12 Accounting Mistakes New Businesses Make

/Published:19th January 2026/inBusiness, Limited Company, Running a business, Tax
Accounting Wise - 12 accounting mistakes new businesses make

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Starting a business is challenging enough without your bookkeeping quietly undermining your cash flow, tax position, or credibility with lenders and suppliers. Yet for many new UK businesses, accounting problems do not arrive with flashing warning lights. They build up slowly in the background, often unnoticed until a tax bill, missed deadline, or funding application brings them into sharp focus.

The good news is that most new business accounting problems are not caused by complex tax rules or advanced financial decisions. They usually come from a small number of predictable mistakes made early on, often due to time pressure, lack of guidance, or trying to handle everything alone. Better still, every one of these mistakes is avoidable with simple habits, clear processes, and the right support.

This guide breaks down the 12 most common accounting mistakes new UK businesses make, explains what they can really cost you, and shows you exactly how to avoid them. Along the way, you will find practical tips, official resources, and real-world advice designed to help you stay compliant, tax-efficient, and financially confident from day one.

Whether you are a sole trader, freelancer, or running a limited company, getting these fundamentals right early can save you thousands of pounds, countless hours of stress, and difficult conversations with HMRC later.

Below are the accounting mistakes we see most often when working with new businesses across the UK, and how to make sure they never become your problem.

1) Mixing Business and Personal Money

One of the most common accounting mistakes new businesses make is mixing personal and business finances. It often starts innocently, using a personal bank account to receive early payments, paying for business costs on a personal card, or dipping into the business account for everyday spending. Over time, this creates confusion that is surprisingly difficult to untangle.

What this looks like in practice

  • Using one bank account for both personal and business transactions
  • Paying household or personal expenses directly from the business account
  • Business income landing in a personal current account
  • Ad-hoc transfers between accounts with no clear purpose recorded

Why it is a problem

Blurring the line between personal and business money leads to messy records, missed expense claims, and extra time spent explaining transactions to your accountant. It also increases the risk of mistakes on your tax return and can raise unnecessary questions from HMRC.

For limited companies, the risks are even higher. Personal spending from the company account can create a director’s loan account without you realising it. If not managed properly, this can trigger additional tax charges, unexpected repayments, or even penalties.

From a practical point of view, lenders, investors, and grant providers also expect clean financial records. Mixed finances make your business look disorganised and can weaken funding applications or credit checks.

How to fix it

  • Open a dedicated business bank account and use it consistently for all business income and expenses. This is essential for limited companies and strongly recommended for sole traders.
  • Create a clear payment routine. Sole traders should take regular owner drawings, while limited company directors should use a structured salary and dividend approach instead of random transfers.
  • Reimburse personal spending properly. If you pay for a business expense personally, keep the receipt and reimburse yourself through the business with a clear description.

Practical tip: If you are just starting out, set a simple rule: business money only moves in or out of the business account for a clearly labelled reason. If you cannot explain a transaction in one sentence, it probably does not belong there.

Separating your finances early is one of the simplest steps you can take to reduce stress, save accounting fees, and stay on the right side of the rules. It also gives you a far clearer picture of how your business is actually performing

2) Not Keeping Proper Records From Day One

Many new business owners tell themselves they will deal with the paperwork later. In reality, “later” usually means year end, a looming tax deadline, and a frantic search through emails, bank statements, and a shoebox full of receipts. Poor record-keeping is one of the fastest ways to turn a manageable accounting task into a stressful and expensive problem.

What this looks like in practice

  • Saving invoices and receipts sporadically or not at all
  • Relying on bank statements alone to reconstruct income and costs
  • Forgetting what certain transactions were for months later
  • Trying to “catch up” everything in one go at the end of the tax year

Why it is a problem

Without proper records, it becomes extremely easy to miss allowable expenses, meaning you could end up paying more tax than necessary. It also makes it harder to prove your figures if they are ever queried by HMRC , increasing the risk of delays, adjustments, or penalties.

Poor records also cost you time and money. Rebuilding accounts months later takes far longer than recording transactions as they happen, and accountants often have to charge more to clean up incomplete or disorganised data.

Beyond tax, weak record-keeping makes it difficult to understand how your business is performing. You cannot reliably track cash flow, profitability, or growth if the underlying numbers are incomplete or inconsistent.

Your legal obligations in the UK

If you are self-employed or a sole trader, you are legally required to keep accurate records for your Self Assessment tax return. This includes income, expenses, invoices, receipts, and bank records, and they must be retained for the required period as set out on GOV.UK.

If you run a limited company, the rules are stricter. Companies must keep proper accounting records, including details of all money received and spent, assets and liabilities, invoices, receipts, and supporting documentation. These records must be kept for specific minimum retention periods and be available if requested.

How to fix it

  • Record income and expenses as they happen. A few minutes each week is far easier than hours of reconstruction later.
  • Keep all supporting evidence, including invoices, receipts, bank statements, and proof of payment, whether digital or paper.
  • Use a consistent system. This could be accounting software, spreadsheets, or a simple digital filing structure, as long as it is maintained properly.

Practical tip: If you cannot back up a figure with evidence, assume it may not be allowed. Good records protect you just as much as they save you tax.

Getting your record-keeping right from day one is not about being perfect. It is about being consistent. That consistency makes compliance easier, reduces costs, and gives you confidence that your numbers will stand up if they are ever reviewed.

3) Missing Filing Deadlines (Companies House and HMRC)

Missing accounting and tax deadlines is one of the most stressful mistakes new business owners make, and one of the most avoidable. It usually does not happen because someone is careless, but because they simply did not realise how many different deadlines exist, or that they fall at different times and are handled by different bodies.

What this looks like in practice

  • Assuming all accounts and tax returns are due on the same date
  • Only discovering a deadline after a reminder or penalty notice arrives
  • Rushing accounts or tax returns close to the deadline
  • Confusing personal Self Assessment deadlines with company obligations

Why it is a problem

Late filings almost always result in penalties from HMRC and repeated delays can lead to escalating fines. In more serious cases, persistent non-compliance can trigger enforcement action or strike-off warnings.

There is also a reputational cost. Late accounts filed at Companies House are visible to lenders, suppliers, and potential partners. This can weaken finance applications, slow down credit approvals, and raise unnecessary concerns about how well the business is being run.

On a personal level, missed deadlines create avoidable stress. Dealing with penalties, appeals, and last-minute submissions takes far more time and energy than staying on top of dates in the first place.

Key UK deadlines new businesses often miss

One of the most common causes of missed filings is assuming everything is due at once. In reality, company accounts deadlines and Corporation Tax obligations are separate and do not always align.

  • Statutory accounts must be filed with Companies House by their own deadline, which is usually different from your tax return deadline.
  • Corporation Tax payments are due before the Company Tax Return is filed, not after.
  • Company Tax Returns must be submitted to HMRC within the required timeframe, even if tax has already been paid.
  • Confirmation Statements must be filed annually within the permitted window to keep company details up to date.

How to fix it

  • Put all deadlines in your diary as soon as you incorporate, including Companies House filing dates, Corporation Tax payment deadlines, and Company Tax Return submission dates.
  • Understand that not all deadlines are the same. Treat each obligation separately and plan ahead for them.
  • File early where possible. Submitting accounts and returns ahead of time reduces pressure and leaves room to correct errors.

Practical tip: If you rely on reminders to tell you something is due, you are already too late. Treat deadlines as fixed business commitments, not optional admin tasks.

Staying on top of filing deadlines is not just about avoiding penalties. It protects your business reputation, improves your chances of securing finance, and gives you peace of mind that nothing important is about to slip through the cracks.

4) Forgetting About Cash Flow (Profit Is Not Cash)

One of the most confusing realities for new business owners is discovering that a business can be profitable on paper and still struggle to pay the bills. Profit shows what you have earned over time. Cash flow shows what money is actually available right now. Mixing the two up is a fast route to stress.

What this looks like in practice

  • Seeing healthy profits in your accounts but having an empty bank balance
  • Waiting on unpaid invoices while expenses continue to leave the account
  • Relying on overdrafts or personal funds to cover short-term gaps
  • Being surprised by VAT, PAYE, or tax bills when they fall due

Why it is a problem

Cash flow problems can bring an otherwise viable business to a halt. VAT, PAYE, suppliers, and tax bills are all due on fixed dates and they do not take into account whether your customers have paid you yet. Late or slow payments can quickly create a domino effect, even if your sales figures look strong.

Poor cash flow management is also one of the main reasons businesses fall behind with payments to HMRC, miss deadlines, or take on unnecessary debt. Over time, this adds pressure and limits your ability to invest or grow.

How to fix it

  • Do a simple weekly cash check. Review money coming in, money going out, and what is expected over the next 30, 60, and 90 days.
  • Invoice promptly and follow up consistently. Send invoices as soon as work is completed, chase overdue payments politely, and consider part-payment upfront for service-based work.
  • Ring-fence money for tax. Move estimated VAT and tax amounts into a separate “tax pot” account so the cash is there when it is needed.

Practical tip: If you would not be comfortable spending it today, it should not be treated as available cash. Always assume part of your balance belongs to VAT or future tax.

Understanding cash flow early gives you control. It helps you plan ahead, avoid nasty surprises, and make decisions based on what the business can actually afford, not just what the profit figure suggests.

5) Not Tracking VAT Properly (or Registering Too Late)

VAT is one of the areas that catches new businesses out most often, usually not through deliberate avoidance, but through simple lack of awareness. Many businesses drift over the VAT threshold without noticing, while others register but misunderstand what actually counts as taxable turnover.

What this looks like in practice

  • Crossing the VAT threshold without realising it
  • Assuming VAT is based on profit rather than turnover
  • Not knowing which sales count as taxable for VAT purposes
  • Charging customers VAT too late or not at all after registration should have happened

Why it is a problem

Late VAT registration can be expensive. If you should have registered earlier, HMRC can require you to pay VAT retrospectively from the date you should have registered, even if you did not charge it to your customers at the time. This often means the VAT comes straight out of your margin.

In addition to the VAT itself, there may also be penalties and interest for late registration. For growing businesses, this can turn what felt like a positive milestone into a serious cash flow shock.

Understanding the VAT threshold

VAT registration in the UK is based on your rolling 12-month taxable turnover, not your financial year or calendar year. This is a key detail many new business owners miss.

As of 1 April 2024, the VAT registration threshold increased to £90,000. If your taxable turnover exceeds this amount in any rolling 12-month period, you must register for VAT.

How to fix it

  • Monitor your rolling 12-month turnover monthly, not just at year end. This gives you early warning if you are approaching the threshold.
  • Understand what counts as taxable turnover. Not all income is treated the same for VAT, and mistakes here are common.
  • Get advice early if you are close to the threshold. In some cases, voluntary VAT registration can be beneficial. In others, it can increase prices and reduce competitiveness.

Practical tip: If you are growing quickly, assume VAT will become an issue sooner than you expect. Planning for it early is far less painful than dealing with a backdated bill.

Handled properly, VAT is manageable. Ignored or misunderstood, it can create sudden and avoidable financial pressure. The key is visibility, regular monitoring, and knowing when to ask for advice.

6) Being VAT-Registered but Not Set Up for Making Tax Digital

Being VAT-registered is not just about charging VAT and submitting a return every quarter. For most VAT-registered businesses, VAT also comes with Making Tax Digital (MTD) for VAT requirements. The common mistake is thinking you can keep everything in spreadsheets and then manually type the totals into the VAT portal, or assuming your software setup is “probably fine” without checking whether it actually meets the rules.

What this looks like in practice

  • Tracking VAT in spreadsheets and manually copy/pasting figures into HMRC systems
  • Using accounting software, but not setting up the VAT scheme, rates, or reporting properly
  • Using multiple systems (for example, EPOS, invoicing tool, spreadsheet) with manual re-keying between them
  • Realising you are not compliant when the VAT deadline is a few days away

Why it is a problem

MTD for VAT generally requires you to keep VAT records digitally and submit VAT Returns using compatible software. HMRC guidance makes clear that VAT records and returns should be managed through compatible software rather than manual entry into the VAT portal.

A rushed, last-minute setup often leads to incorrect VAT figures, missed deadlines, and avoidable stress. It can also create ongoing problems, such as unreliable VAT reports, inconsistent treatment of expenses, or broken digital links between systems.

What “compatible software” and “digital links” actually mean

Compatible software is software that can keep digital VAT records and submit your VAT Return to HMRC. HMRC maintains a list of recognised options, including full accounting software and bridging solutions where appropriate.

If you use more than one tool to maintain your VAT records, the transfer of VAT data between them should be done via digital links, not manual copy/paste. VAT Notice 700/22 sets out the digital record keeping and digital links requirements in more detail.

How to fix it

  • Choose functional compatible software early and make sure it is set up correctly for your VAT scheme, rates, and reporting periods. Use HMRC’s recognised software list as your starting point.
  • Set up digital links properly if you are using multiple systems (for example, spreadsheets plus bridging software, or separate invoicing and bookkeeping tools). Avoid manual re-keying wherever VAT data is transferred.
  • Do not leave the software decision until VAT deadline week. Build in time for setup, testing, and a dry run VAT return so you are not troubleshooting under pressure.

Practical tip: Before your first MTD VAT submission, run a test check: can you trace every box on the VAT Return back to digital records, without manual copy/paste steps? If not, fix the process now, not the night before filing.

MTD compliance is easiest when your process is simple and consistent. Once the software is set up correctly, most businesses find VAT becomes far more routine and far less stressful.

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7) Misclassifying Expenses (or Claiming Things You Shouldn’t)

Expense claims are one of the quickest ways to accidentally overpay tax or land yourself in trouble. The problem is usually not fraud, it is confusion: treating long-term equipment like a day-to-day cost, claiming private costs as business costs, or missing allowable items because nothing is being categorised properly.

What this looks like in practice

  • Treating equipment purchases as everyday expenses when they should be treated as capital items
  • Claiming home, phone, or vehicle costs without adjusting for private use
  • Guessing categories in your bookkeeping, then hoping it is fine at year end
  • Missing common allowable costs because receipts are lost or transactions are not labelled

Why it is a problem

If you miss allowable expenses, you can end up paying more tax than you need to. If you claim costs that are not allowable, you risk underpaying tax and having to correct it later, potentially with interest and penalties.

The core rule HMRC applies is that expenses must be incurred wholly and exclusively for business purposes to be allowable, and mixed-purpose spending is particularly risky if you cannot clearly separate the business element.

Another common trap is confusing day-to-day running costs with capital spending. For example, some equipment may be treated differently depending on your accounting basis, and capital allowances may apply instead of claiming the full cost as an expense.

Common “watch-outs” we see in new businesses

  • Equipment vs everyday costs: laptops, tools, machinery, and office kit may not always be treated the same as routine running costs, especially if you use traditional accounting rather than cash basis.
  • Mixed personal and business use: phones, broadband, vehicles, and some home-working costs often need a reasonable private-use adjustment, supported by notes or logs.
  • Private items claimed as business: HMRC explicitly disallows claiming goods bought for private use as business expenses.

How to fix it

  • Use clear categories in your bookkeeping from the start (for example: travel, software, subcontractors, rent, insurance, bank charges). This reduces errors and makes your year end far quicker.
  • Keep notes on anything with mixed use. A short note like “mobile phone 70% business use” or a basic mileage log can save a lot of time and avoids awkward guesswork later.
  • When in doubt, ask before you file. Fixing expense treatment after submission often means amended returns, reworked accounts, and extra fees. HMRC also advises contacting them if you are unsure whether a cost is allowable.

Practical tip: If you want your bookkeeping to stay clean, label transactions while they are fresh. “Train to Manchester for client meeting” beats “travel” every time, especially months later.

Getting expense treatment right is not about claiming less. It is about claiming correctly, with evidence, and using a consistent approach that stands up to scrutiny and keeps your tax bill fair.

8) Ignoring Payroll and “Accidentally” Becoming an Employer

Hiring help is often a sign your business is growing, but it is also where many new businesses stumble into compliance problems without realising it. Paying someone regularly does not automatically make them a contractor, even if that is what you call them. Employment status depends on the reality of the working arrangement, not the label.

What this looks like in practice

  • Paying someone weekly or monthly without checking their employment status
  • Assuming a freelancer invoice automatically means no payroll obligations
  • No written contract setting out how the relationship works
  • Discovering payroll responsibilities only after HMRC queries the arrangement

Why it is a problem

If someone should be treated as an employee or worker, you may have PAYE and National Insurance obligations, even if you have been paying them “gross”. This can lead to backdated PAYE, employer’s National Insurance, interest, and penalties from HMRC.

There may also be pension responsibilities. Employers generally have duties under auto-enrolment rules, including assessing staff and making pension contributions where required. Failing to comply can result in enforcement action from HMRC.

Beyond tax, getting employment status wrong can create legal risk, including claims for holiday pay, sick pay, or employment rights that were never budgeted for.

Understanding employment status

HMRC looks at factors such as control, substitution, and mutuality of obligation when deciding whether someone is an employee, worker, or genuinely self-employed. It is the working reality that matters, not whether you call someone a contractor or how they invoice you.

How to fix it

  • Confirm employment status before you pay anyone. Make sure you understand whether they are an employee, worker, or genuine contractor, and document the arrangement clearly.
  • Get proper contracts in place. Written agreements help clarify responsibilities, payment terms, and expectations, and they matter if arrangements are ever reviewed.
  • If you need payroll, run it properly from the start. Register for PAYE, use compliant payroll software, and budget for the true cost of employing someone, including employer’s National Insurance and pensions.

Practical tip: If someone works regular hours, uses your systems, and cannot send a substitute, pause before paying them as a contractor. Checking status early is far cheaper than fixing it later.

Hiring support should move your business forward, not create hidden liabilities. Taking time to get employment status and payroll right protects you, your workers, and your cash flow.

9) Not Reconciling the Bank Account

Bank reconciliation sounds technical, but in reality it is simply checking that what your accounting software says matches what has actually happened in your bank account. Many new businesses assume that if transactions are imported automatically, everything must be correct. Unfortunately, software can only reflect what it is told, not whether something makes sense.

What this looks like in practice

  • Relying on automatic bank feeds without reviewing the transactions
  • Duplicate income entries caused by manual invoices and bank imports both being recorded
  • Missing expenses that were paid but never categorised
  • Payments sitting in suspense or uncategorised accounts indefinitely

Why it is a problem

When bank accounts are not reconciled, errors quietly build up. Income can be double-counted, expenses can be missed entirely, and VAT figures can be wrong without anyone noticing. By the time accounts or tax returns are prepared, the numbers may look plausible but be fundamentally inaccurate.

Incorrect reconciliations can also lead to submitting the wrong figures to HMRC, which may mean paying too much tax or underpaying and having to correct it later. Either outcome costs time, money, or both.

From a management point of view, unreconciled accounts make it impossible to trust your reports. If you cannot rely on your bank balance in the software, you cannot confidently plan spending, investments, or tax payments.

How to fix it

  • Reconcile your bank accounts regularly. Monthly is a minimum for most businesses, but weekly is far better if you have frequent transactions.
  • Check every bank line has a clear explanation. Each transaction should be categorised correctly and supported by an invoice, receipt, or note explaining what it was for.
  • Investigate differences immediately. If the bank balance in your software does not match the real bank balance, fix it before moving on.

Practical tip: Treat bank reconciliation like locking the door at the end of the day. It is a routine check that prevents much bigger problems later.

Regular reconciliation keeps your accounts honest. It gives you confidence that your figures are real, your tax calculations are based on accurate data, and nothing important is slipping through unnoticed.

10) Losing Receipts and Forgetting Evidence

Receipts and invoices might feel like boring admin, but they are what turn an expense from a guess into a legitimate tax deduction. Many new businesses rely on screenshots, emails saved “somewhere”, or memory alone. Unfortunately, when it comes to tax, memory does not count as evidence.

What this looks like in practice

  • Screenshots of payments with no supplier details or VAT breakdown
  • Missing invoices for online purchases or subscriptions
  • Receipts lost in emails, phones, or messaging apps
  • Relying on “I definitely bought it for the business” without proof

Why it is a problem

If HMRC ever queries an expense, you must be able to show both what the cost was and why it was business-related. Without proper evidence, HMRC can disallow the expense, increasing your taxable profit and potentially leading to additional tax, interest, and penalties.

Lost evidence also creates problems long before any HMRC review. Accountants cannot confidently include costs without documentation, VAT cannot be reclaimed without valid VAT receipts, and year-end work takes longer when transactions have to be questioned or excluded.

What counts as good evidence

Good evidence usually means a receipt or invoice that clearly shows the supplier name, date, amount, and what was purchased. For VAT-registered businesses, it should also show the VAT amount and rate where applicable. Bank statements alone are rarely enough.

How to fix it

  • Use a receipt capture app. Even a basic app that photographs receipts and uploads them to your accounting system is far better than relying on memory or screenshots.
  • Adopt a consistent naming habit. Clear file names like “Train London client meeting May 2026” make transactions easy to understand months later.
  • Store everything in one place. Use a combination of cloud storage and accounting software attachments so evidence is always linked to the transaction.

Practical tip: If you cannot explain an expense clearly to someone else using the evidence you have, assume it is not strong enough. Fix it while the details are still fresh.

Good record-keeping is not about hoarding paperwork. It is about protecting your claims, supporting your figures, and making sure every allowable expense actually works in your favour.

11) Treating Year-End Accounts as a One-Off Project

For many new business owners, year-end accounts feel like an annual ordeal rather than a natural checkpoint. There is a rush to gather paperwork, answer questions, and meet deadlines, followed by relief and then months of silence until the cycle repeats. This stop-start approach is one of the biggest reasons accounts feel painful and unhelpful.

What this looks like in practice

  • Panic every January or at the financial year end
  • Trying to rebuild months of activity in one go
  • Making decisions throughout the year without up-to-date numbers
  • Finding out about tax bills or problems long after they could have been managed

Why it is a problem

Rushed year-end work leads to mistakes, missed reliefs, and missed planning opportunities. When accounts are treated as a once-a-year exercise, there is no reliable information to guide pricing, spending, or cash flow decisions during the year.

It also means surprises. Tax bills appear without warning, dividend decisions are made too late, and opportunities to adjust strategy or save tax are lost because the numbers were not reviewed in time.

From an efficiency point of view, year-end clean-ups take far longer and often cost more than maintaining accounts regularly. Errors compound over time, making each year harder than the last.

How to fix it

  • Introduce a monthly mini-close. Each month, reconcile the bank, review invoices and expenses, check your VAT position if applicable, and take a simple snapshot of profit and cash.
  • Run a quarterly “bigger review”. Look at pricing, margins, upcoming tax liabilities, and dividend planning if you run a limited company.
  • Use the numbers to make decisions. Accounts should inform what you do next, not just satisfy a filing requirement.

Practical tip: If you only look at your accounts once a year, they will always feel scary. Regular small check-ins make the year end boring, which is exactly how it should be.

When accounting becomes a routine rather than a crisis, it turns into a tool instead of a burden. You gain visibility, confidence, and far more control over where the business is heading.

12) Trying to DIY Everything for Too Long

Doing things yourself at the start is completely normal. Budgets are tight, systems are new, and it feels sensible to keep control of everything. The problem comes when DIY accounting stops being a short-term phase and quietly becomes a long-term drag on the business.

What this looks like in practice

  • Evenings spent wrestling with spreadsheets instead of selling or delivering work
  • Second-guessing VAT, payroll, or tax rules and hoping for the best
  • Putting off deadlines because you are unsure what is actually required
  • Only asking for help once something has already gone wrong

Why it is a problem

The biggest cost of doing everything yourself is not always visible on the profit and loss report. It is opportunity cost. Every hour spent struggling with accounting is an hour not spent winning clients, improving services, or growing the business.

There is also a higher risk of expensive mistakes. Areas like VAT, payroll, Companies House filings, and Corporation Tax are unforgiving if handled incorrectly. Errors here can lead to penalties, interest, and stressful correspondence with HMRC.

Many businesses only realise the true cost of DIY accounting after something breaks. At that point, fixing the problem is usually far more expensive than getting the right support earlier.

How to fix it

  • Be clear about what you will keep in-house. Tasks like invoicing, receipt capture, and basic cash monitoring often make sense to handle internally.
  • Outsource the high-risk areas. VAT returns, payroll, year-end accounts, and tax filings are usually best handled by a professional who deals with them every day.
  • Choose support that still gives you control. A good accountant should provide a simple monthly rhythm, clear dashboards, and plain-English explanations so you always know where the business stands.

Practical tip: If accounting tasks regularly spill into evenings or weekends, that is a signal, not a badge of honour. Your time is often worth more than the fee you are trying to save.

Getting help is not about giving up control. It is about buying back time, reducing risk, and putting your focus where it has the biggest impact. The strongest businesses are rarely built by doing everything alone for too long.

Quick “New Business Accounting” Health Check

If you want a fast self-audit to see whether your accounting foundations are solid, work through the checklist below. You should be able to tick each item confidently without caveats or “I’ll sort that later”.

If several of these are missing, that is a signal to tighten things up sooner rather than later.

  • Dedicated business bank account in use
    Business income and expenses are clearly separated from personal spending.
  • Records captured weekly
    Income and expenses are recorded regularly, not reconstructed at year end.
  • Bank account reconciled monthly
    The accounting software balance matches the real bank balance.
  • VAT threshold monitored monthly (if you are near it)
    Rolling 12-month taxable turnover is reviewed so there are no surprises with HMRC.
  • MTD for VAT software in place (if VAT registered)
    Compatible software is set up properly, with compliant digital record keeping and digital links.
  • Key deadlines diarised
    Accounts, tax returns, payments, and the annual Confirmation Statement are all scheduled, with no reliance on last-minute reminders from HMRC.
  • Receipts and evidence stored and easy to retrieve
    Invoices, receipts, and proof of payment are stored centrally and linked to transactions.

Practical tip: This check should take no more than five minutes. If it takes longer, or you are unsure about several answers, that is usually where problems and unnecessary costs start to creep in.

Strong accounting does not mean complicated accounting. It means knowing where your money is, what you owe, what is coming next, and being able to prove it if asked. Get these basics right, and everything else becomes easier.

Useful UK Resources

If you want to check the official rules or go deeper on any of the topics covered above, the following GOV.UK resources are the most reliable place to start. These set out what is required in plain terms and are the standards HMRC and Companies House will expect you to follow.

These resources are not just background reading. They define what “compliant” looks like in practice. Using them alongside regular bookkeeping and professional advice helps ensure your records stand up to scrutiny and your decisions are based on the rules as they actually exist.

Final Thoughts: Get the Foundations Right Early

Most accounting problems do not come from doing anything reckless. They come from small issues left unchecked for too long. Missed deadlines, messy records, VAT surprises, and cash flow stress are rarely dramatic in isolation, but together they can quietly hold a business back.

The good news is that every mistake in this guide is preventable. With the right systems, a simple routine, and clear advice when it matters, accounting becomes something that supports your decisions instead of slowing you down.

How Accounting Wise can help

At Accounting Wise we work with new and growing UK businesses every day. Our focus is on keeping things clear, compliant, and genuinely useful, not drowning you in jargon or spreadsheets you never look at.

Whether you are just starting out or feel like things have become harder to manage than they should be, we can help you:

  • Set up clean bookkeeping and record-keeping from day one
  • Stay on top of VAT, payroll, and Making Tax Digital requirements
  • Avoid missed deadlines with clear, proactive support
  • Understand your numbers with simple monthly check-ins and clear dashboards

If you want accounting that feels calm, predictable, and under control, rather than something you only think about when a deadline is looming, we would be happy to help.

Get in touch with Accounting Wise to see how we can support your business with straightforward, fixed-fee accounting that grows with you.

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12 Accounting Mistakes New Businesses Make FAQ

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If you run a limited company, yes, it’s essential because the business is a separate legal entity. If you’re self-employed, it’s not mandatory, but it makes record-keeping, tax reporting, and cash flow tracking far easier and cleaner.

Monthly is the bare minimum. Weekly is better for busy or growing businesses. Regular updates reduce errors, prevent missed expenses, and remove the year-end panic.

You must keep records of income, expenses, invoices, receipts, bank statements, and proof of payment. If HMRC asks, you need to show what the cost was and why it was business-related.

You must register when your taxable turnover exceeds the VAT threshold in any rolling 12-month period. This is not based on your financial year, which is why many businesses register late by mistake.

Spreadsheets can work at a very early stage, but they increase risk as transactions grow. VAT-registered businesses also need to meet Making Tax Digital requirements, which usually means compatible software rather than manual submissions.

Missed deadlines can trigger automatic penalties, interest, and visible late filings. Over time, this can damage your business reputation and make finance applications harder.

Ideally before problems appear. Key moments include approaching the VAT threshold, hiring staff, paying dividends, or feeling unsure about your numbers. Early advice is usually far cheaper than fixing mistakes later.

With good systems, most small businesses should only spend a few hours a month on routine accounting. If it regularly eats into evenings or weekends, that’s often a sign the setup needs improving.

Glossary of Key Accounting Terms for New Businesses

Allowable Expenses – Business costs that can be deducted from income to reduce taxable profit, provided they are incurred wholly and exclusively for business purposes.

Cash Flow – The movement of money in and out of your business. Positive cash flow means more money is coming in than going out at a given time.

Capital Allowances – Tax relief claimed on certain business assets, such as equipment or machinery, instead of treating the full cost as a day-to-day expense.

Confirmation Statement – An annual filing submitted to Companies House to confirm that your company details are accurate and up to date.

Corporation Tax – The tax a limited company pays on its taxable profits.

Director’s Loan Account – A record showing money taken out of or paid into a limited company by a director, outside of salary or dividends.

Digital Links – The electronic transfer of data between systems or software, required for Making Tax Digital for VAT compliance.

Making Tax Digital (MTD) – A UK government initiative requiring businesses to keep digital tax records and submit VAT Returns using compatible software.

PAYE (Pay As You Earn) – The system used to collect Income Tax and National Insurance from employees through payroll.

Reconciliation – The process of checking that accounting records match real-world data, such as bank statements.

Rolling 12-Month Turnover – A VAT test that looks at taxable sales over any continuous 12-month period, not a fixed financial year.

Self Assessment – The system used by self-employed individuals and some company directors to report income and pay tax to HMRC.

Statutory Accounts – Annual accounts that limited companies must prepare and submit to Companies House and HMRC.

Taxable Turnover – Sales that count towards the VAT registration threshold, including standard-rated and zero-rated supplies.

VAT (Value Added Tax) – A consumption tax charged on most goods and services in the UK by VAT-registered businesses.

VAT Notice 700/22 – HMRC guidance explaining digital record keeping and digital links requirements for MTD for VAT.

Working Capital – The cash available to run day-to-day operations, calculated as current assets minus current liabilities.

Understanding these terms makes it far easier to spot problems early, ask the right questions, and avoid many of the common accounting mistakes covered in this guide.

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