What tax?

[littlesnuggler]

I've just recently launched my website to sell my items. Before this I only sold on Ebay and to friends, etc. I haven't even thought about registering my business as I have just really been testing the market. Can anyone please advise me on what I should do regarding my business, i.e. at what point do you have to register it, what are the advantages, etc.

Thank you

[Cloverst]

Hi helen,

You are supposed to register your busines for tax with in the first 3 months of trading. Not doing do is against the law and can result in a hefty fine. You also need to register for national insurance contributions. There are two types of these one at a fixed rate payable by direct debit and one based on earnings like tax.

You can get more info from the business link website and you should contact your local business link who should give you 2 years free business startup support and advice. It is well worth contacting them.

They can also provide you with more info one the insurance you will need on start up and whether or not you need to register with the information commisioner.

Hope this helps!

[Katianne]

What if you are not making any money, do you still need to register within 3 months? I haven't sold anthing as yet. I have been keeping a record of what I've spent and saving invoices.

[Cloverst]

'fraid so.

You have to register 3 months from the start of trading profits or not.

The idea is that if you are operating at a loss (i.e. your outgoings are more than sales) then you will not be taxed at the end of the year.

See here:

Income Tax & National Insurance (http://www.businesslink.gov.uk/bdotg/action/detail?r.l1=1073858808&r.l3=1073875654&type=RESOURCES&itemId=1073789949&r.l2=1073859215&r.s=sc)

If you do not pay your national insurance throughout your life, including time spent at home looking after children (you can apply for it to be paid by the government as 'home responsibilities') you will not get a full state pension upon retirement.

Interestingly I was also reading that if you put aside one room of the house solely of use for your business than you are legally obliged to pay business rates on that room as well as council tax on the rest of the house plus you will be subject to capitol gains tax for that room should you sell you house! :o

It's worth looking into these things so you don't get bit on the butt later on...

[Sparklez]

Also worth noting that if you may NI through PAYE (if you already work) you can get a NI exemption certificate for your business if you don't make that much from it - off the top of my head, I think the threshold is around £4000. Best thing to do is give the tax people a call. They're actually really helpful and it's not as scary as you think.

Carol.

[littlesnuggler]

Thank you all for your information, looks like I've got some homework to do.

[candles by lisa]

Yep 3 months is the limit. After that you will get charged £100 for each month you are late declaring your tax status.

You can get the small earners exemption certificate (which means you wont need to pay national insurance if you earn under £4,000 I think it is) on the inland revenues web page.

They are actually really helpful despite what people say.:o

[Katianne]

Ok, have had a look at the site is it the 'Becoming self employed form' I need to fill in?

[candles by lisa]

If you want to declare you tax status you can do that over the phone with the Inland Revenue it only takes a couple of minutes to do. However the National Insurance must be done on the form and I think it is call something like self employed small earners or something like that.

It asks for the usual details, company etc and at the end will ask for projected earnings. This will only be a guess just now as you have only started up.

Hope this helps.

All the best.

Lisa

[Sparklez]

If you call the Tax people they'll make sure they send you all the correct forms for the NI exemption, and will arrange to send you lots of other useful info. I found this the easiest way as I didn't find the web site all that clear. They really are a helpful bunch, even if they steal lots of my wages :p

Carol

[nattynetty]

I've just recently launched my website to sell my items. Before this I only sold on Ebay and to friends, etc....

Hi there littlesnuggler

As t'others have said you HAVE to register within 3 months of starting and the InRev really are quite helpful.

When you fill in the form stating when you started might be an idea to bend the truth a little so you don't get hit with a fine - however, if you do this remember not to claim for any business expenses you incurred before this date (sound obvious I know but I have heard of people forgetting and then having to explain themselves to the tax man).

Not that I condone anyone lying to the taxman cos it's a very bad thing to do

[Cloverst]

The best thing really to remember is that the government want people to become self employed, it's good for the economy, and because of that there is plenty of help out there. Much of it involves picking up the phone but if you have a query start with business links helpline. They are wonderfully helpful and can arrange for an advisor to deal with all your queries.

Interestingly there are also plenty of grants out there for small businesses which they can advise you on.

[Samm]

This is great information, thanks for everyone that posted here. I got in a bit of a state about it all and spoke to the Business Link, they run a number of new business FREE seminars, so I've signed myself up to one of them in May. I also got the number for the HM Revenue to declare myself, its 0845 154515 incase anyone needs it!

[littlesnuggler]

Quite agree Samm, there's some really helpful info here. I've registered and still waiting to hear from IR. At least I've done the right thing.

Business Link are great too, very helpful.

[EMEvans]

I registered with the IR over the internet in February, phoned them this week as i hadn't heard anything - suprise suprise my registration hadn't been logged. Now i'm going to receive a penalty but they did say as i earn under the threshold to send it back to them with a covering letter explaining this, more work again!! Had to register again over the phone.

If you have registered over the internet i would give them a call to make sure they're dealing with it.

[Samm]

I just registered over the phone today. I was told that as I'm in full time work and probably gonna earn less than £4000 a year I can be exempt from paying NI. Just thought I'd share!

[EMEvans]

You will still have to write to them once you receive a request for money from them. Just send the request back to them together with a covering letter with the reason why. They usually tell you this when you phone them but as they seem to be slacking at the moment, thought i best point this out too.

[Katianne]

Ok, I am just going to post this in case anyone else is still confused (because I still was, despite all your wonderful advice and reading the IR website!!)

I spoke to the IR to clarify what I need to do re: VAT. I explained I have a full time job but I do crafts in my spare time which I have recently started to sell. I was told that unless me total earnings is over £64k, I do not have to pay VAT or anything else (N.I.). I can reguster voluntarily if I want to. I was told the only VAT I wil pay is on the materials I buy (which of course I do anyway as VATs always added.

So, for anyone that was still confused, I hope that's helped !!!

http://www.mumszone.co.uk/forums/images/smilies/party0038.gif

[liz15a]

I was told that unless me total earnings is over £64k, I do not have to pay VAT or anything else (N.I.). I can reguster voluntarily if I want to. I was told the only VAT I wil pay is on the materials I buy (which of course I do anyway as VATs always added.


yes but this only applies to registering for VAT though, if you havent already, you would still need to register as self employed for income tax purposes....the two are different issues (its just I would hate for anyone to not register with the IR because they are only doing it part time or not earning over £64!) You would probably find you are owed a rebate at the end of the financial year anyway for the first year or two!

This issue is a bit of a bugbear of mine as I talk to too many stall holders at local fairs who are earning lots of money from their craft but who arent registered with the IR, and who are even claiming incapacity benefits and the like on the side!!

[nattynetty]

Quite agree Liz it's absolutely vital to register for income tax purposes...you can take solice in the fact that these people will get caught eventually - craft fairs and boot sales do get visited by the InRev I know this for a fact (although if I revealed my sources I would then have to kill you ;) )

And Kate, take it from me you'd almost certainly get tax rebates for the first few years if you're working full-time as you'll be paying tax on your wages but your actual earning will probably be less once you've calculated in your part-time business (as most new businesses make a loss to begin with especially if your materials are quite pricey)...

...an example:
Wages £25,000
Craft Sales £3000
Expenditure (including milage for fairs, stall fees, materials, advertising etc) £5000

So you'll be paying tax on £25000 but actually only earning £23000 therefore you'll have overpaid on £2000 so will get a refund of a few hundred quid. :) If there's ever an incentive for anyone to register that's got to be it!

I really hope that makes sense as it's late but I've probably just confused you even more.

[Katianne]

Thanks guys. I'm a bit annoyed with the advice they gave me in that case - I asked if there's anything I have to register for etc and the guy told me no. So, I need to register as self employed and can do this online?

[EMEvans]

I would phone them if i was you to register as some of there online registrations haven't been recorded on there system.

You will receive a penalty but don't worry about this as you can send it back to them stating you earn under the threshold.

[Katianne]

I have printed a form of as they are only open Mon - Fri. Its the 'Becoming Self Employed and registering for Nat. Ins. contributions' form. Is this the right one? Sorry all, I am getting so confused with all this and bet I sound really stupid!!!

[EMEvans]

Yes it sounds like the right one. They will still send you a bill for class 2 N.I contributions but again you can send this back with a covering letter saying you will be earning under the limit from your self employed work and that you are in full time employment.

Hope this helps

[Katianne]

Yes, thats a big help - thanks Emma :) (and everyone else!)

[Katianne]

Ok, so I've just sent my form off. My next question is...do I need to print of all my invoices for the materials etc I've bought and send them to the IR at some point? The reason I ask is that I read a post saying that you don't have to, that you just record what you've bought etc? Is this in relation to this? Sorry all (again!).

[EMEvans]

No, you don't send them anything yet. When you receive your first tax return (which will be next year) you need to fill this with the information from your income and expenditure accounts

[Katianne]

And do I need to enclose the receipts and invoices then?

[EMEvans]

No, you keep them. Make sure you keep them safe for 7 years though because if ever you have an enquiry from IR they can go back 7 years

[sunflowergifts]

Hi all. Been reading this thread and thought I would drop my 5p worth into it. Unfortunatly for me I am a bookkeeper for small business's who are just starting up (far rather do my jewellery - but something has to pay the bills) Anyway, if you need some advise from someone who does this for a living pm me and we will go from there. The advice in this thread is correct, (don't want to step on to many shoes) but there are things you need to do, to get the most benefit to you and still be legal.
Anyway if I can help give me a yell

[EMEvans]

NIce to meet you sunflowergifts, i'm also in the trade (so to speak) but i'm more on the VAT side of things. I only do accounts when i have time these days.

[sunflowergifts]

NIce to meet you sunflowergifts, i'm also in the trade (so to speak) but i'm more on the VAT side of things. I only do accounts when i have time these days.

Nice to meet you to. I wish I could stop the accounts side of things, but in all honesty I would get very bored if I had nothing to complain about (and no Tax Man to argue with ;-) !!!)!!!:) It allows me endulge my crafting addiction! So can't complain!

[willowmax]

:) I just read this whole thread and it is really useful - I have just phone the IR and registered etc and will be sent a form for my exemption as I work full time.

I am after some information on what you need to do to be able to buy wholesale!!! I have been told that you need to register as a company - but not limited - and you get a number. This number can then be used to prove you are a company and can get the good wholesale - does anyone know what I am talking about - I have no idea!!

I have asked various people - I even asked the very helpful lady at the IR and she did not know what I was going on about either. I could have got totally the wrong end of the stick which would not surprise me!!

Anyway - if anyone can help - i'd appreciate it

Cheers

[Seahorse]

HIya

Im at work at the mo and reading yuor question sparked something in my tiny brain.

I looked on our headed business notepaper and there is a company number at the bottom, lots of digits.
Maybe this is what you mean?Im assuming if you give that number over to a supplier it prooves your a registered company.

Just a thought.

[liz15a]

if you are just working for yourself then you shouldnt be thinking of setting up as a company - this would involved other people in the business plus you would be classed as an employee and have to pay salaries etc, so you should only be registering as self employed.

Whoever told you you need to be a company to buy wholesale is not right! You may be asked by some wholesalers to produce proof of trading (a copy of an invoice from another supplier, or a business utility bill for example) but thats all!

I've found a very useful pdf on all these issues, which may help:
http://www.hmrc.gov.uk/startingup/working-for-yourself.pdf

[Katianne]

Has anyone else registered as self employed by completing and sending the form? I did about 2 weeks ago and haven't heard anything back - is that normal???

[liz15a]

the IR are very slow at doing things!

If I was you I'd give it another week and then start chasing.

I can't honestly remember how long it took (it was 3 years ago now for me!) but it did take them nearly 5 months to calculate my last tax return so dont expect miracles!!!!!

[Annette]

Hi all

I have just sent off my form for self employment. I've already been on a one day 'becoming self employed' at the Revenue and Customs offices - and would say it is well worth doing and they're free of charge.

The lady that did it was very helpful and started the course off with 'anything said here will remain in this room'. There were nine of us, which was great all with different types of businesses and we all asked different questions so we probably gained more than if it had been one to one. They are phasing these out in the future.

She did say don't expect to hear from them quickly, possibly at least 6 weeksafter sending your form in!!

I love anything free that may be of some benefit so I'm doing the Self Assessment course on 30th May.:jaw:

Business Link also do free courses for people starting out - been on the first one and the guy looked and spoke like David Brent from The Office??:mf: It was ok but better for networking.

[Seahorse]

Has anyone else registered as self employed by completing and sending the form? I did about 2 weeks ago and haven't heard anything back - is that normal???

I have,cant remember the exact date, maybe posted mine a week ago.

[willowmax]

Hi all

There were nine of us, which was great all with different types of businesses and we all asked different questions so we probably gained more than if it had been one to one.



Anyone local to Bath/Bristol area fancy going on one of these courses - the "Becomming Self Employed or Self Assessment"

When I rang the IR today the lady tried to book me on one but I backed away thinking it might be over my head but it sounds as if they could be really useful.

Might be good if a group of us went along as we all want the same sort of info and it is easier when you know the people you are going with

If others are interested I can find out the dates and times of the local to Bath/Bristol ones are and see how many spaces they have
:pile:

[mjbelkin]

if you are just working for yourself then you shouldnt be thinking of setting up as a company - this would involved other people in the business plus you would be classed as an employee and have to pay salaries etc, so you should only be registering as self employed.

Sorry Liz, but that's just not true. If you set yourself up as a company, say a limited company, then you only need involve 2 people - 1 to act as Director, 1 to act as company secretary. As both are 'officers of the company' they are not necessarily also employees, and so are not covered by the minimum wage laws. In fact, there are certain advantages to setting up as a limited company, but I won't go into them here.

Get yourself registered with the Revenue, and once that has come through it should help you access wholesalers, but some of them do have minimum purchase levels.

[Katianne]

I have finally received my forms from the IR since I declared myself as self employed. They have sent me a bill for NI contriubtions for 06/07 and also an exemption form for small earners (which is me!!!). Now, from reading the form I would assume that I did not have to pay this NI bill, as I did not make any profit during 06/07. So in that case, do I just complete and return the exemption form and the bill will be cancelled, or do I need to pay the bill and then get a refund later????

[EMEvans]

No you don't need to pay the bill but get the exemption form sent off asap. Take a photocopy of it before you send it too.

[candles by lisa]

I have finally received my forms from the IR since I declared myself as self employed. They have sent me a bill for NI contriubtions for 06/07 and also an exemption form for small earners (which is me!!!). Now, from reading the form I would assume that I did not have to pay this NI bill, as I did not make any profit during 06/07. So in that case, do I just complete and return the exemption form and the bill will be cancelled, or do I need to pay the bill and then get a refund later????


I got the same thing. I had sent in my NI excemption certificate but they didn't receive it so I ended up getting a bill. I phoned them and they cancelled the bill from their end. They sent out another NI exemption form and I filled that in (and made sure they got it).

I would give them a phone and they will more than likely cancel the bill from their end (remember to get the name of who you speak to just in case!!).

Cheers.

Lisa

[Roseberry Crafts]

Oh sh*t! I just didn't even think about all that head-achy stuff.
Been selling on ebay on and off for years. Does this mean I'm going to have an enormous bill or do I just tell them about my official beginning in Dec '07 (ish)? Seems ridiculous to cause so much hassle when I only ever make a couple of quid here and there!

[EMEvans]

I would contact them asap with your official start as you only have three months to let them know or you get a fine.

[Roseberry Crafts]

Oh cripes! What sort of figures are we talking about? Has anyone actually been fined?:o

[EMEvans]

Couldn't tell you the figures as it hasn't happened to me. I did leave it a little late when i contacted them but it was fine. If you do it this week then it will be fine i'm sure. You can do it over the phone to and it doesn't take that long.

Hope that helps

[AlexandraB]

So glad I read this thread, have just rung them and registered as self employed :) Just in time as well!

They were really friendly and helpful.

Thanks to everyone that has contributed to this thread, it was very helpful and informative and possibly saved me a fine!

[ladyluckjewellery]

I've registered as self employed with them too, they took a few weeks to send a letter out to acknowledge my registration though - typical IR from my experience :mad:

Another thing to bear in mind, if you are also employed and are doing your crafts in your spare time ( as I am), if you make a loss through your craft self employment, you can use that loss to get a tax rebate on the tac you pay in your employment - it's not all that difficult to work it out, and if you file online it calculates it for you :mf:that's the option I choose.

Self assessment forms look daunting at first glance, but they are pretty easy to fill in, especialy if it is just for 1 craft business, and another employed job.

Claire

[AlexandraB]

I always heard that tax returns are a nightmare! I'm glad to hear someone say that they aren't too difficult.

[ladyluckjewellery]

No they're not all that difficult really, I think the words Tax, Inland Revenue, Tax Return etc strike fear into the hearts of most people though - myself included :D

I've been doing the tax return for OH's business for the past 5 years, have previously been self employed / employed at the same time and had to do one for myself, and am now self employed yet again!

I don't profess to know all of the current regulations about tax, or be a qualified accountant, but if anyone wants any general advice on tax records and self assessment please feel free to ask.

Claire