Tax

[Sparklez]

Yesterday I phoned the tax people and registered myself as a self employed sole trader as a pert time activity (not my words). Just wondered if anyone else has registered for tax and if it leads to more paperwork than it's worth?

Not sure it was the best move in the world, but didn't want to get caught out, and end up owing the tax man money (I'm already in that boat due to an HR screw up at my full time job).

Thanks
Carol

[Seahorse]

I need to do the same(tho Im going to be a chicken and fill the forms in and send them off, Im too shy to talk to poeple, hence I like forums).

Was it easy, what did they ask?

My friend is selling cards, i told her about being registered but I dont think she is gona do it, I warned her she could get in trouble!!

I think there is one horrid form to fill in at least once a year with net/gross etc and other confusing words to deal with.
Other than that I dont know.

Good move.Very wise to register, Id hate to get caught out too.So, they are taking some of my hard earned profits!!!!Suppose its better than owing them a huge fortune in the future.

I also have to think of a company name before I do any registering, still cant think of one!

[0103media]

Yesterday I phoned the tax people and registered myself as a self employed sole trader as a pert time activity (not my words). Just wondered if anyone else has registered for tax and if it leads to more paperwork than it's worth?


I'm self employed and have been for a long time.. I'm actually far better off compared with when I was employed due to being able to put your cost against tax.. The only extra cost is my account fees but these are pretty small..

A few Things you can put again tax..
Petrol..
The depreciation of your car and like..
Loan/creadit cards..
Bank charges
Clothes..

Etc..

Hope that helps

[Sparklez]

I need to do the same(tho Im going to be a chicken and fill the forms in and send them off, Im too shy to talk to poeple, hence I like forums).

Was it easy, what did they ask?



Was very easy Seahorse, all he asked was name, address, NI number, date of birth etc, then trading name and what address I was using for business. Also asked my PAYE ref number, which i didn't have to hand.

He was actually really nice, didn't have much of a sense of humour, but was okay. And he volunteered the info about the NI exemption certificate.

I actually didn't set out yesterday to register. Only phoned to ask for some info and he said I could to it there and then so I just went for it.

If your friend has been trading for more than 3 months, she will have to be careful. You only get 3 months to register and there are penalties if you don't

HTH

Carol

[Sparklez]

I'm self employed and have been for a long time.. I'm actually far better off compared with when I was employed due to being able to put your cost against tax.. The only extra cost is my account fees but these are pretty small..

A few Things you can put again tax..
Petrol..
The depreciation of your car and like..
Loan/creadit cards..
Bank charges
Clothes..

Etc..

Hope that helps

I knew you could put in things like petrol, but I didn't know about bank charges, I'm assuming that wouod only be charges on your business account? I wonder if I could put a whole new wardrobe against tax :D .

Is an accountant expensive? I was thinking about doing my own, if I keep it fairly simple. Wonder if my granny would come out of retirement for me?:rolleyes:

Thanks
Carol

[0103media]

Regarding clothes ..

If you need those clothes for the bussiness then its an expense simple as that..

A computer, digital camera etc..

My accounant is really cheap but he has been my parents accountant for about 28 years..

I pay less then £300 and have about 12 accounts for him to sort out.. (I think this year he might charge a bit more)

[Fran]

I'm registered to Inland Revenue as a sole trader and no it's not much in the way of paperwork. You will receive a P35 each year and that's to log your earnings if any and as mentioned you can offset a lot of out goings.

If your working from home you can also have some household bills paid in part by your "business/hobby", i.e. Elec, Phone, Rent money for the room you use, insurance etc. this is usually based on a %.

We've dealt with Inland Revenue for 20+ years with our other business and have had 2 visits during that time, at which time they pointed out other things that we could have been claiming for. IR have always been decent with us but then again we've not tried to pull the wool over their eyes. I've heard from others they are not to be messed with! or they will come down hard on you.

You've nothing to lose by registering but everything to lose if you don't.

If things don't work out for you, you can always cancel registration.

Fran

[Sparklez]

Thanks for the replies guys! Feeling more like I've done the right thing now.

Cheers
Carol

[nattynetty]

I agree with the others it's well worth registering as you can actually end up with the tax man giving you money - especially if you are only just starting and also work full-time. Also, more seriously they are known to search the web, read small ads in local papers etc to catch unregistered businesses.

When I first registered as self-employed I was making wedding invitations on a very part-time basis and after all the costs (yep inc % of gas, electric and phone bills) I made a loss - didn't bother me as just a hobby really but I ended up getting £120 tax refund!

As for accountants, ask friends & family for recommendations I'm kinda lucky cos my dad's an accountant who specialises in small businesses - and he's kinda unlucky cos he's got a daughter who always leaves the paperwork til the very last minute!

[Sommerwood]

Lol at Natty, I trained as an accountant and have registered my part-time hobby as a business, but although was always very meticulous when it came to doing others accounts, my paperwork too is left until the last minute!!!

I work too so as its my ffrst year of trading I am sure once I have offset use of home, vehicle costs, etc etc against it all I will show as a loss, which will be good as will bring my tax down for once rather than keep on increasing as it does!

MNot looking forward to fuilling out my tax return though, used to have a programme at the accounts practice which worked it all out for you, now will have to put my brain back in gear!!!

I still do accounts now for the company I work for, but only to profit and loss stage then their accountant takes over, so have got to refresh myself on what percentages to claim for etc.

[handmadeheaven.biz]

I don't think it's worth the risk of not registering, so I just did! If you earn over £4345 a year you pay £2.10 a week national insurance, below and you don't. I've never done anything like this before so it's all new to me. Just got make sure I keep on top of all receipts of incomings and outgoings and I should be ok. I'd rather do this all properly than be caught out. The taxman will catch up with you!! If you have a business you owe it to yourself to do things properly or how else will you grow? :D I actually find it exciting as it makes me feel like the business is official now rather than just a bit of a dabble.

[ejralph]

I found that psychologically speaking, registering was an important step for me also. Aside from just the legal and moral side of it.

It was like I was able to un-ashamedly build my business and didn't feel I had to sculk around in the shadows.

As Steph says, it isn't worth the risk not declaring your sales and registering. Even if you work a full-time job elsewhere, technically you still need to inform the tax office if you are selling online etc. And I know they check ebay, because I knew a guy who worked for tax office and he said finding tax dodgers on ebay was "like shooting fish in a barrel" :eek:

I think also though it does get on my nerves when people don't do things by the book because it makes it so much harder for those of us who do.

If you have to make your living from your sales, and you pay tax and NI, you pay insurance to make sure no-one gets hurt by what you do and what you sell - then it is really infuriating to be sat next to someone in a craft fair who is just doing this for "pin money" - because they so often undercut your prices, because they can afford to.

I know that is being highly idealistic, but I do wish sometimes that people would have some solidarity to their chosen craft. Its hard enough to compete with factory-made imports, and bought in goods already.

I don't sell at craft fairs these days as I only run my business online now - but I did enough on the "front line" to remember just how many frustrations there are, without being sat next to someone selling their work for peanuts because they can!

I never used to mind when it was someone selling tat, but when it was someone making beautiful work and underpricing themselves I just wanted to weep! lol

[handmadeheaven.biz]

emma, i totally agree with your standpoint on this :D if only everyone felt the same.

i feel so much better now i've registered. like you said, i won't feel worried anymore about promoting handmade heaven (http://www.handmadeheaven.biz) :)

[ejralph]

And so you should promote it Steph - your work is gorgeous and I think as many folks as possible should know about it!

Just loved those coasters you made for Laura's commission by the way. (can't remember if I posted on your thread over at GH or just thought about doing it! ) They are so pretty - gorgeous colours.

Emma

[handmadeheaven.biz]

thanks emma. i'm always worried when i do commissions whether the client's going to like what i've created specifically for them. luckily laura said they were 'PERFECT' so that was a relief! i did like them so much i wanted to keep them tho! hahaha!

[alicub]

How appropriate!! I have just been reading the HMRC guide to self employment and how to register!!!!

I am currently only making things as a hobby really....but, I feel if I want to promote myself and take my hobby seriously I need to register!

I didn't realise that if you also work full time (which I do!) you may end up with a tax rebate if your business is making a loss.....

[Andamento]

I saw a post somewhere that defined how much you could make as a hobby before you had to declare anything, I think it was £800. I did a very quick search on the web and haven't been able to find anything official about this. At the moment, taking into account equipment & material costs I'm not anywhere near making a profit and am unlikely to do so for a long time based on current craft fair performance! It's basically something I do in my spare time so to me it's a hobby (not even a paying one!). Does anyone know where I'd find an official definition of paying hobby as opposed to small business? I was thinking of trying to sell some things on ebay but don't want to get into any bother with the tax man if I can avoid it!

[ejralph]

thanks emma. i'm always worried when i do commissions whether the client's going to like what i've created specifically for them. luckily laura said they were 'PERFECT' so that was a relief! i did like them so much i wanted to keep them tho! hahaha!


It's the reason I don't do commissions!

Either in my lampwork or polymer beads, because getting something just how the client had envisaged it would be nigh on impossible for me. The most I will do ( and only for very dear customers) is to take a very lose brief such as "can you do something that sort of shape, in these sort of colours?"

And then, I just give them first refusal on the item I have made. If they like it, great - if not, there is no obligation and the beads will just go into my store. Either way then, everyone is happy. I am able to be free enough in my designs not to lose sleep, and the customer has the chance to get something in the area she wants, but still with the element of surprise.

Sounds to me rather like you worked on the same basis - much easier than having a client say "ok, I want this colour here, and that colour there and oh, can I have a dot of this here and a splodge of that there..." um...how about NO! I aint a blinkin robot :p

I meant to ask you if you do slumpy fused bowls at all? I think they would make fantastic christmas pressies. I know I have various couples that i need to get things for and I don't want to spend more than the £10-15 mark on them, but at the same time you can't really buy one coaster for a couple! I wonder how much harder it would be to slump them into funky little dishes of the same size? Then they could be little trinket bowls, soap dishes and the like? I don't know - what I know about fusing you could write on a grain of rice and still have room for the Lords Prayer, but the idea came into my head to ask you about it anyway....:D

[nattynetty]

I saw a post somewhere that defined how much you could make as a hobby before you had to declare anything, I think it was £800. I did a very quick search on the web and haven't been able to find anything official about this. ... Does anyone know where I'd find an official definition of paying hobby as opposed to small business? I was thinking of trying to sell some things on ebay but don't want to get into any bother with the tax man if I can avoid it!

Hi

Don't quote me on this but I'm pretty sure no such thing exists...I'm sure in the dim and distant past (well ok about 18mths ago) I asked my dad about it and he didn't think there was such a rule. Maybe that's why you couldn't find anything about it on the web :confused:

I'm sure if I'm wrong someone will correct me.

Netty

PS. Whoever said about tax office employing people to catch unregistered businesses are spot on...apparently it's not unheard of them even listening in on conversations in the pub!

[alicub]

I don't think there is a hobby rule either :mad: It would be on HMRC website if you did not have to decalre earnings under a certain level! Would be nice though:p

Civil servants have a responsibility as employees to declare anything they see or hear that may be considered fraud...Like the Police in that respect.

[handmadeheaven.biz]

I meant to ask you if you do slumpy fused bowls at all? I think they would make fantastic christmas pressies. I know I have various couples that i need to get things for and I don't want to spend more than the £10-15 mark on them, but at the same time you can't really buy one coaster for a couple! I wonder how much harder it would be to slump them into funky little dishes of the same size? Then they could be little trinket bowls, soap dishes and the like? I don't know - what I know about fusing you could write on a grain of rice and still have room for the Lords Prayer, but the idea came into my head to ask you about it anyway....:D
i want to branch out into things like this but at the moment i don't have any moulds. it's next on my 'to buy' list!

[Seahorse]

I have to say I love the idea of actually being able to say I have my own business(only in the planning stage at the mo)Id walk around like a proud peacock thinking to myself 'Ive got my own business dontchaknoow'.

Well, Ive told my friend she needs to register, theers not much elase i can do.Maybe il bring it up again in the next few weeks, I think she has been selling for only 2 weeks.

A question-somebody said soemthing like 'you can get money off X as business expenses'
I need a computer, mainly for my potetntial future site but also my parents may use it to book flights(is that allowed?), if I bought one and kept the receipts could I get some money off it?Would it be via the tax people?

[carolinemhannon]

i've just registered for tax, it took less than 5 mins and it was really painless, there sending me lots of info on what i can claim, i'm going to keep my petrol receipts and pay and display tickets from my visit to the post office

[handmadeheaven.biz]

I need a computer, mainly for my potetntial future site but also my parents may use it to book flights(is that allowed?), if I bought one and kept the receipts could I get some money off it?Would it be via the tax people?yes, if it's for your business you can include it in your costs

[Seahorse]

yes, if it's for your business you can include it in your costs


And what kind of money could I get back from it?
God I sound so greedy!!

[handmadeheaven.biz]

if you pay VAT you'll get that back if you're registered for it but it's considered a cost of business so they offset against your profit, i think

[0103media]

if you pay VAT you'll get that back if you're registered for it but it's considered a cost of business so they offset against your profit, i think

Don't mention the word VAT :( yuck.. lol..

If you are VAT registered you need to charge 17.5% on all your sales which goes stright to the gov at the end of every month..

The bonus about been registerd is that at the end of the year you get the Vat back but only for what you have bought..

I'm not a buyer and seller and in services thus basically i'd lose 17.5% profit..

You can choose to register but you have to register after earning
£57,000 + And that turnover NOT profit..!!..

[Seahorse]

Hmm, I think I convinced myself NOT to be VAT registered(no way Il ever have a turn over of 50k+)
So if I have to charge customers extra money like VAT and give that away, but then get some back at the end of the year on what I have spent out, I think I realised its not worth it.
Im happy to buy a computer and not get any money back, as long as its being used for a good purpose.

I think Ive succesfully confused myself.heeelp, im melting, im meeeeltiiing.

[Peter]

That's what you get for playing with water.....................at least a house didn't fall on you. ;)

[Seahorse]

That's what you get for playing with water.....................at least a house didn't fall on you. ;)

hehe, have had this response from friends when I turn up somewhere 'didnt know youd arrived, didnt hear your broomstick'.

[alicub]

I saw a post somewhere that defined how much you could make as a hobby before you had to declare anything, I think it was £800. I did a very quick search on the web and haven't been able to find anything official about this. At the moment, taking into account equipment & material costs I'm not anywhere near making a profit and am unlikely to do so for a long time based on current craft fair performance! It's basically something I do in my spare time so to me it's a hobby (not even a paying one!). Does anyone know where I'd find an official definition of paying hobby as opposed to small business? I was thinking of trying to sell some things on ebay but don't want to get into any bother with the tax man if I can avoid it!


Read up on this at work today!!! Sorry it doesn't exsist.....Everyone needs to register as self employed if they make (or buy to re-sell) items with the intention of making a profit. As previously mentioned if earning less than £4465 for tax year 06-07 you will not need to pay extra NI contributions...

Sorry for the bad news...:rolleyes:

Ali
alicub.etsy.com
alicub.blogspot.com

[swirlyarts]

I'm registered to Inland Revenue as a sole trader and no it's not much in the way of paperwork. You will receive a P35 each year and that's to log your earnings if any and as mentioned you can offset a lot of out goings.

If your working from home you can also have some household bills paid in part by your "business/hobby", i.e. Elec, Phone, Rent money for the room you use, insurance etc. this is usually based on a %.



You have to be really careful with claiming if you work from home. A friend of a friend of my husbands worked from home and he claimed for every room in the house apart from his bedroom. That was fine until he came to sell his house and they IR came along and said that they needed lots of the money back - I can't remember the exact details but I will ask hubby and post it up! Maybe should've waited a bit before posting.....

[Seahorse]

After reading that I have a dilemma.
My full time job is very dull and I can basically spend 7 and a half hours doing craft to sell.
I will also work at home.

I dont see the point in wasting 7 hours a day not doing anything.Is it ok to not be insured at work when I make things but, on paper, be based at home and be put on the house insurance?

Hope that made sense.

[swirlyarts]

Found it - hope it makes sense!

You can use a part of your house for business purposes, and are allowed to claim as much of the house as you use for business. He claimed that since everywhere in the house (apart from his bedroom) was a business, then he could claim back 90% of the running costs (new boiler, furnishings, heating, lighting etc.).

When you sell your primary residence, you don't pay capital gains tax on the increase in value of the property. BUT this does not apply to a business property - you can be liable to pay CGT on the increase in property value. Since 90% of his house is a business, then he is potentially liable to pay CGT on 90% of the gain in property price (minus the £8500 tax free threshold). You might get away with it, but if the tax man ever investigated, then it's a BIG fine that you might be liable for. (back tax, plus interest, plus any penalties - and if you've spent the money on buying a new house, then where does it come from?).

[Fran]

Found it - hope it makes sense!

You can use a part of your house for business purposes, and are allowed to claim as much of the house as you use for business. He claimed that since everywhere in the house (apart from his bedroom) was a business, then he could claim back 90% of the running costs (new boiler, furnishings, heating, lighting etc.).

When you sell your primary residence, you don't pay capital gains tax on the increase in value of the property. BUT this does not apply to a business property - you can be liable to pay CGT on the increase in property value. Since 90% of his house is a business, then he is potentially liable to pay CGT on 90% of the gain in property price (minus the £8500 tax free threshold). You might get away with it, but if the tax man ever investigated, then it's a BIG fine that you might be liable for. (back tax, plus interest, plus any penalties - and if you've spent the money on buying a new house, then where does it come from?).


That makes very interesting reading. we've moved house several times in the past 10 years and notified IR of the change of details and so far this has never been an issue.......................Hmmm this is worth investigation me thinks :confused:

Fran

[swirlyarts]

It might well be worth investigating! Don't want to be caught out! I must admit that we tend to err on the side of caution when it comes to the business!

[0103media]

Been meaning to post this since about 1am but forgot..

The 2nd year is a killer!!!!

ok why am I saying that.. Well when I set up the first year was only 4 months... The tax is only for that 1/4 so when its came to pay my tax in Jan I only paid for that 1/4 with the expectation that the next year would yield the same amount..

BUT

That one 1/4 was only 1 project and a small amount, the year after I'd given up full to work just to work for myself the an entire full time amount of tax..

ok thats sound fine..

BUT

Come the 2nd tax year I had to pay an entire years worth of tax Plus 1/3 of next years and again 1/3 in April...


To explain this i'll make up some figures..

Lets say your first yr = £5k (never really an entire yr)
Your going to pay almost nothing if it your total income but lets also say u have a full time job..

20% (easy round number ;) ok so in jan you pay £1k

April you pay £0

Your 2nd year you make £20k

But the 2nd Jan you have to pay 20% of 20K which is £4k plus 1/3 4k for the next year thus the total in jan would be £5,333

April would come and you'd pay another £1,333

When this hit me for the first time it was a killer!!

Save always for your 2nd year !!!

[Sparklez]

Thats a good tip media - I'm saving already, just in case I do have something to pay this year.

Thanks
Carol

[Seahorse]

Media, Im so confused!

[swirlyarts]

Media, Im so confused!
Thats why we employ an accountant and I leave the financial dealings up to hubby!!

[Seahorse]

It does kinda make sense I just dont know which bits the 20% refers to, the full time job or the personal business!!
Im sure its me not reading it correctly, its late in the day,im tired, drained of all enthusiasm, my legs have gone to sleep, my back hurts,Im hungry, im going out for the first time in years on Friday and I have a spot developing right by my nose.Timing huh!

[swirlyarts]

Timing huh! I know exactly what you mean - I'm going out for the first time since Tara was born, on Sat, and my stomach seems to have decided to grow stupidly big - it was big before but......