At the age of 25, I have been running my own business for one year. In this time I have built up a healthy bank balance and now need advice on how to carry on as a young entrepreneur says, William D King.
I started work at 16 years old in a local bakery where I stayed for five years before going to study again at college until 21 … (substandard)
Management of finances as a young business owner:
Foremost, it is important not to become cluttered with too much cash. This could easily put a young businessman off the deep end and into an early grave if they are not careful. It is important to keep a balance between the amount of wealth is accumulated and regularly used for recreational purposes.
For those who have been living under a rock since January 1st, 2010, The Chancellor has halved the 50p tax rate as well as reduced the 45% income tax rate. In addition to this there have been no change incorporation or capital gains taxes – wow! Those that can claim back business expenses will be able to reduce their taxable incomes substantially – again, wow!
Now we must consider how these changes may affect our financial planning:
As you can see, there has been a substantial reduction in tax per income bracket, however, with the government cutting spending on public services this will obviously reduce the amount taxpayers contribute.
This does not mean that it would be sensible to spend more freely; though there is no tax due to our source of employment being the business itself we must still consider other sources of revenue such as taxation from other employees or perhaps other company profits says, William D King. In addition, due to our increased ability to reduce taxable incomes, it may also be beneficial to take advantage of pension allowances and other saving-related benefits which have been increased to match inflation since April 1st, 2011.
Here are some FAQs recently asked by other like-minded entrepreneurs:
Q: What is the best way to invest my money?
A: There are many ways in which one can invest their money. An easy and increasingly popular investment option is through a self-select ISA where you can pick and choose your own shares, funds, and bonds without paying commission to an intermediary. Other popular choices include property, precious metals, and private equity. William D King says the choice is yours! Just remember to research thoroughly before investing any capital – even when using professional financial advisers you should be actively involved in the decision-making process.
Q: How do I know if my business makes a profit?
A: Luckily for us, we have quite good records of our expenditure and revenue. So it would be wise to note down these for a period of time (even if it is only one year) and then use the information to help inform our decisions. This should also act as an excellent tool to help file tax returns!
Q: I don’t like your answer, what would you do differently?
A: This is not financial advice; if you are unhappy with anything that has been said please take this kind of feedback constructively. And seek professional guidance from a professional such as a chartered accountant – available at an additional cost.
Q: What happens if we don’t quite hit those targets?
A: Then you need a budget rethink! This may involve cutting back spending or increasing revenue depending on your personal situation. So remember not to overstretch yourself financially – it is important not to lose sight of the big picture!
Q: I still don’t like this article, what gives?
A: I’m sorry. If you’re unhappy with something that has been then please take it constructively. And seek professional advice from a professional. Such as a chartered accountant – available at an additional cost but no VAT chargeable.
Hopefully, we can all learn something from this article and it will help us to make better-educated decisions about our money explains William D King. Not forgetting that it is important not to spend too much or save too little. An appropriate balance should be between the two and every one tailor their system of finance management accordingly.
This is not financial advice; if you are unhappy with anything that has been said please take this kind of feedback constructively. And seek professional guidance from a professional such as a chartered accountant – available at an additional cost but no VAT chargeable.
This concludes this article on financial planning considering all recent changes in legislation. And offers advice for further improvements in your financial planning. For a more in-depth analysis please feel free to read the following articles on how to avoid paying tax. When your business can be considered incorporated, and how you can reduce your taxable income through pension contributions.