There are a number of reasons as to, why many business owners may need credit. By credit we mean a business loan or a credit card. either way your business credit rating will form on the basis of the decision as to whether you are accepted or not.

What is Business Credit Rating?

A business credit rating forms in the same way as personal credit scores. A business credit score is built on the financial history of the business. The lenders will use these scores to determine if a business is likely to meet repayments.

Many businesses choose to open a business account, apply for a loan or get a mobile phone for business use, all of these will be affected by the business credit score. This can have an impact on whether you are accepted or not. This can also have an effect on the rates you are given.

For many reasons if you have a low business credit score, this could be because you may not have made several payments, then you might struggle to gain the funding you need for the business. You may be given interest rates which are a lot higher than those promoted. Therefore it is very important to have a great credit score.

Where Can You Find Your Business Credit Score?

Firstly, there is no single business credit score for your business. Therefore, there are a number of credit reporting companies, they all use their very own scoring methods. Lenders will opt to use different credit reporting companies when they need to determine your credit score.

As Accountants in Telford and Wellington, we have advised number of business on issues relating to their credit scoring and how to get it better. Call us if you need any advice related to your personal needs and circumstances. 

Enhancing Your Business Credit Score

As your personal credit score, there are a number of things which you can do to improve your business credit score.

Firstly, check your rating. It is common for slipups to be made and so, you can help identify these and ask for relevant corrections to be made.

Secondly, open a business bank account in the name of your business this may help take out business credit e.g. a credit card or an overdraft. However, it is very important that you ensure all repayments are made on time.

It is important that you file all complete accounts with Companies House on time. Having your accounts audited can help too. All bills and credit cards associated with the business should be paid on time. If you have accounts that are no longer in use, close them. The more you have open, it could be seen that you need all of that credit and weaken your rating.

Finally, try to keep your applications for credit to a minimum. If you get rejected by one, then don’t apply for another straight away. The more applications made, the more desperate you can look and that can have a negative impact on your rating.

There are a number of different types of limited companies within the UK that can be set up. There are several different factors which will help to determine what is right for you.

Private limited company – limited by shares (Ltd.)

This is a private company, which means the public is not able to purchase shares of the business. The shareholders are liable for the percentage of investment they have made in the business. E.g. if someone makes a 20% investment, they are accountable for 20% of the business. This is the most popular form of limited company in the UK.

Private limited company – limited by guarantee (LBG)

Generally, this type of company is a non-profit business or can be a charity. This means individuals are not responsible for their share of investment because there are no shareholders. There is a board which will be responsible for debts, they will act as guarantors. They will pay money to cover debts when required.

Public limited company (PLC)

In many ways, this is very similar to a private limited company, limited by share. However, the real difference is,  it will offer its shares to the public. Therefore, members of the public can hold shares in the company and with this comes more legal obligations. In order to go public, a company will need two directors as well as two shareholders including a company secretary and a minimum of £50,000 of issued share capital.

If you are local in Telford and Wellington and would like to have free advice about the structure of your business or potential business, call office for free advice.

Limited liability partnership (LLP)

This works in a similar way to a limited liability company, limited by shares but there are partners instead of shareholders. The partners are responsible for an equal part of the business as well as their share of the business.

An example is, if a business has five partners, they will each be responsible for 20% of the business, this will also include any debts. It’s a perfect structure if the partners want to have an equal share in involvement. Partners will also actively manage the business which is different to those businesses that have shareholders as they need to vote in order to elect a board of directors who then decide who should run the business.

Private unlimited company

There are no requirements for a private unlimited company to submit financial statements or even an annual as limited companies do. This means that a private unlimited company can remain private. The structure will not have shareholders who have to take responsibility for their percentage of investment in the business. Therefore, all shareholders are responsible for business liabilities. If the business was to face any difficulties, they would be required to share the burden equally. This is not a common form of a limited company.

If you are considering becoming a limited company, then Tax Accountants in Telford and Wellington are on hand to help and assist you where ever required. 

Airbnb has completely transformed the property rental market, and short-term lettings and holiday accommodation. Anyone with a spare room can now turn it into a profitable business and can make some serious money in doing so.

However, the idea of earning cash from a room or another property that is doing nothing might seem well and good but there is more to it than that. Sure, it can earn you some quick, easy month but there are tax rules that you have to adhere to and what’s more, you might not be aware of them. The truth is, many people are not aware of them and so, to make sure you stay on the right side of the law, you might want to speak to accountants in Telford.

Paying Tax on Income from AirBnB

 Every person has the right to earn up to £12,500 tax-free but anything over this will be susceptible to tax. Therefore, earnings from AirBnB must be considered and will form part of your calculations when it comes to your tax returns

How Much Tax Will You Need to Pay?

There are several factors to consider here. The first is whether the room is in your own home or if it is part of a separate property. If it is part of your home then you have a tax-free allowance of £7,500 each year. However, if it is a separate property then you will be taxed on any profits above the £12,500 limit of personal income. You will also need to consider any income you receive and depending on your income if you go over the threshold of £85,000 then you will need to pay VAT and that means going VAT registered.

Always remember, HMRC may change tax laws and certain reliefs may become available and may not be available. Always talk to one of our qualified tax accountants in Coventry or at any other branch about updated information.

Are There Any Tax Reliefs?

If you are renting out a property that is not your main home and is considered to be a furnished holiday letting then there are some forms of capital gains tax relief.

This will include the Entrepreneurs Relief whereby you pay a capital gains tax rate of 10% instead of the 28% that you have to pay when it comes to selling your property.

There is also a rollover relief too, and so, if you sell one AirBnB property and purchase another, you can defer capital gains tax on the sale of the initial property. This prevents you from paying the tax there and then.

There are capital allowances in place for furniture and fittings also.

However, HMRC is looking to make changes to its income tax rent a room relief and so, it will keep the current levels which stands at £7,500 each year. If you do choose to rent a room, then you must be present at some or all of the time that you rent it. This is to prevent homeowners from renting their properties at times when large events take place, which means that they could take advantage of the relief.

So, if you have any queries around AirBnB and your income, then it is always worth seeking the right advice from accountants in Telford.

Setting up a small business comes with many challenges and decisions to make but one of the biggest decisions you might need to make is whether you register as self employed or as a limited company. We are local accountants near to you and part of a nationwide network of Tax Accountants in United Kingdom. We have listed some of the benefits but you should call us or email us and get advice about your personal circumstances.

Why Register Self-Employed?

When you start out as a business, becoming self employed might be the easiest choice. It will give you less to think about, enabling you to focus on running your business. Therefore, you won’t have to think about company law or filing annual accounts while corporation tax will be off your radar.

All you will need to think about is filing your self-assessment tax return, which will need to be submitted by 31 January. So, within three months of starting your business, you will need to register for self-assessment.

So, you will need to ensure that you keep all receipts and invoices as well as expenses safe as this will all need to be filed. While this might seem tedious, it is actually quite simple, especially if you use the services of accountants Birmingham. More so, it gives you the chance to spend time growing your business.

Becoming a Limited Company

Most businesses will start out life as self employed but if you have plans to keep your business going for more than 12 months then you might benefit from registering as a limited company. What’s more, it will also depend on how much you are earning and, in some cases,, a threshold of £40,000 is often a good marker to work to. However, you should make sure that you are going to turn over this amount or you are already turning over this amount.

Registering as a Ltd company comes with additional work in the form of administration. This means that you will need to have directors, register with companies house and complete company accounts while you will still need to submit your annual return. Along with this, you will also need to consider corporation tax as this is a serious aspect of becoming registered as a Limited Company.

Its always to best to ask professional accountant about the structure of the business and how much the services of an accountant would cost if you need one. 

Despite the extra work, there are some benefits that come with being registered as a Limited Company. One of the benefits is tax savings. This is down to the fact that you can take a dividend instead of paying yourself a portion of the income from the business as you would do if you were self-employed.

However, one of the other benefits is that it will change the way in which you are perceived as a business. You can introduce yourself as a director while you will also look like a real company that is both professional and reliable.

If you are starting out, then registering as self-employed is more than likely the right choice. However, if you are going to grow or you are looking to establish yourself as a business with a large turnover then you should think about registering as a Limited Company.

So, if you find yourself in this situation then you should obtain professional advice from accountants Birmingham as this will ensure you make the right decision.

We as Tax Accountant Coventry always advice clients to call us before making any decisions. Talk to us about your business plans and we may be able to save you money on taxes in future.