Running a small business in the UK is exciting. But let’s be honest — finance can feel like a maze. Tax deadlines, VAT returns, payroll, cash flow… it’s a lot.
This guide by Motivuu breaks it down. Simple, clear, and practical. By the end, you’ll know the essentials, the key dates, and the terms that matter.
💡 Why Finance Matters
Finance isn’t just about numbers. It’s about survival. Cash flow keeps the lights on. Tax compliance keeps HMRC off your back. Smart budgeting helps you grow.
Think of finance as the engine of your business. If you ignore it, the car stalls. If you maintain it, you can go far.
🏦 Setting Up the Basics
💳 Separate Business and Personal Accounts
Open a business bank account. Keep your personal spending separate. It makes bookkeeping easier and keeps HMRC happy.
📒 Bookkeeping
Track every pound coming in and going out. Use software like Xero, QuickBooks, or FreeAgent. Cloud tools save time and reduce errors.
📊 Budgeting
Plan your income and expenses. Forecast for at least 12 months. This helps you spot cash shortages before they happen.
📅 Key Dates for 2025
Missing deadlines costs money. Here are the big ones for UK small businesses:
- 31 January — Self Assessment tax return deadline (for 2023/24).
- 31 March — End of the financial year for most businesses.
- 6 April — Start of the new tax year.
- 31 May — Deadline to give employees P60 forms.
- 6 July — Deadline to submit P11D forms (employee benefits).
- 31 July — Second payment on account for Self Assessment.
- 1 October — Corporation Tax return deadline (if year ended 31 Dec 2024).
- 31 December — Deadline for filing accounts with Companies House (for year ending 31 March 2025).
💰 Taxes Explained
📝 Self Assessment
If you’re self‑employed, you file a Self Assessment tax return. It reports your income and expenses. HMRC calculates what you owe.
How to complete it:
- Register online with HMRC.
- Keep records of income and costs.
- File online before 31 January.
🏢 Corporation Tax
Limited companies pay Corporation Tax on profits. The current rate is 25%.
How to complete it:
- Prepare annual accounts.
- File a Company Tax Return (CT600).
- Pay tax within 9 months of year‑end.
💷 VAT
If your turnover exceeds £90,000 (2025 threshold), you must register for VAT. You charge VAT on sales and reclaim it on purchases.
How to complete it:
- Register online.
- Submit quarterly VAT returns.
- Pay HMRC electronically.
👩💼 Payroll Basics
If you employ staff, you must run payroll. That means calculating wages, tax, and National Insurance.
Steps:
- Register as an employer with HMRC.
- Use payroll software (BrightPay, Sage, QuickBooks).
- Report PAYE information to HMRC each payday.
- Provide payslips and annual P60s.
💸 Cash Flow Management
Cash flow is king. Profit looks good on paper, but cash keeps you alive.
Tips:
- Invoice quickly.
- Chase late payments.
- Negotiate better payment terms with suppliers.
- Keep a cash reserve for emergencies.
💳 Funding Options
Sometimes you need extra money. Options include:
- Bank loans — Traditional, but harder to get.
- Government schemes — Check for grants or low‑interest loans.
- Crowdfunding — Raise money from supporters.
- Invoice financing — Get cash upfront for unpaid invoices.
📖 Glossary: UK Finance Terms
- Self Assessment — Annual tax return for the self‑employed.
- Corporation Tax — Tax on company profits.
- VAT (Value Added Tax) — Tax on goods and services, currently 20%.
- PAYE (Pay As You Earn) — System for collecting tax and NI from employees.
- P60 — End‑of‑year summary of employee pay and tax.
- P11D — Form reporting employee benefits.
- CT600 — Corporation Tax return form.
- National Insurance (NI) — Contributions for state benefits and pensions.
- Balance Sheet — Snapshot of assets, liabilities, and equity.
- Profit & Loss (P&L) — Report showing income and expenses.
- Cash Flow Statement — Shows money moving in and out.
📑 Structuring Your Accounts
Every business needs three key reports:
- Profit & Loss Statement — Shows revenue, costs, and profit.
- Balance Sheet — Shows what you own and owe.
- Cash Flow Statement — Tracks cash movement.
Tip: Use accounting software to generate these automatically.
⚠️ Common Mistakes to Avoid
- Mixing personal and business expenses.
- Ignoring tax deadlines.
- Forgetting to chase invoices.
- Not saving for tax bills.
- Overestimating future sales.
🛠️ Tools That Help
- Xero — Great for small businesses.
- QuickBooks — Easy to use, good for payroll.
- FreeAgent — Popular with freelancers.
- BrightPay — Excellent payroll software.
🏆 Final Thoughts
Finance doesn’t have to be scary. Break it into steps. Track your money. Know your deadlines. Use the right tools.
Small businesses thrive when owners understand the basics. Master these essentials, and you’ll spend less time worrying about HMRC — and more time growing your business.
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