Nigel Eastaway, the chairman of the technical committee at the Chartered Institute Of Taxation, advises small business owners how to avoid common pitfalls so that they can concentrate on building up a thriving business.
"Before starting, get a business plan. Decide what you're going to do and how you're going to do it."
He adds that the most common mistake is failing to compute the amount of capital needed.
"If you're used to getting a salary each month and then leave your job to start your company, you don’t realise that it could be months before an invoice you have submitted for work completed is paid. You are left waiting for funds and it is very easy to end up with financial difficulties."

Becoming self employed means understanding different tax requirements, which can be complex and confusing. Within the first three months small business owners must inform the Inland Revenue that they are setting up their own business and ask to be registered for self-assessment.

Income tax is not the only payment for which you need to plan; the self employed also have to make national insurance contributions. The employer picks up the administrative burden of taxation for employees too. Eastaway says this is a reason why many small businesses do not take on staff.
Another administrative responsibility that small business owners must shoulder is value-added tax. If your annual turnover exceeds the £60,000 threshold, you must register for VAT. If your profits are low, this is a problem that can be avoided but you will be incurring costs and being registered for VAT can save you money. Some opt for voluntary VAT registration before they reach the limit.