Sole trader, business partnership or limited company?

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
Elin
Posts: 5
Joined: Mon Mar 05, 2018 2:43 pm

Sole trader, business partnership or limited company?

Post by Elin »

First time on here - hi everyone!

My husband and I have recently acquired a holiday home. We are planning to refurbish the property over the next few months and then rent it out as a holiday rental.

This is all new to us; we both work as employees in very different fields from property management and have never been self-employed or completed tax returns before :shock:

Do we need to register as a sole trader, business partnership or limited company? We want to ensure we get business rates on the property and we want to do everything by the book right from the beginning.

I'd be grateful for any advice at all!!!
zebedee
Posts: 1270
Joined: Fri Sep 12, 2014 2:57 pm
Location: yorkshire dales

Post by zebedee »

You don’t need to register as any of those unless you want to or are advised to do so by an accountant or other expert on your circumstances.
The holiday let and income from property comes under the category of “unearned income” on your tax returns. It is possible to complete your own tax returns but you may benefit from the advice of an accountant who knows about holiday letting. Don’t just use any accountant though, as they won’t have the expertise you need.

Obtaining small business rate relief is dependent upon the number of days the property is available to let. Any taxable allowances are dependent upon the number of days actually let.

If your property has not been used as a holiday let before, make sure you don’t need permission for change of use. You will need to contact your local authority to do this.

Once it is available to let you can then contact the Valuation Office who will determine your business rates. You will need to apply for small business rate releif after that.

You will really need your own website. I can give you a discount code for Promote my Place which will allow you to set up a website very easily and it can be as detailed or as basic as you have time for (you can add pages and edit your site any time.)

You don’t say where abouts your property is, but good luck.
newtimber
Posts: 1945
Joined: Sat Nov 24, 2012 5:57 pm
Location: Brighton
Contact:

Post by newtimber »

If you are doing a substantial amount of building work involving things like heating, then you need to be aware that you can claim capital allowances.
I would agree with Zebedee that you use an accountant to start with as these things can be complicated as to what you can and cannot claim
akwe-xavante
Posts: 306
Joined: Wed Jul 01, 2015 3:19 pm
Location: East Yorkshire

Post by akwe-xavante »

Submitting self assessment online yourself is not as complex as you may think at all whatsoever.

HMRC is your friend not your enemy and you can phone them free for help and advice. So ok i've been self employed for 30yrs+ and i have a number of small businesses and of these the accounting and self essessment process for a FHL is bar far the simplist.

You don't need an accountant, in my opinion employing an accountant for a such a simplistic small business is a complete waste of time and money.

Contact an accountant for advice and yes it suddenly becomes complex and a nightmare and they'll tell you that you'll struggle on your own and they can make sure that there costs are worthwhile because of the savings that are possible in return! Nonsence and rubbish.

I'n my earlier, younger and nieve years self employed i employed accountants and i can assure you that i will never never again employ an accountant again.

Accounting and self assessment and submission doesn't get any simpler than a FHL.

Complying with HMRC rules to qualify is easy enough.

HMRC are not your enemy, phone them it's free and they are not there to get as much tax from you as possible, quite the opposite. You get to talk to a specialist in FHL rules etc and they are always friendly and helpful.

You don't need expensive accounting software either, if you have a PC then all you need if you don't have and use Microsoft Office is LibreOffice and a simple understanding of spreadsheets. But to be honest accounting for a FHL can be easily done by hand using pen and paper too. Go to an accountant and they'll have you signed up to use QuickBooks on your phone in no time costing you an additional fortune and quickbooks does all there hard work for them and it'll take them 10 minutes to submit your self assessment for you!!!!!!

Crackers!!
Elin
Posts: 5
Joined: Mon Mar 05, 2018 2:43 pm

Post by Elin »

Thank you all for your advice!

Zebedee - the house is in Pembrokeshire. I'll try to update my profile!

The property was a holiday let previously so that's one thing to worry about!

Newtimber - we are doing a lot of work - entire heating system, new kitchen, floors, decorating - so I've started a spreadsheet to keep track of all the expenses and will scan all the invoices and receipts. I'd like to do the tax returns myself and I've read up a lot on the HMRC website, and as you said, akwe-xavante, I can always call them for help. I might look into accountants just in case, though!

I still don't really understand the benefits of being a sole trader etc but more than happy if I don't need to bother with it for now.

Zebedee - I might get in touch about the website another time, once the property is looking a bit more appealing!
zebedee
Posts: 1270
Joined: Fri Sep 12, 2014 2:57 pm
Location: yorkshire dales

Post by zebedee »

I would agree with Akwe with regard to filling in your own tax forms, I have done it in the past and getting help from HMRC is very straightforward, they are not dragons.

I am more lucky with regard to the accountant at the moment. I prepare paper records for him and he submits everything now. No pressure to use an expensive app and he is very, very reasonable with costs as well as having property himself. He may retire soon, and then I will take over myself again.

One advantage to the accountant was the other year when the Valuation Office decided to reevaluate all properties for business rates. They were happy to accept the accountants report - those who did their own self assessment had a longer more complex form to fill in but that may not tax ( :D ) you at all.

Make sure you take good photos of your renovation. Guests may be interested (particularly if it is a period property) with either a blog, website page or folder in the property showing how you have improved the place. If gusts know you value your property, they are more likely to respect it.

It sounds like you are going into this venture with the right attitude and I wish you every success.
akwe-xavante
Posts: 306
Joined: Wed Jul 01, 2015 3:19 pm
Location: East Yorkshire

Post by akwe-xavante »

Do we need to register as a sole trader, business partnership or limited company?

This is all about indemnifying yourself of risk by registering your company at companies house therefore limiting your liability and responsibilities to others therefore protecting personal monies, property and belongings. Very important if your business is large or may become large in future with employees and extensive stock and debts, borrowings etc.

Registering your new business with HMRC for the purpose of taxes is required, you are a Sole Trader even though you may or not employ people to help you.

Bank accounts.......... Unless your VAT registered, your business is a partnership with some other person (Not Family) or a LTD company you don't need a Business Bank Account and there are no benefits to you in having one even though your bank will pressure you to have a business bank account. They'll tell you that you must have a business bank account, they may even tell you it's "The Law"........ Rubbish. You don't need a business debit or credit card either unless you are VAT registered, a LTD company or trading as a partnership (Not Family). Your telephone and broadband doesn't have to be a business account either. BT and other providers will tell you you need a business account....No you don't, why pay a lot more for a lot less!?

However it is important "In My Opinion" that you should have a separate personal bank account for your venture with credit and or debit cards and a cheque book. Keep your business completely separated from your personal monitory affairs.

It makes accounting so much simpler.

Registering your business at companies house either as a "sole trader, business partnership or limited company" is only required where there’s a serious amount of property, money, employees or a high level of risk associated with the business venture. If a bank wants monies back that you have borrowed, an employee or some other person sues you they cannot take personal monies, belongings or property from you. They can only take monies, stock and property directly associated with the registered company / business.
Giraffe
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Joined: Sun Jun 26, 2016 10:10 am
Location: Cornwall, England

Post by Giraffe »

Thanks a-x for a succinct summary. It's answered some queries I've had for a while. Giraffe x
The best things in life are free
newtimber
Posts: 1945
Joined: Sat Nov 24, 2012 5:57 pm
Location: Brighton
Contact:

Post by newtimber »

akwe-xavante wrote: Bank accounts.......... Unless your VAT registered, your business is a partnership with some other person (Not Family) or a LTD company you don't need a Business Bank Account and there are no benefits to you in having one even though your bank will pressure you to have a business bank account. They'll tell you that you must have a business bank account, they may even tell you it's "The Law"........ Rubbish. You don't need a business debit or credit card either unless you are VAT registered, a LTD company or trading as a partnership (Not Family). Your telephone and broadband doesn't have to be a business account either. BT and other providers will tell you you need a business account....No you don't, why pay a lot more for a lot less!?
I don't think VAT registration makes any difference as to whether you need a business bank account. It's only Ltd companies that legally have to have a business bank account as they are separate entities. https://www.theguardian.com/money/2005/oct/13/finance
Elin
Posts: 5
Joined: Mon Mar 05, 2018 2:43 pm

Post by Elin »

Thatks for clearing that up! We'll just stick to our separate bank account and register for tax returns then. I doubt we'll make much money, if any, in the first year!
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