Tutorial A basic guide to tax / self employment

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A basic guide to tax / self employment - A basic guide to tax / self employment

Self Employment
​

If you are earning an income from activities not through employment, then you need to set up as self employed.

This can be done online, here;
https://online.hmrc.gov.uk/registration/newbusiness/introduction

HMRC will send you a confirmation letter, and you will then need to activate the various services on the website.

A tax return will then be due by 31 January following the end of the fiscal year.

Example, you set up...
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Read more about this resource...
 
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Fantastic stuff Joe.(y)

Gonna go self employed myself soon and info like this just makes it all a lot easier(y).
 
The tax return date above is if you qualify to do your tax returns online. If you don't and have to complete paperwork then the deadline is 31st October or 3 months from the date you received notice to complete a tax return if the notice was received after 31st July.
 
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graphilly said:
The tax return date above is if you qualify to do your tax returns online. If you don't and have to complete paperwork then the deadline is 31st October or 3 months from the date you received notice to complete a tax return if the notice was received after 31st July.
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A good point I didn't mention.

I have zero clients that do paper returns, all done on-line. :)
 
I have a question about offsetting purchases.

For example, I am looking to start/register my photography business in May/June 2013 but need to purchase some equipment now (for arguments sake let's say £2,000).

When I start the business, can I offset the costs of the equipment against my earning (which could be very low initially) or should I register as a business before I purchase any equipment?

I currently run a mobile disco business which I am hoping to end but as I have wedding's and other functions booked up to (and including) 23rd May 2013 I feel I should honor these although I'm not sure it's ok to run 2 self-employed businesses together - I also work full time during the day (as an employee).
 
If you buy items before you start business, you can offset these items by way of capital allowances, however, as you have introduced these items into the business, personally, the capital allowances will be different to if you bought them during the business year.

It's fine to run two self employment businesses.
 
^Joe said:
If you buy items before you start business, you can offset these items by way of capital allowances, however, as you have introduced these items into the business, personally, the capital allowances will be different to if you bought them during the business year.

It's fine to run two self employment businesses.
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In that case then, maybe I should register my business immediately. I expect a tax rebate will be due as initially, my profits will be far less than my expenditure in the first year...

By the way, thanks for the PM :)
 
This is brilliant, but unfortunately, most people that need it pointing out aren't looking for business advice, they just want some help selling pictures without the bother of 'running a business':wacky:
 
Can I ask a really stupid question? I want to register all of my intended photographic stuff with HMRC but I am currently also employed in a day-job which has nothing to do with photography.

Therefore, can I still register as "self-employed" in the same way as discussed in the top post here?
 
Suzanne said:
Can I ask a really stupid question? I want to register all of my intended photographic stuff with HMRC but I am currently also employed in a day-job which has nothing to do with photography.

Therefore, can I still register as "self-employed" in the same way as discussed in the top post here?
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Yes, I'm currently in full time employment in I.T and I have my own mobile disco business and soon will have a photography business.

You just have to fill in the relevant areas on your self assessment (which you'll get every year once you've registered).
 
Suzanne said:
Can I ask a really stupid question? I want to register all of my intended photographic stuff with HMRC but I am currently also employed in a day-job which has nothing to do with photography.

Therefore, can I still register as "self-employed" in the same way as discussed in the top post here?
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Yes, same as me. I let my accountant do it all. £100 and he makes sure that everything is correct and that I pay as little tax as possible. I would really recommend using an expert for this.
 
Hi Suzzane,

My understanding is you register your business (let's say as a sole trader) with HMRC but then write off pre-business equipment as a capital allowance transfer on your next tax return (april2013). Purchases made after you have registered can be deducted as per normal. Would advice you have an accountant to help you out here. What you mustn't do is try to get allowances on purchases, expenses etc to finance a hobby as opposed to a real business. The later will end up with a knock on the door from HMRC looking to reclaim anything they deem as dodgy !
James
 
cambsno said:
Yes, same as me. I let my accountant do it all. £100 and he makes sure that everything is correct and that I pay as little tax as possible. I would really recommend using an expert for this.
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That's something I need: a good accountant.

I currently do my own tax return but I know for a fact there is so much more I could claim for, e.g. home office supplies & utilities etc.

I'll keep doing them myself for now as my earnings are quite low*cough,cough* , but definitely something to consider when I start my photography business...
 
Justin1971 said:
That's something I need: a good accountant.

I currently do my own tax return but I know for a fact there is so much more I could claim for, e.g. home office supplies & utilities etc.

I'll keep doing them myself for now as my earnings are quite low*cough,cough* , but definitely something to consider when I start my photography business...
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I use Joe, who started this thread. Drop him a pm, he is a good bloke.
 
Thanks for all of your help. I've asked a friend who is an accountant and also experienced with HMRC to give me a hand to ensure that I get it all right.
 
So if i set up on the 6th of april (next financial year) i would get a full 12 months of capital allowance?
 
I'm a little confused. I set up as a sole trader last night and it appears I have to pay NI contributions starting asap. What if the first 12 months I only do two jobs earning a total of say £300, would I therefore be exempt or get a refund? I also have a full time day job so another question is tax return at the end of year, I'm assuming my day job salary is to be accounted for within the sole trading under "any other income". I ask as its not going to be much I could earn before it would take me over to paying super tax
 
oblivion said:
I'm a little confused. I set up as a sole trader last night and it appears I have to pay NI contributions starting asap.
What if the first 12 months I only do two jobs earning a total of say £300, would I therefore be exempt or get a refund?


I also have a full time day job so another question is tax return at the end of year, I'm assuming my day job salary is to be accounted for within the sole trading under "any other income". I ask as its not going to be much I could earn before it would take me over to paying super tax
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Your class 2 NI contributions: You will need to complete a form CF10 and send it to HMRC. You can get them from HMRC website. This will get you an exemption certificate.

No. On your tax return, you will be asked to complete an employment section, and a self employment section.

Getting an accountant may be the answer to all of your problems. (Well.. not ALL :) )
 
Porsupah said:
Do these guidelines need updating in light of the introduction of Universal Credit? It would seem the situation for newcomers to self-employment (ie without a solid income stream from their photography) may be significantly impacted thereby:

http://www.enforbusiness.com/smetoolkit/universal-credit-issues-start-ups-and-self-employed

I am, however, not even vaguely related to an accountant, less still one myself.
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A complete joke, only really applicable to people who fall into the benefit system but a right pain for them having 2 separate accounting methods to adhere to. What was it that Osborne said about IDS recently?
 
I'm very interested in this thread as I've recently been researching how I can take my hobby and turn it in to a business. I recently attended a "School for Creative Startups" session on tax and VAT.

Realistically I would need to do this alongside my long term employment, at least to begin with and can probably only really afford to spend 2 weekends a month plus some evenings.

I understand that registering as a sole trader is an efficient way to ensure that I can legally sell images and pay the required Tax. And that, as I don't think that I'll be making more than £5,595, I can register for NI Class 2 exemption, even though I pay Class 1 through work.

Two main questions:

1) A group of us are planning on documenting an event next year, we have organised rights to sell the images. We'll be taking the train there and hiring a car, we need to buy some PPE. Are all these valid expenses? We are planning on allowing educational use but charging for commercial use of the images. Would this affect the tax liability (as it may reduce profits)?

2) Say if after 3 years of doing this, it hasn't worked out and I've made a loss. Would the HMRC allow me to wind up the business? Would cameras, lights etc. that I've transferred into the business still be mine? Would I be liable for any rebates I'd been given?
 
Your best bet would be to speak to an accountant who will be (or should be!) up to speed on the latest rules.
 
I have a question to ask to.

I'm probably going to speak to an accountant next year as I was already self employed while working for virgin media / kelly communications taking part in slave trade! So I am due a tax rebate.

I am now going to be doing some video & photography bits and pieces. Which I will be earning from and being paid from a VAT registered company at 1 stage. But for a bit extra on the side to make sure my bills are covered I'm working part time in retail at the moment and I have now gone back to PAYE.

What I want to know is am I still registered as self employed if I want to pay tax or any earnings or is there something I need to do as having a 2nd job if i can call it that?
 
st599 said:
I

Two main questions:

1) A group of us are planning on documenting an event next year, we have organised rights to sell the images. We'll be taking the train there and hiring a car, we need to buy some PPE. Are all these valid expenses? We are planning on allowing educational use but charging for commercial use of the images. Would this affect the tax liability (as it may reduce profits)?

2) Say if after 3 years of doing this, it hasn't worked out and I've made a loss. Would the HMRC allow me to wind up the business? Would cameras, lights etc. that I've transferred into the business still be mine? Would I be liable for any rebates I'd been given?
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Although I'm not an accountant so take this with a large pinch of salt my advice would be

a) Yes on the expenses , so long as they form part of your business (allowing free educational use is irrelevant if you are also selling commercially - you just set the expenses against your pre tax income from sales)

b) If you are a sole trader "the business" doesn't exist as a legal entity , so the cameras etc are yours (if you went ltd company you definitely need professional advice) , you 'shouldnt' be liable for rebates as these are based on tax vs earning in any given year ... however HMRC take a very dim view of people setting up businesses with the intent to make a loss and thus fund a hobby from their day job - that kind of thing will get you audited and fined if you are shown to have acted improperly.
 
Grant1990 said:
What I want to know is am I still registered as self employed if I want to pay tax or any earnings or is there something I need to do as having a 2nd job if i can call it that?
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with the same proviso as above - you are self employed for any money earnt as a contractor , you are employed for any money earnt through PAYE - if you contract for a company who also employ you it can get messy - in that case speak to an accountant asap ( Btw ^joe on here is used by several members and has a good rep - although ive never used him myself)
 
Hi - I've just come back onto the site and I'm in the process of trying to do my first tax return.

I'm employed PAYE part time and I have my own new business. In my first year I made a loss (of course) due to capital spend (camera, lenses, computer etc) but if I put that against my PAYE earnings it pretty much balances out. But does that mean I 'lose' my personal allowances on my PAYE for that year? How do I put in the business losses? And yes I know I should have got an accountant but I'm too late to do that now and I'll do it from next year (which I will do in April!!)

PS - this is ShoeQueen - I've not been able to get back in since the new site as I've forgotten my password and changed my email so can't find any other way other than rejoining! If an admin can help that would be great)
 
Hi Lynn
You only get your personal allowance once, hopefully that's all covered in your PAYE income.

Once you've input your PAYE details in, it'll ask you a load of other questions before getting to the self employed income.

At that point, if you choose to use 'basic' mode, you only need to input your self employed turnover, expenditure and capital.

Be aware that it'll not work out your actual tax 'on the fly' but it will report an incorrect 'tax due' figure at the end. Then you input your bank acct details and the nice man from HMRC will just pay your rebate into your bank. Hopefully in time for you to go and spend it at the photography show.
 
Thanks Phil. I think my PAYE income is very low and even if I got all my tax back it would just about cover my flight over to the show (but it would be nice). What about all my losses in the business (thousands) - can I carry them forward to the next year? Turnover is my income? I've got all those figures sorted out - all cross referenced with bank a/cs and receipts - I thought that was the complicated part but it was easy. Knowing where to put what in the form is the hard part!
 
With the simple input there's only 3 things to put in relating to your SE earnings. Like I said, income, expenditure and capital. I think you can carry your loss into the next year, rather than taking it as a rebate, but if you bank it you can earn interest, or if you invest it in capital it'll help with next years bill better.

If your whole PAYE income isn't more than your allowance, then you'll get some of your allowance for your SE income, but it won't make a difference whilst you're posting a loss.
 
Hi Lynn

I've sorted the accounts. I've merged them back into ShoeQueen and updated the email address.
However, you'll have to request a password reset for the 'new' account :)
 
Hi

So much time has gone by so please forgive if I asked & have seen an answer to this in the past on another thread.

Like most folk who have posted here I am in full time employment and PAYE taxed via my employer.

I am due to exhibit in April (I was invited & approved by the admin/curator of the Gallery early last year), the exhibition is one where the works are for sale and from what I understood some photographers & artists do sell all their works with some having to do multiple prints i.e. more sales than the actual displayed number. That is the prospective background...........................though whether & how many I may sell remains to be seen :) it could of course be a total :tumbleweed:.

It is my intention to keep receipts for all the materials et al purchased to make the exhibition images (cost of Giclee prints, cost of mounts, cost of frames.................etc including delivery costs of said production items) so that I know apart from my time spent creating the prints I will know the profit on the sales as appropriate.

So as this is the first time and hopefully not the last that I will be selling such items what should I be doing by way of ensuring any earnings (profits) are accounted for in regard to HMRC??? All of my gear has been bought over some years as personal purchases......................and on the surmise that, though likely of a modest nature, would it be best/wise/advised to "transfer" any or all of the gear into the SE (if that is what is best, going SE that is!) 'side'.

Many thanks in advance for any insight as to how to handle the matter on the basis that I have yet to even know if I will sell even one image let alone many of them.................................oh, how many of you, or indeed is it required, told your employer???
 
HMRC have guidelines on 'business assets used for personal use' which is the basis for what you're suggesting.

So if you're planning to only ever shoot with a view to selling, then it's fine to transfer the assets and account for 100% of the value at transfer*.

So the relevant points would be:

How much 'business activity' are you planning with the camera moving forward?

You are selling your gear to the business at market value (2nd hand gear, not what you paid for it new)

Your other business costs whilst going out to shoot photos

Unfortunately in your position, the proper advice, 'ask an accountant' makes little sense as the figures probably won't make it worthwhile.
 
Hi Phil

Many thanks for the feedback & insight :) Re:- The gear, as the images to be printed/offered for sale are the result of travel and personal projects i.e. not commissioned, 'issue' is to start with the lowest on my list of "what to do as needed..." if it takes off then likely a higher priority?

Of most concern is the "how do I handle the HMRC/tax situation" on the surmise I do indeed actually sell any prints on this first go of trying plus the SE aspect in regard the need or not to let ones employer know about the added/change of status???

In regard to the going SE (part time earnings) if the sale goes well and gives me the much welcome boost to go further how long do you have to get registered as SE and as such declare those earnings??? Do accountants offer a fixed fee consultation (similar to lawyers when needing one off advice?) to ensure I tick the boxes literally & metaphorically?

Many thanks again for any further insight :)
 
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