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Setting up as Self-employed

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  • Setting up as Self-employed

    Heres the next help topic in the series.

    Selling your craft items and whats involved

    If you start working for yourself, you must register with HMRC as self-employed, even if you already send in a tax return.

    Your business income is counted alongside your existing personal income, so the accounting side of your business will be very straightforward. As the name suggests, you will be personally liable for any debts you incur in the running of your business which you wouldn’t be under the Limited Company route.

    In terms of accounting, you will need to submit an annual self assessment form to HMRC and keep accurate and up-to-date records of all business transactions and accounts.

    In the April after your business starts, HMRC will send you a Self Assessment tax return to fill in. HMRC will also use the return to assess any profit-related (Class 4) NI contributions you may need to pay.

    Self-Employed people are also liable for Class 2 NI contributions (currently £2.30 per week: 2008-9 Tax Year).

    If your income from self-employment is low, you may be able to apply for the Small Earnings Exception.

    Value Added Tax (VAT)

    Even though you will have registered as "self employed" when setting up, you won't automatically be VAT registered. You don’t usually need to register for VAT until your turnover reaches a certain limit in any 12 months, or you expect it to do so. This limit – the ‘VAT threshold’ – is currently £67,000 (from 1/4/2008 - previously it was £64,000).

    Your annual turnover is normally the total amount of money coming into your business from the goods or services you sell

    If theres any other help topics you think should be created, please PM me and i will create one.