You started out with making something for friends and family or even helping a neighbour with a website. Then, word of mouth gets around and suddenly you are getting asked if you have the same work available. “Can I have one of your items with my name on it?” Soon after, your notifications are going off and your spare bedroom is filled with boxes. Suddenly, you have a frightening realisation: “Oh no, I think I accidentally started a business.”
Welcome to accidental entrepreneurship. It’s exciting but soon the tax man will start to care about what you’re doing. To keep him from knocking on your door and to turn your accidental hustle into a machine that brings you money, three financial steps must be taken this month.
Step 1: Separate your money
You probably have all of your cash for your personal life and business life in the same bank account. Stop. The sooner the better. It creates a nightmare when it comes to accounting. Open a separate bank account for your business. It doesn’t have to be anything fancy. It can be a free checking account from your bank. Any money that comes from your business goes into this separate account and any money that comes from your personal life goes into a separate account. It will save your sanity when you’re trying to separate everything for tax season. For Cheltenham Accountants, visit https://www.randall-payne.co.uk/services/accountancy/cheltenham-accountants
Step 2: Tax Trap
A lot of people think that when you’re the boss you get to keep 100% of your earnings. But, HMRC says otherwise. For every payment you make, you must put some aside. Take this money and put it into a separate account. Don’t touch it. HMRC is going to take it out of your account come tax season. It’s better to put it in a separate account and pretend that you’re not using it instead of getting a huge bill when you can’t pay it.
Step 3: Track the invisible
People think that the only expenses are materials and whatnot but there are a lot more. Create a separate account to track your invisible expenses like Canva, postage stamps, internet bill, mileage driven to and from drop-off points. This all can be taken off your taxes to lower your taxable income, therefore lowering the taxes you pay.
The Golden Rule of Accidental Entrepreneurship
You don’t need a whole corporation to start out. Just being clear and taking care of your business like it’s a real business will save you money.
