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Firefly2105
04-01-2012, 03:12 PM
A friend and mI have decided to start selling some finished projects of ours via Facebook and possibly a website - how do we go about the legal side?

I know it has already been said that someone in our position would have to register as a business - any tips on how to go about this?

I also noticed someone said you only pay tax on profit over 5000 - how can this be accurately documented, since we are knitters (does equipment count as an expense, as well as wool, etc? How could we accurately work out the cost of individual projects?) and is this per year, or in total?

Finally, as we will both be selling, would we register together as one business, or seperately?

Any replies will be appreciated.

Caroleecrafts
04-01-2012, 04:12 PM
To ensure you get it right ring and talk to the HMRC, they have workshops you can attend and are very helpful. We could all give advice but often better coming form the horses mouth.

rosiepinkStudio
04-01-2012, 04:53 PM
I would like to say that Caroline is absolutely spot on with her advice - I'd just like to add that you need to do it NOW.

My daughter and I are in a 'partnership' and we attended an HMRC workshop - best thing we did - everything became clear and we were relieved that we hadn't put it off as registering with HMRC is something you have to do at the very beginning.

jencel
04-01-2012, 05:53 PM
You should definitely go on an HMRC course.

You pay tax on your profits, which are calculated as sales minus expenses. You will get more info from HMRC about expenses.

Your personal tax free allowance is set against this before any tax is calculated (which is probably where the figure of 5000 comes from) but personal allowances differ, and if you have any paid employment, your allowance may be used up there.

HMRC also do a booklet about working from home, which may be useful for you.

soyofthenorth
04-01-2012, 07:31 PM
I agree with everyone else. An HMRC course is definitely the best way to go. From the examples you gave, (equipment and wool), neither of these is an expense. They would be assets, since you have got something to use after buying them. Expenses are things like postage charges, craft fair fees or utility bills.

Cocoa & Heart
04-01-2012, 10:44 PM
For other practical advice - there is also loads on this forum under Crafts as business. I found also lots of information on google (small business info) and UK Handmade has great tips as well.

Good luck

AnnieAnna
05-01-2012, 11:17 AM
For Firefly - do what Caroline and the other's are advising - contact the HMRC and follow what they tell you to do.
While you are doing that and learning the ins and outs of self employment - you'll have a year before having to fill in a tax form - get yourself a little book or a page on your computer and write down the details of anything you buy to do with your knitting. I do date, where I bought it, what it was and how much I paid.
Wool is the first thing on the list but if you made a special journey to get it, jot that down too. Just write down any spending connected to your little venture. You can sort out what's relevant and what goes in what box later - after it's been explained on your HMRC course. Keep the receipts and put them in an envelope or box in a safe place.
If you sell anything note that in another book or on another page. I do date, customer's name or the fair I sold it at, what it was and how much was paid.

Your needles are your tools. The HMRC course will explain if there is a way of sort of selling them to yourself. It's worth doing with big machiney tools but honestly, with knitting needles, it's easier to let it go. But if you buy a new set of needles jot that down in your book.

If the jargon is confuddling your brain (s'cuse me a mo while I argue with Stephen that your wool is an expense - a tax allowable expense - I stick it under the heading of materials (that get used up)) just bring calm to you brain cells by thinking Money In/Money Out and sort out what goes where later. They keep changing what they ask you to put where on the tax form so let them sort you out on your course.

How much income can you keep before paying tax? I don't know where the 5000 came from. That used to be the answer years ago. If you register before March 4th (or is it the 5th?) you can make 7,475 a year (2011 -2012). After it'll be 8,105 (2012 -2013). (The rules are different if you are over 65.)

The cost of each project - that's a whole new topic. Do a search in the box top right of this page - and you should find it's all been discussed at length.

Should you be seperately self employed, a partnership or a limited company? They all have different implications. Seach on http://www.businesslink.gov.uk/bdotg/action/home for the details.
It's usually advised that the first option is the simplest. Just factor in how would your friendship cope with things going wrong. You might prefer the legal protection of the other two ways of doing business.

beadsbydesign
05-01-2012, 11:18 AM
this is the forums page with links for all the things connected with running a craft business
http://www.craftsforum.co.uk/showthread.php?63212-Essential-information-for-starting-up-a-craft-business