Paying oneself

moonpenny

Hi!
Hope someone can give me some advice!
I work full time and am in process of setting up a small "part time" business buying in and selling accessories. There may be some craftwork involved as well and I envisage most of my customers being local.

I am quite happy to keep it small and carry on working and if it grows all the better!

My problem is; how do I work out what to pay myself? (I understand these are called drawings)
Do I account for every minute I spend on the business or do I just roughly estimate the hours spent?
If any of you "small craft business people out there could give me some advice on this matter I would be grateful!

fguk

I am going to assume that you are running as a sole trader, not as a Ltd Company. In which case

1) You can take whatever you want from the business, obviously best to factor in any taxes and expenses first. You should not take more than the "company" can afford...

2) keep good records of the financial ins and outs (including your drawings), consider a separate bank account for this as its neater and beneficial for the tax man purposes.

3) You dont need to keep records of how long you work for your own business, although it could get complicated if you employee someone or you ever get the tax man interested in what you do. So keeping some records wouldnt seem a bad idea.

Horace

I know that when I did my business plan I was advised to produce a survival budget - basically this is the money that you need for household bills, rent or mortgage etc. These would form the basis of your initial drawings.

As someone else has said keep some simple accounts: incomings and outgoings. You would need to put aside a third of your takings for tax.

You can get free business advice from your local chamber of commerce and from business link.

HTH

Savvy_Sue

If you're expecting to make any money out of this, then you need to tell HMRC and register as self-employed. And there's a time limit for doing this: leave it too late and they will fine you.

Horace

Savvy_Sue wrote: »

If you're expecting to make any money out of this, then you need to tell HMRC and register as self-employed. And there's a time limit for doing this: leave it too late and they will fine you.

It's 90 days. If you register after that time, they will sting you for tax from before the registration if you see what I mean.

moonpenny

Thanks all for your answers. Am a bit clearer now.
Havn't started business yet. Feel like I have to get everything sorted out in my head first instead of rushing headlong and not knowing what I am doing.