New tax year, time to review your finances

To mark the new UK tax year, CMI Southern board members Jo Strain and David Sullivan share their own top business planning checklists for fellow managers working as independent practitioners and consultants.


Jo Strain, who has worked both for SMEs and large corporates, writes

At the start of the new UK tax year, it’s a good time for independent consultants and sole traders to take a couple of hours to do a quick business health check. If you are setting up a new business, there’s plenty of free guidance on the internet (for example ) and through your local library.



Here are some areas to consider.
  • Goals and Objectives – check your business plan and ask how did you do against the goals and objectives you set yourself last year? In that light, set your goals and objectives for this year. Is there a plan in place to achieve them? Could your company be more successful if you had a business mentor?
  • Regulation and Legal Requirements – check key regulations and legislation applicable to your business for changes or new items which are coming into force either at the start of the UK financial year or part way through your trading year. Do you need a licence for your business activity, or do you need to renew an existing one perhaps? The UK government licence finder site provides advice for firms selling to consumers,  and the website is one of the resources available offering free legal advice.
  • Insurance – its important to have the right insurance in place to protect you and your clients. It can also enhance your professionalism. Depending on the business you are in and the way you conduct your business you may need a range of insurances, such as:
    • professional indemnity insurance
    • public liability insurance
    • product insurance
    • tool or stock insurance
    • business building insurance, or
    • home business insurance
    • check your professional memberships to see what insurance cover is included. Business insurance comparison websites make it easier to shop around and get a good price.
  • Professional memberships – Institutes, like the Chartered Management Institute (CMI), are often used to demonstrate professional competency to clients, provide professional support, continued professional development and/or may be a requirement to practice.
    It is a good time to check required memberships are in place/renewed and that you are making the most of the benefits included in the membership. If your professional membership includes insurance – read it carefully to check the cover.
  • Skills – based on the market for your business, are there additional skills you need to develop or hone? Can your professional membership(s) help you gain these skills?
  • Competition – who are your key competitors, and how does your offering stack up against theirs? Are there any new competitors you need to watch out for and/or learn more about?
  • Marketing including demand generation – what were the most effective ways you generated demand for your services and products last year? What were the least effective approaches? Do key materials you rely on need updating?
  • Sales pipeline – how big is your backlog of business? What activities are underway to ensure there is a continued flow of sold business? Could you team up with other trusted consultants to deliver larger engagements/projects?
  • Product and/or Service Delivery – what would enable you to deliver more efficiently, consistently or to a higher quality? Which deliverables do your clients rave about and which ones need attention or could be omitted?
This basic framework may assist you in the questions to consider when reviewing your finances.
  • Review cash flow patterns over the previous year. Are there ways you can smooth cash flow by adjusting revenue and or cost payment schedules?
    Review the most significant cost items. Can they be reduced or payments spread over the year?
  • Is your business sufficiently financed to support your business plan?
  • Are there grants, allowances or incentives you could apply for? Could crowdfunding be an option?
  • Which clients provided 80% of your revenue? How can you deepen your relationship with them and make them repeat clients?
  • HMRC – Check if tax rules and allowances have changed. Check which reliefs and incentives could apply to your business?
  • Review local authority web sites for local small business incentives and grants that you might be eligible to apply for.


David Sullivan, an independent contractor and interim manager, shares his experiences

As we enter the start of a new UK tax year, it is a good time for contractors and independent consultants to ensure their financial plans are still up to the mark! In 2017-2018, it is especially important to plan as new Government rules concerning ‘On’ and ‘Off Payroll’ payments are about to take effect within the public sector and could make a huge difference to your disposable income.  This short article is aimed purely at getting you to think about about your business expenses, how you can minimise these costs, and reminding you to consider them when pricing your services and claiming back expenditure.

A Simple Business Planning Formula

(Daily Fees x Paid Days) – Expenses – Taxes > Desired Disposable Income

Note: all of these factors are variables!

Like any other business, of course, you need to balance your fees and desired income against what the market will bear. However, from my experience many contractors and independent consultants assume their Daily Rate is fixed, assume they will be working for 223 days, don’t consider all of their expenses, and assume their taxes are also fixed and then accept the Disposable Income that comes out of the calculation! I think of expenses as Fixed and Variable and here is one way to consider the most popular.

  • Overhead Expenses – these tend to be costs you will have regardless of whether you are working or when your commissioning agency/ firm pays your fees.
    • Membership of professional institutes and organisations that support your work or help with your credibility. These could also cover a ‘licence to operate’ style memberships
    • Business Insurances: professional indemnity, public liability etc.
    • Pension payments by your company
    • Life and Key Worker insurance and/or Health insurance. If you can not work the company’s income is probably zero
    • Accountancy fees
    • Bank charges and interest
    • Rent of business premises. This can include use of a room in your house but you should check the rules on how this can affect your home insurance, council tax, and tax when you sell your house
    • Tools and equipment costs. This will include the specialist tools of your trade as well as office equipment to support your business.  Clothing may only be included if it is essential protective clothing or counts as a uniform
    • If you have a company car there will be some fixed costs of the company owning the car whether or not you use it e.g. insurance, tax, and some level of servicing. Don’t forget with the increase in ‘personal taxes’ you may be liable to pay for this ‘benefit in kind’
    • Telephones – fixed and mobiles. Some people use fax services
    • Computer costs: replacement equipment, licences, security, broadband access and back-ups possibly using ‘cloud’ services.
  • Variable Expenses – these, in general, will vary depending on how much paid work you do.
    • Travel to and from clients (including accommodation if necessary) and, of course, prospective clients, interviews and networking events
    • Training costs including travel and accommodation as part of the training
    • Advertising and marketing
    • Stationery, postage, printing and copying

You may want to plan for more training to remain current in your area of expertise or to expand your portfolio of sell-able skills. This may mean that your training costs increase when you are not actually earning money. Likewise the costs of advertising/marketing, networking, stationery, and postage may also be higher when you are seeking contracts.

The general rules for claiming expenses applied by HMRC are:

  • they are incurred ‘wholly, exclusively and necessarily’ in the course of your business, and
  • they can be supported by appropriate evidence (eg receipts; mileage records etc).

Much more detail on this can be found on the HMRC website covering self-employed allowable expenses.

For prudent business planning you should aim to increase the number of allowable expense categories and simultaneously reduce the actual figure within each category.

You could also look at optimising the other variables in the ‘business planning formula’. I have shared some examples below.

  • What rate of fee are you worth, what’s the going rate, and what rate will the market bear? Could you take on more complex tasks that have a commensurate higher rate?
  • How many days is it realistic to work? What about sick-days (yours and family members), training days, time between contracts, days working ‘on the business’ rather than ‘for the business’.
  • Have you ensured that you are using ‘prudent tax planning’?
  • Have you really sat down and worked out the income you ‘need’ and the income you ‘want’? You might be surprised and you could reduce the number of working days?

For detailed advice and guidance you should review the HMRC website and speak to an Independent Financial Advisor and your Accountant. The Contractor Calculator website can also be useful.

Events and webinars

CMI Southern is planning an event for its 2017-2018 programme on getting to grips with finances, aimed at those who have or are thinking of setting up as independent practitioners. Contact us if you have general questions that would be useful to be included in the session or are able to assist with content.

Videos, webinars and e-learning for the self-employed provided by the HMRC

Working for yourself (HMRC website)

Business records for the self-employed (HMRC website)

Help and support for running your business (HMRC website)

Spring 2017 Budget in Full

CMI’s Ann Francke on the 2017 budget

The Business Finance Guide (IAEW and British Business Banks publication 2017)

Better Business Funding (supported by the UK Government and featured by the HMRC website)

Start Up Loans 

CMI’s Management Direct features checklists and reading materials to help develop your skills as an independent practitioner, consultant or small firm. It is available to members as a free resource.


Aricle first published in April 2017.

[1] Note the information on this page is given in good faith from personal practitioner experience. The writers of the blogs on this page are NOT financial advisers and CMI Southern recommends you should always seek the professional advice of a qualified Independent Financial Advisor, HMRC and/or a professional accountant as part of your Business Planning.