18 December 2024
Table of contents
Table of contents
Juggling more than one business can feel like spinning plates – exciting, but tricky too. Whether you’re running two side hustles or managing a whole empire, staying on top of things requires more than just enthusiasm. It takes a bit of strategy, smart organisation and a solid plan to keep everything running smoothly. It’s not as awful as it sounds.
Short answer – yes. If you’re running multiple businesses, keeping your bookkeeping separate is very important, mainly for financial and legal reasons.
For example, limited companies are considered entities in their own right, so keeping their financial records and bank accounts separate is a legal requirement.
But it’s useful even if you have multiple sole trader businesses. For a start, keeping the books separate helps you see which business is performing, and which one needs some gentle words of encouragement.
You’re also far more likely to report your income and expenses correctly on your tax return. It’s especially crucial if you find yourself in the confusing realm of VAT registration and multiple businesses. Mixing them together can lead to potential issues with HMRC, especially if they ever need to audit or verify your records.
Keeping things separate helps you stay organised.
When each business has its own clear financial picture, it’s much easier to manage cash flow, spot problems early and keep everything above board. Plus, if you’re ever planning to sell one of the businesses, gain extra funding or bring in investors, having clean, separate books makes everything much smoother. It’s not just about staying compliant – it’s about giving each business the attention and clarity it needs to thrive. Preferably whilst not losing your mind.
When it comes to tax, the main difference between being a sole trader and running a limited company boils down to how your profits are taxed and who takes the hit for that. If you run more than one business this can be an important distinction.
As a sole trader, your business income is treated as your personal income. So, everything you earn from your business is added to any other income you have (like a salary or rental income), and you pay tax based on the total amount.
Even if you run two totally separate and very different sole trader businesses, everything will get lumped together for the purposes of working out your tax bill.
BUT – oh yes, there’s always a but – you should still keep all your sole trader bookkeeping records separate. When you enter the details onto your Self Assessment tax return, you’ll need to create a new section for each business.
So to make it clear: one tax return, but with a separate section for each source of income.
The more you earn, the higher your tax rate – this is known as Income Tax. On top of that, you’ll also need to pay National Insurance (NI) contributions, which help fund things like pensions and healthcare. You’ll pay all this even if you “leave the money in the business” because as far as HMRC are concerned, you are your business.
With a limited company, things work a little differently. The company is considered a separate legal entity from you, so it has its own tax responsibilities. If you have more than one, then they’re all separate too (unless you get into parent companies when it all gets a bit weird and separate but also somehow not, but let’s keep this simple for now).
Each company will submit its own Company Tax Return to HMRC, accounts to Companies House, and pay its own Corporation Tax bill.
Businesses need to register for VAT and starting charging it on taxable sales once their turnover reaches the VAT registration threshold of £90,000 in a 12-month period. If you’re approaching the threshold and don’t want to become VAT threshold, you can’t simply create a new limited company and start making sales through that instead as a way to dodge your VAT responsibilities.
Most people who set up more than one limited company do so for all sorts of practical and legitimate reasons. Tax avoidance isn’t one of them, and it makes HMRC very cross.
Yes, if you have more than one limited UK company each of them needs its own separate bank account. This is because, legally, each company is considered its own separate entity, so its finances should be kept distinct from your other companies – and from your personal finances, too.
It’s not a legal requirement but if you have a business with lots of transactions then it’s certainly useful to keep everything separate so you can tell what’s what. Plus, then you can use a bank feed to enter everything into your bookkeeping more easily. We like bank feeds.
There’s a lot to consider (besides taxes) to keep everything running smoothly. One of the key things to think about is time management. With different businesses to run, you’ll need to prioritise tasks, set clear goals, and maybe even delegate if you bring yourself to relinquish control.
Another important consideration is cash flow. Each business might have different income streams, expenses and payment cycles, so keeping an eye on cash flow for each one separately is so important.
You’ll also want to make sure that you’re not overextending yourself financially or spreading your resources too thin. On the legal side, check you’re compliant with all the relevant regulations for each business – this could include things like employment law, health and safety requirements, data protection, workplace pensions or industry-specific rules.
Don’t forget about business insurance too, as running multiple companies might mean you need different types of coverage for each one.
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A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.
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