Using the flat rate scheme incorrectly.
There is a simplified way to deal with VAT for VAT registered businesses, where a set percentage is applied to gross income based on a list published by HMRC.
However LOTS of clients use the percentage and apply it to net sales whereas it should be applied to the gross income for the business. This mistake in operating the scheme can lead to underpaying the VAT significantly which can create an assessment payable to HMRC when they catch up with you.
There is information at the bottom of this blog about the flat rate scheme, but if you are unsure it is definitely worth getting advice so taht you can make sure you do not fall in to this trap.
Taking too much money out of a limited company.
Directors can take money out of a company in the form of wages via payroll, loan repayments if they introduced monies or assets, or dividends.
People who are not used to running a company and especially Directors who used to be self employed often fail to grasp that the company's money has to be seen as separate from their own money.
If you take money assuming it can be classed as a dividend later on, you need to be sure that there are profits in the business. Dividends are only to be paid to shareholders when there are post tax profits. If you take too much you will end up paying tax on an overdrawn Directors loan.
Leaving the bookkeeping until the year end.
This is the worst pitfall in my mind, as it creates lots of other problems and will leave you pulling your hair out.
The workload feels like a mountain which means you will dread tackling it.
You will not remember everything in detail from 12 months ago, so you can end up missing expenses or incorrectly allocating money.
If an opportunity comes along and you need to decide if your business is in the right place to take advantage, out of date figures are just not going to help you.
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We have been a client of BW Bookkeeping since 2017 and rely on them for a range of services. They helped us change from a sole trader to a limited company and handle all our banking and VAT.
Mason Grab Hire Ltd, Aston Clinton
Excellent bookkeeping service and knowledge of the work.
Phil Bass, Dunstable
I learned more about how to direct my business in 20 minutes talking to Jen than in 4 years of meetings with my accountant.
Rob L, Aston Clinton