Web Hosting – This is a seemingly small cost, until you consider that you will need to renew your domain name each year in order to ensure that it is not purchased out from underneath you. The more desirable the domain name you hope to snag, the more it is going to cost you; many of the best names on the internet have been purchased and are held by cheeky resellers who raise the prices on attractive domain names. You may also want to purchase all of the ‘top level domains’ for your name (the various permutations of .net, .co.uk, .com etc) and point them at your main site in order to avoid confusion.
- VAT – Once your business meets the threshold of £82,000 you must start collecting VAT (unless your product or service is exempt). You will probably collect more VAT from your customers than you will pay to your suppliers, and so you will fill in a quarterly VAT return and arrange to pay the surplus to HMRC. This is of dire importance – you cannot ignore the importance of paying VAT. Failure to do so can result in your complete bankruptcy and a black mark on your credit report, preventing you from doing business in the future.
- Annual Return/Annual Confirmation Statement – Each year you are required to file a statement with Companies House confirming the statutory details of your company, i.e. the Registered Office Address, Officers, Secretary, Business Classification etc. Up to 30th June 2016 this statement is known as the Annual Return, but from 1st July 2016 the Annual Confirmation Statement will take its place. A filing fee accompanies this statement and, at the time of writing, this stands at £13 for filing online and £40 for filing on paper.
Good planning and strong business sense can go a long way when it comes to ensuring that your new enterprise is successful, efficient and profitable – both as soon as possible and far into the future. By preparing for the costs above, you are on track to triumph.
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