Step #19 of my Top 20 Tips for Small Business Start Ups might sound like the tedious stuff that's been pushed towards the end of the list. But you need to be confident you're running your business in a fully legal and compliant way, and you need to make sure you're not shocked by future tax bills. Sort both before you take your first paying customer for a stress-free future.
A quick note: I'm a marketer, not an insurance broker or accountant, so treat this as a guide to the questions to ask and the resources to use.
1: Insurance
What you need depends on your business: how many people you employ, what assets you have and what you do. MoneyHelper's guide to business insurance when you're self-employed is a great starting point. Here are the main types:
Public Liability Insurance
Public liability insurance can pay compensation if your business activities cause injury to a customer, member of the public or damage to their property. It's particularly worth considering if customers visit your premises or if you work at customer locations. While it's only a legal requirement for certain industries, many clients will ask to see proof of cover before working with you.
Professional Indemnity Insurance
If you provide advice, expertise or professional services, professional indemnity insurance can protect you if a client claims you've been negligent, provided incorrect advice or made a costly mistake. This is particularly relevant for consultants, accountants, designers and other professional service providers.
Product Liability Insurance
Businesses that manufacture, repair or sell products should consider product liability insurance. It can cover compensation claims if a product causes injury to someone or damages property. This can be especially important in higher-risk sectors such as food and drink.
Employers' Liability Insurance
Employers' liability insurance covers compensation claims if an employee becomes ill or is injured because of their work. If you employ staff, this insurance is generally a legal requirement rather than an optional extra.
Equipment Insurance
If your business depends on specialist equipment, equipment insurance can cover the cost of repairs or replacements when things go wrong. For many businesses, replacing essential equipment quickly can be the difference between staying operational and losing income.
Buildings and Contents Insurance
Businesses that own or lease premises should consider buildings and contents insurance. This can provide protection against risks such as fire, flooding, theft and other unexpected events that could damage your workspace or assets. If your business is based at home, make sure you’ve told your insurer you’re running a business from home.
Business Interruption Insurance
Business interruption insurance can help cover lost profits and additional expenses if an unexpected event forces you to stop trading temporarily. If a fire, flood or similar incident would significantly disrupt your operations, this cover may be worth investigating.
Legal Expenses Insurance
Legal disputes can be expensive and time-consuming. Legal expenses insurance can help cover the costs of defending your business in matters such as employment disputes, contract disagreements or property-related issues.
Credit Insurance
If your business relies heavily on a small number of large customers, credit insurance can provide protection if those customers fail to pay what they owe. This can help safeguard your cash flow and reduce financial risk.
Goods in Transit Insurance
For businesses that regularly ship products, goods in transit insurance can cover stock that is lost, stolen or damaged while being transported. This is particularly relevant for e-commerce retailers and manufacturers distributing products around the country.
The one that's compulsory
If you take on an employee, you must have Employers' Liability insurance as soon as you become an employer. GOV.UK says it must cover you for at least £5 million and come from an authorised insurer, and you can be fined £2,500 every day you're not properly insured, with a further fine if you don't display your certificate. You don't need it if you only employ close family members or people based outside England, Scotland and Wales. See GOV.UK's page on employers' liability insurance.
Why it matters more for sole traders
As we saw in Step 11, a sole trader is personally responsible for all of the debts of the business. A limited company may give you some protection if things go wrong, but GOV.UK points out you may still need business insurance either way.
Don't forget yourself
When you're self-employed, there's no employer sick pay. MoneyHelper has a guide to personal insurance when self-employed that's worth a read.
How to buy the cover you need
Shop around, and think about using a broker who specialises in business cover. And don’t panic, you’re not likely to need all of them. The British Insurance Brokers' Association has a find insurance tool. Also ask your trade or professional body, because many offer insurance deals, and check whether any licence or registration from Step #15 requires specific cover.
Part 2: Tax
Tax is less scary when you know what's coming. Which taxes apply depends on your structure (Step #11) and what you do.
The main ones
• Income Tax and National Insurance (sole traders and partners). You pay these on your profits through Self Assessment. MoneyHelper explains tax and National Insurance when you're self-employed.
• Corporation Tax (limited companies). The company pays this on its profits, and directors may pay Income Tax depending on how they take money out.
• VAT. You must register if your taxable turnover goes over £90,000 in the last 12 months, or you expect it to in the next 30 days. You can also register voluntarily. See GOV.UK on registering for VAT.
• PAYE. If you employ people, you'll need to register as an employer. GOV.UK has a step-by-step guide to employing someone.
Self Assessment, step by step
If you're a sole trader, you must register for Self Assessment if you earn more than £1,000 in a tax year (6 April to 5 April), as we covered in Step 3. You can register earlier if you prefer. GOV.UK's register for Self Assessment page walks you through it, and warns that telling HMRC late could mean a penalty. Check filing and payment deadlines on GOV.UK too, and put them in your diary now.
Use GOV.UK's Self Assessment tax calculator to estimate your bill, and make sure you know which expenses you can claim.
Keeping records
You must keep records of your business income and expenses. GOV.UK explains what records to keep and how long. From the 2024 to 2025 tax year, cash basis accounting is the default for most sole traders, so you record income when it's received and expenses when you pay them.
Making Tax Digital
This is a change to be aware of. Under Making Tax Digital for Income Tax, sole traders and landlords with qualifying income above £50,000 have had to keep digital records and send HMRC quarterly updates through compatible software since 6 April 2026. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. It might not affect you in year one, but it's why choosing the right software (Steps #8 and #10) matters. GOV.UK has a step-by-step guide.
Set aside your tax pot
My single most useful tip: every time you're paid, move a percentage into a separate savings account for tax. It means your bill is never a surprise.
Get professional accountancy help
A good accountant often pays for themselves. The ICAEW's Business Advice Service offers a free initial consultation, and GOV.UK has a page on getting help with tax. HMRC's Help for Hustles pages explain things in plain English too.
Your homework to do from this advice
Remember, you don't have to do everything today!
• ☐ List which types of insurance could apply to you
• ☐ Get at least two quotes, and ask what's not covered
• ☐ Check whether you need Employers' Liability insurance
• ☐ Diary your Self Assessment registration and filing deadlines
• ☐ Open a tax pot savings account
• ☐ Book a free chat with an accountant
Want to talk it through?
I can't advise on tax or insurance, but I can help you plan the launch around them. Book a call with me here.
Next up in the series: Step 20, Finding Your First Customers. The really exciting part.
