18 replies to this topic

[shorty]

Right planning to start up my own online business.
got the major stuff sorted such as website, suppliers sorted.

however attempting to find out the legal sort of stuff i draw a blank

currently full time uni student so this would be operated on a part time(ish) basis.
i understand that VAT registering is voluntary unless you earn over a certain amount a year

what i don't understand is will i have to register self-employed, pay tax, register as a business.

any help on the matter would be very much appreciated.

[shorty]

bump!

[Ethel]

Registering for VAT is rarely worth it unless you have to.

You'll be a sole trader. Just keep a simple set of books to record your expenses and income so you sort out your tax at the year end.

There must be loads of info online

Google,
sole trader, self employed national insurance income tax, new business start up...

It'd probably be worthwhile speaking to a bank (not your own, if the option is using an existing current account) and thinking about insurance.

[shorty]

checked online and such but none of it makes sense

my mum suggested i just start it up and keep a log of accounts so money goes in, money goes out.
not a problem doing that

What i wanted to know is if i WILL have to register as a sole trader/ self employed as my mum has suggested not to bother.

[2lrminivan]

you have to register self employed
think you can do it on line
go to your local job centre they have leaflets all about it

[bert998]

if you havent already spend a good few hours reading up on the business link website.

www.businesslink.gov.uk

[shorty]

if you havent already spend a good few hours reading up on the business link website.

www.businesslink.gov.uk

ohh yeh fair bit of last night and the night before reading through it.

reckon the easiest thing to do will be to register.

http://www.businessl...emId=1073790854
didn't find that last time so there is a way i won't have to pay NI contributions, thats one good piece of news

Edited by shorty, 30 September 2009 - 06:59 PM.

[shorty]

hmmm

trip to HM Revenue tomorrow might be worth while maybe

[Dan]

What you have to do depends on how much you earn from the business. If you earn less than a certain amount there used to be a box on the tax return for general freelance income. The amount allowed used to be equivalent to something like half the personal allowance. I don't know if that option exists any more. If it doesn't exist or the business earns more than that then you will have to register as self employed and fill in self employed pages with your tax return. How much detail you need to provide again depends on how much you earn. If you earn less than about £16,000 profit per year from your self employed business then you only have to provide minimum information to them, if you earn more than that you must provide a lot more detail. In any event you will have to fill in a tax retun every year to declare the income. Yes you need to keep financial records and you have to keep them for 7 years after the tax year they refer to. If you don't currently have a full time employer you may also have to register self employed with National Insurance.
The threshold for optional VAT registration is something like £65,000 this year I seem to remember. That's a turnover figure, not profit. Turnover more than that and you must be VAT registered. That is applied only to the turnover from this particular business, not your total income.
You don't have to become a company.

[shorty]

nice one Dan
and yes i seem to remember seeing the VAT border price around the 65,000 mark

found out that if a business earns under 5000 pounds (just abit more) then national insurance doesn't have to be paid so long as the correct form is filled in.
but as for the matter on the tax i was under the impression that if i earned under a certain amount tax wouldn't have to be paid, not been able to verify this yet though.

will possibly pay a visit to HM Revenue offices near me tomorrow

[Ethel]

That's correct, £6475 is the current personal tax allowance - you only pay income tax on any earnings above that amount. You should still keep accounts, it's your responsibility to prove what you earned. I'm not sure what National Insurance Contributions you'd pay on that if it was your only earnings & you were self employed.

[shorty]

yeh i will keep records for everything
apparently i wouldnt have to pay NI Contributions if i fill in a 'Small Earnings Exemptions Form'

[leigh21]

so what is this online buisness of yours mate?

[Shylos]

yeh i will keep records for everything
apparently i wouldnt have to pay NI Contributions if i fill in a 'Small Earnings Exemptions Form'

That's what I did - I think the certificate they send you lasts for 2 or 3 years which is handy.

[Dan]

I've never done it but I seem to remember thre is something tricky about the small earnings exemption. They have to accept your reasons for earning a small amount or something, it's like asking to reduce or defer your payments on account (something else I should have mentioned before). In any case it does indeed last for a couple of years but only if you don't earn more than the allowed figure at any time, after that you have to start paying. Remember also that sometimes the figures are based on turnover for a self employed person, not profit. I think you have to start paying Class 2 stamp (the minimum as a self employed person) after your turnover reaches the threshold, then when your profit reaches another threshold you start paying earnings related class 4 stamp which is an amount that's calculated when you fill in the tax return. If you are making enough to have to pay stamp but still less than the personal allowance for tax or the earnings related limit then all you pay is the class 2. That's about £2.50 / week and is paid quaterly. I also don't think you pay that at all if you are an employed person at another business and have a self employed income alongside that. In that case you would be paying class 1 stamp anyway and the extra income would be used to calculate your earnings related NI. You either pay class 1 or class 2, not both. Unless you're me. I get to pay both some weeks. Some weeks I also get to pay two or three class 1 stamps. There is no way I can get this money back as cash (I can choose to turn it into a voluntary additional payment though which is nice I suppose). The revenue really don't understand my industry at all.

Other than the class 4 stamp being part of the tax return, NI and tax are completely seperate. I should have said yesterday that self employed people pay their tax under the payments on account system. After you enter one tax return as self employed at the end of your first year trading (the first year you just pay one lump of tax at the end) you are put on this system automatically. You pay your tax for the year before the year finishes, in 2 large installments based on what you earned the year before. Any difference is then taken care of through a bonus payment. Sometimes you get a bonus refund it you made less than the year before. It's a stupid and unfair system.