Looking for a little advice. Confused!?!?!?

[avextracker]

Hi all.

I have been reading through the posts on this forum and I think I understand everything, but I thought I would ask JUST to be sure.

I've put together and website and I'm just about ready to go live, selling using the website and also selling on Ebay.
I have a full time job earning approx £20k and plan to keep this job, and run my self employed business in my spare time.

Now, I've called up HMRC and the guy on the other end of the phone explained to me that I only need to pay £2.40 per week Class 2 National Insurance on my self employed income, and I would also continue to pay my Class 1 contributions with my full time jobn as normal. He said that the threshold is £5075, and (for the first few years at least) I don't plan on earning this much in profit.

So is that correct? I would only need to pay £2.40 per week unless my profit exceeds £5075? Will there be any other payments required on any profit earned? Income tax? Any % of earnings below the £5075 threshold?

Can someone confirm that its £5075 of profit? Meaning, any expenses, EBay / Paypal fees, cost of running website, posting items, materials etc etc etc are deducted from total revenue, and if the remaining figure is below £5075 then I am exempt from paying anything further?
Would I still need to complete a self assessment at the end of the year?

I'm assuming that I will need to keep a record of all transactions of stock, costs and revenue, and work out total profit for the year to complete a self assessment if this was needed.. How do those of you who use Ebay manage to do this, what with the transactions all being processed online.

I think that's everything covered.
I would appreciate any help anyone can provide.

Thanks a lot!!!

[ladyluckjewellery]

Hi,

Yes, that's correct, it's £2.40 per week for Class 2 NIC's until your profit is over £5000 ish, that's regardless of how much you earn in your full time job, or even whether you have another job!

You will still need to pay tax on any profit, as you will (like me) have used up your personal tax allowance in your full time work. HMRC will send you through a self assessment form to complete, which is actually simpler than it looks to do it yourself, or for some it is worth having an accountant do it.

As for record keeping, I just save the payment pages (for transactions in or out) as html files on my pc for my records and also log them all (and all 'offline' transactions) in a spreadsheet - I'm aiming for a paperless system as much as I can, although you wouldn't believe it to look at my office!!

Claire

[greannancrafts]

Don't forget you can make a loss for the first 2 years and therefore reduce your tax bill on your salaried job

Jane

[Carl Martin]

The £5075 figure is personal allowance allowed by every adult person by HMRC - yes £2.40 sounds about right I think if you were full time self employed then its around £9.50 per week. There is no upper threshold as far as i am aware on NI contributions which effectively what that is, unless there is a higher rate bracket of NI for 44K +per yr income. Don't forget they are only talking NI contributons not INCOME TAX.... you will be taxed as per your 20K salary through PAYE you will then have to record all your SELF EMPLOYED expences and your profits and fill out a self assesement form once a yr. You will need to register within 3 months of starting your buisness . You need to contact Inland Revenue to obtain a UTR no (Unique Tax Reference number) when you register then you go from there. Depends on what you earn depends on what you pay.!!

[befascinated]

Hi I recently was sent my first bill for NI @ the £2.40 a week rate I contacted the HMRC Office and asked about threshold for class 4 contributions etc and discovered that because I was going to earn less than the £5075 net earnings threshold I could apply for excemption from the class 2 contributions called "small earnings excemption". They sent me a simple form completed and received my excemption notice. Maybe you should look into this before you pay money.

[cardsbykatie]

If you are employed and pay national insurance conteibutions through your employment then as long as you are earning under approx 5k from self employed earnings you can get an excemption from paying self employed ni contributions. If you're not making much profit you should be paying national insurance if you pay on employed pay. Any profits however you will have to pay tax on as you have gone over the threshold in you employed pay. Hope this makes sense!

[avextracker]

OK, Thanks for all the help people!!

I think I'm getting my head round it all now.

What % of tax do I have to pay on all profits? Is this paid all in one lump sum at the end of the financial year?

Although I could be exempt from paying NI contributions on my self employed wage, would it be advisable to continue to pay this?

[Carl Martin]

Your looking at approximately 23% upto 44K then its the dreaded 40% after that, thats one reason why I have a limited company only 21% deductions and thats on Gross profit not turnover.Makes a big bloomin difference. It may be best for you to visit an accountant or book keeper at least as IMHO unless you got your eyes wise open self employment can bite you in **** if you get it wrong.

[befascinated]

I wouldnt pay it personally all I did was wait until I got the bill rang the NI people and explain the situation. They were really good and said to not pay the bill and they would send the form It arrived two days later and the certificate about three weeks after that.

[avextracker]

Thanks to all that have helped on here, it is appreciated.

I have done a lot more reading up on it, and I think I understand it a lot better now.

Few things I need clearing up again...

When I contact HMRC to delcare self employment as well as full time employment - will my tax code change with my full time employment? Will my employer know that I am also self employed?

When the time comes for me to do my first self assessment, I'm assuming I will only need the short version? I have looked over the forms on the HMRC website, and the thought of filling out the longer form scares me!! The short form seems easy enough though - I am keeping records of all stock I have bought, and all expenses as I go really, so come that time, it shouldn't take long for me to calculate everything.
One thing though, how will HMRC know to send me the short version of the form?

The more I read up on all this, the more I am becoming more educated and acustomed to the whole procedure. It doesn't seem so bad as it did before!

Thanks again!!

[ladyluckjewellery]

Hi,

Your tax code shouldn't change, and HMRC won't inform your employer, but you should, if only to check that you don't have a clause in your contract that says you can't do any additional work (it's not that uncommon a clause either!)

I was automatically sent the long form, but now do mine online. It looks complicated at first glance, but actually about 85% of the form was irrelevant to me, so I just filled in the boxes that I needed to. If you mean by 'short form' the bit that relates specifically to self employed, then I think they send both versions, but you only fill in the one relevant to you. It's based on your turnover - below a certain amount (£15k I think), anything under that and there are only 2 boxes to fill in!

Claire