Mortgage lenders use different rules to work out how much they can lend. For example, some of the business rules can be:

• Single Applicant – Three times the borrowers annual salary – sometimes more
• Joint Applicants – Two and a half times the joint salaries, or three times the  higher salary plus the lower salary.

Lenders base their loans on the borrower’s gross income before tax. This can sometimes include regular overtime or commission. They also look at the regular outgoings (expenses), like:

• Payments on other loans
• Service charges on the property
• School fees for children

If your bank account regularly goes over your arranged overdraft limit, you will have to pay extra interest and charges. Your bank could also cancel your overdraft limit or refuse to renew it when your agreement runs out. If you lose control of your bank account, it can become very difficult to manage your business and household finances.

Unpaid cheques, direct debits and standing orders will make your debt problem worse and any money paid into your bank account may be taken up by interest and bank charges instead of covering payments you need to make. You may find it easier to change your overdraft into a loan. Remember, you may lose your overdraft as the bank will often make it a condition of the loan that you keep your current account in credit. You will also be committed to making payments towards the loan each month. Make sure you can afford this and make sure the interest rate on your new loan is no higher than the overdraft rate was.

Leases for hiring equipment may be priority or secondary debts, depending on your circumstances.

Check the agreement very carefully to see whether:

• you have the right to keep the equipment at the end of the lease; and

• if you will have to pay for the equipment for all of the period set out in the agreement whether you return it or not.

Under lease-hire agreements, the company which supplied the goods will always own the goods and will be responsible for repairs. Under lease-purchase agreements, if you pay a fee at the end of the leasing period, you will then own the equipment. Check with the leasing company if they will reduce your debt if you return the equipment. If you have the right to keep the equipment, or if you need the equipment to keep trading, you should treat the missed payments as a priority debt.

If the council have tried to use bailiffs, and you have still not paid your business rates in full, they may apply to the magistrates’ court for an order for you to be sent to prison (‘committal’).If you have not paid because you don’t have enough money, the court is not likely to send you to prison. The court would have to show either:

• you have deliberately refused to pay (known as ‘wilful refusal’); or

• you could afford to pay but did not (known as ‘culpable neglect’).

You must go to the hearing and show the court your business and household budget to explain why you have not been able to pay.Take along any evidence to show you have tried to pay what you could afford.

If your business does not have yearly sales that add up to the registration level shown on the tax sheet, you do not need to be registered for VAT. If you are already registered for VAT and you want to be demoted from the register, you will need to show that your turnover will be less than the de-registration level (shown on the tax sheet) over the next 12 months. You could use your budget sheet to show this.

You must pay VAT on all of your sales, unless the sales do not qualify for VAT (known as ‘zero rated’) or are exempt. The tax paid on goods and services you have bought (shown on the invoices) is your input tax and the tax on your sales is your output tax. If you have bought more than you have sold, or your sales are zero-rated, your input tax will be more than your output tax and you will get the difference paid back as a refund.

You have to send VAT returns every three months (every quarter).The date on invoices you send or receive is known as the ‘tax point’, and this usually helps you to decide which return you should include them in. However, you may apply to your local VAT office to account only for the tax you have  actually received. This is called ‘cash accounting’. You can also get back the tax you have paid on debts a person or company is failing to pay you, instead of waiting for the person or company to go bankrupt or go into liquidation (this is when a company stops trading and its assets are sold and split up equally between its creditors