5 business finance myths busted

1. BR tax code is bad.

If I had ￡1 for everyone who complained to me about being on a BR tax code, I'd be very rich!

What is the BR tax code?

It means that you are being taxed at basic rate on all income earned via PAYE, up front.

Why is this not necessarily a bad thing?

If you have 2 jobs or you are both employed and self employed it may make sense for you to be paying 20% tax on all income up front because either you will be due to pay it eventually or if not, you will get some of it back in a rebate (so see it as a savings scheme).

If you have one job where you earn, say, ￡20k per year and then you take on an additional job and they put you on a BR tax code, this is fine because you are using up your personal allowance of ￡12,570 in the first job, so the tax you are paying should be 20%.

If you are self-employed and your profits are going to be over ￡12,570 then you take on an employed role too, it's certainly a good idea to be on a BR tax code, otherwise you will get a big tax bill when you do your self-assessment; in my opinion it's better to pay the tax as you earn it (PAYE).

2. HMRC are mean and scary.

It's honestly not true.

OK, so the letters through the post could look better. The brown envelope and the bold black and white type and all the jargon isn't the friendliest.

But the people working there are actual real humans who are just doing a job. If you have ever spoken to HMRC on the phone, it's likely that you've had a friendly, polite and helpful conversation with someone. I know I've had many, when I can actually get through.

At the moment especially, HMRC are frustrating to deal with; long wait times, systems not talking to each other, incorrect fines on accounts. There's never been a better time for small businesses to hire an accountant to help with all of this because we deal with HMRC on a daily basis and so we know what you will have to pay, what you can appeal, how to handle most situations in the best and most time-saving way (sometimes you will have to wait on hold but mostly things can be resolved online or with a letter in the post).

3. All accountants are patronising.

OK, some are but definitely not all of us.

I remember when I first started working in an accountancy practice and I was so intimidated by the partners and managers and anyone more senior than me, I honestly felt like they expected me to know it all already and so I do get it, as a business owner you will feel the same.

But as I learned more and gained more experience, I realised that some accountants just aren't great communicators so they aren't intentionally being patronising, they are just presenting you with the facts and maybe forget that everyone doesn't know all that they know.

It's one of the many things I am keen to keep at the forefront of my mind. I often say when a client or potential client says they know nothing about accounts, almost apologetically, I tell them I know nothing about photography, social media, operations, graphic design, interior design, life coaching; whatever you do, I'm not an expert in that so I certainly don't expect you to be an expert in accounts and tax, otherwise you wouldn't need me.

I also make sure to say that no question is ever stupid. Whatever you are asking me about your accounts, I'll have heard it before. If I've explained something to you and you don't understand it, then I've not explained it well enough so please do ask until you understand it. They are your accounts and it's your tax bill and money and I want you to feel comfortable with it all.

And finally, there are lots of other accountants like me too, sole practitioners working from a home office and providing a personal and supportive service to small businesses. I am part of a Facebook community, the Sole Circle which is made up of accountants and bookkeepers and we share ideas, ask advice and refer work; so if my client list is full, I'll find someone else who will work well with you and I promise they won't be patronising either.

4. Business finances are boring.

Nope. I won't have it. You don't find your business finances boring. It's either:

a. An excuse not to look at your numbers and bury your head in the sand.

b. Your accountant isn't a good fit or you don't have one.

c. You need a bookkeeper to help and guide you through your numbers.

d. You have money mindset gremlins (we all do!)

e. All of the above.

Finance is one of the main functions of your business and a very important one.

The main three areas of any business, small or large are Sales & Marketing, Operations and Finance.

Knowing your numbers can give you so much confidence to grow your business, and by analysing them you can see what you need to do to move forward.

Don't dismiss your business finances as boring; they are key to your success, whatever success looks like for you.

Even though I'm not taking clients on now until 2024 there are still ways we can work together....

?? You can come to my next FreeAgent training (keep an eye on my socials to see the date for the latest one)

?? You can book a one off 1:1 with me for ￡125 + VAT. Book here: https://carolineboardmanconsulting.co.uk/book-an-appointment/.

5. VAT registration is to be avoided.

I understand that for some this cap of ￡85k turnover per annum works, for various reasons and that's fine.

However, do consider it for yourself and your business rather than listening to "the man down the pub" or your peers in your industry when they say it's not worth it.

Speak to your accountant about the possibility and they can help you to manage the transition from non-VAT registered business to VAT registration.

A double myth bust on this one too. Sole traders CAN VAT-register, you do not have to incorporate to register for VAT and equally you do not need to be VAT-registered just because you trade through an LTD.

You must register if your total VAT taxable turnover for the last 12 months was over ￡85,000 (the VAT threshold).

If you are a client of mine and approaching the threshold please do keep your FreeAgent up to date so that I can help you to track your turnover. When you hit around ￡70k turnover one of my admin team will be in touch to ask you to book a call to discuss.