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  1. #1
    Beachview is offline Junior Member Junior crafter
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    Default Confused about tax

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    Hi everyone

    I'm looking for some advice, as I'm thinking of setting up a business selling handmade jewellery. I'd be selling it at local craft fairs. I know I'll have to register with HMRC, but I'm totally confused by it all. I need an absolute beginner's guide.

    Do I have to fill in 2 online forms, one for tax and one for NI contributions? I'm very worried about making mistakes.

    I've never really used spreadsheets or anything like that. What's the easiest way to keep all the records? I know to keep all my receipts for materials and tools, which I've already done. I've started making some things, but not enough for a craft fair, and I want to get all the tax sorted first.

  2. #2
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    Hi, welcome to the forum!

    Don't worry, it can all seem really daunting at first, but you'll get your head around it gradually.

    It's been a while since I registered but I don't remember having to fill in 2 online forms, but here's the link to the bit on the HMRC website that should explain everything you need to do:

    http://www.hmrc.gov.uk/startingup/index.htm

    Basically you will be registering as a sole trader, you usually give a 'trading as' name (e.g. the name of your business) at some point on the form. The N.I. is usually to do with paying class 2 contributions, but the website explains it. Do you already have another job as well? I'm not sure how this effects N.I. if you're already paying through your employed earnings.

    I use a spreadsheet for my accounts, stock inventory etc. But I think others use an Entry Ledger Accounts book, or just a normal notepad to list everything. It's a good idea to do a bit of research of the types of expenses you can include, like a proportion of your broadband, electric, heating etc. as you work from home. Business mileage, e.g. driving to and from a craft fair, picking up supplies or taking orders to the post office.

    There are loads of threads on here too and someone is bound to have asked before about these things, so it's worth doing a search using the 'advanced search' button, then if you can't find what you're looking for feel free to ask
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  3. #3
    nattynetty's Avatar
    nattynetty is offline Super Moderator Super mega humungous crafter with too much time on their hands and chats too much!
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    Quote Originally Posted by Happywrap View Post
    The N.I. is usually to do with paying class 2 contributions, but the website explains it. Do you already have another job as well? I'm not sure how this effects N.I. if you're already paying through your employed earnings.
    If you're already paying NI through another job it's probably best to apply for a small earnings exemption (not 100% sure if that's the exact term) which means you don't have to pay NI for your self employment if you make less than about 5k (again not sure of the amounts nowadays).

    If this is going to be your only job or if you don't pay NI through your other job I think it's definitely worth paying it as it entitles you to certain benefits, for example maternity allowance is about 100 a week more if you pay your class 2 NI.

    Sorry just read that back and it doesn't make much sense, hope someone else can explain it better as my brain has stopped working tonight

  4. #4
    Caroleecrafts's Avatar
    Caroleecrafts is online now Senior Member Try and catch up with this one.. What a crafter!!!
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    Netty is right about the NI and worth getting an exemption if you are in another job or you are at an age where it no longer matters and you have contributed enough for the full state pension. The Ni part can be paid by monthly direct debit and is a simple form to complete, valid for 3 years at that point you renew or notify them before if you have exceeded the allowance.

    I use a simple accounts package and a lot of these about for very little outlay, not talking Sage as that is expensive. Or you can use spreadsheets. Initially you only need and incoming and outgoing but keep a record of any capital purchases as these you only claim a percentage depreciation each year.

    Free accounts to look at : http://www.quickfile.co.uk there are others just google

  5. #5
    Beachview is offline Junior Member Junior crafter
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    Thanks all for your advice

    What's the best way to keep the records? Traditional accounting or cash basis/simplified expenses scheme? I was reading about them here gov.uk/self-employed-records.

    I'm not working at the minute. I'm caring for a relative so I get carer's allowance and income support. I'm allowed to work 16 hours a week with this. So that should cover the NI contributions.

    Thanks for the link to Quickfile. That looks good.

  6. #6
    Caroleecrafts's Avatar
    Caroleecrafts is online now Senior Member Try and catch up with this one.. What a crafter!!!
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    Traditional accounting is fine if you are a bigger business but starting out keep things simple. You are not a ltd co, employing people just a sole trader.

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    The HMRC are more approachable now a days......if you give them a call and just have a chat with them, then they will be able to tell you what you do/dont need to do, as everyone has different circumstances. Sole trader is the thing you need more info on (as mentioned already) and how that relates to your own personal situation regards tax/NI. They will be able to help anyway.
    For accounting, I started off just doing a spreadsheet but now find it best to use a basic accts package (I still keep my own spreadsheet though so I have a backup, hee hee!) but its just as easy to note everything down in a book to start with....whatever suits you best.

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    Hello!
    As others have said I would just phone them! They are really helpful and friendly! You'll need to know what your trading as (normally a sole trader) and have a trading name.
    I have just done a blog post on just this: http://craftbusinessadvice.wordpress...ing-with-hmrc/ (admin if I should not be posting this please remove and Sorry!)

    Re accounts - That will be my next blog post!
    Keep a basic spread sheet with 2 pages - money in and money out, fill it in daily if you can as it keeps everything in order and up to date.

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