Part time work and self employment - getting taxed?

SarahLou

Hi there,

I've recently (Dec 15th) started back at work part time (new employer) after having my daughter 17 months ago. I now work 17.5 hours a week and my annual wage is £6108.09. I've also recently started up my own business as an animal behaviourist, trainer, pet sitter, groomer and dog walker. I started this around about December 12th and have a few "clients" so far. I was just wondering, how do I go about declaring my earnings for this business when I literally won't know at all (yet) what my estimated earnings will be.

It is so dependant on who gets in touch. I could literally see three or more clients in any one week and therefore earn (potentially) a fair bit of extra money but then could go weeks or months with no one getting in touch at all.

I've googled and found I can earn £6,035 before I will start getting taxed (according to the direct.gov.uk website so I'm assuming thats right!) So I'm guessing that it'll only be later in the year that I start getting taxed on my normal wage, won't it? (Hows that work - will I have to tell anyone when I've earnt £6,035? (as that'll be tricky to work out!) or will my employer do that for me?)

Anyhow, so what happens when I do hit the magical £6,035 figure? What do I then declare to HMRC regarding my own business on the side?

I've just got off the phone to an Indian chap who (sadly and sorry to be blunt here) simply didn't really understand a word I was saying. I had to spell everything out to him and he had me repeating everything about 5 times. (And I was quite clear and concice with what I was asking!)

So (if he's recorded it all correctly) he'll now have updated my surname (as I've recently got married too - been a busy bee lately! :rotfl: ), he'll also have now put me down as working 17.5 hours a week earning £6,108.09 a year and he's put me down as having my own business too. He demanded to know an estimated amount of money that I'll earn from that between now and April so I've said £200 as an "on the spot guestimate".

He also asked me to work out what my earnings (official ones from my actual employment) will be between now and April so I just divided the £6108.09 by 3 - I intially divided it by 4 (thinking along the lines of it being a quarter of the year) but he told me quite rudely that "NO - divide it by 3". :mad: So I did. :rolleyes: Is that right?

Unstoppable_2

BY LAW you have to register as self employed within 3 months of starting self employment REGARDLESS WHETHER OR NOT YOU WILL EARN ENOUGH TO BE TAXED. Phone the HMRC Newly Self Employed Helpline number to register: 0845 915 4515. Takes 10 minutes and there's no complicated questions - basically personal details, type of business and business name.

You need to keep a record of income and expenses. Remember to claim for everything business related.
Every year you will be sent a self assessment form to complete with your income and expenses for the previous tax year. In addition to filling in your self employment earnings and expenses, you will need to complete the page for PAYE employment. How much tax you need to pay will then be calculated taking into account what you've earned and paid via PAYE.

If you actually pay a little income tax on PAYE and your business trades at a loss, you can end up getting a tax refund as the total income you've earned from both s/e and PAYE is added up and what tax is due is worked out from that amount, so if the business has made a loss, that loss is taken away from your PAYE income so you'd have overpaid tax on PAYE and therefore get refunded.

Once you get started doing it, it's really dead simple and I don't know why more people don't do it. The trick to making it easy is to keep a set of books and keep them up to date.

Get in contact with your local business link. They regularly run courses on basic book-keeping as well as providing help and support.

nzmegs

You need to declare yourself as self employed with HMRC and they will send you a self assesment to fill in next april. You will then put how much you earned as both employed and self employed and will work out how much tax you owe.
A rough guestimate its to keep 20% of what you earn self employed aside for your tax.

As far as I know your self employed status shouldn't affect your PAYE as you pay them seperately anbd it all get sorted out in your self assesment.

Good luck with your new business venture!

Happy_Girl_2

I was self employed and worked part time until recently

As nzmegs says, you will need to register as self employed with HMRC. They will then send you a self assessment form sometime in April 09. You will not have to file this until Jan 2010, at which time you will need to pay any PAYE/NIC due on profits

From now you will need to pay class 2 NIC which is approx £2 a week, you can do this by direct debit monthly or quarterly. HMRC will discuss this with you when you call

With regards to your employment, what I did was to complete a P46 and tick box c to state I had another job. This means you will be taxed at 20% on all earnings from your employment, but will enable you to have the £6,035 (2008 rate) of free pay before you need to pay tax on your self employment income. You are only entitled to 1 lot of free pay, not 1 per job

When you come to pay the tax on the self employment income, you will have less to pay from your own pocket, and I found this beneficial to me for cashflow. For prudency, you should open a savings account and put some money away monthly to save for your tax bill in 2010 so you have it when it is needed

From now, start keeping receipts for everything you buy for the business. If you don't issue invoices to clients, buy a duplicate book and record all 'sales' in there, one copy for client and one for you. This will prove your turnover for HMRC purposes

Ideally, you should have a separate bank account for your self employment income/expenditure. Abbey do one free of fees.

HTH

SarahLou

Thank you very much to both of you for all your help

Wow, it is a complicated field isn't it!

Right, well my employer has recently given me this P46 form thingy so I'll tick box "C" and see where that takes me. I shall give the HMRC another call tomorrow and (hopefully - surely!?) speak to someone a bit better than the chap I was speaking to the other day who didn't mention ANY of the above. He didn't even mention anything about a self assessment form or anything.

With regards to keeping receipts for anything I buy that is related to my business, how does this work exactly? I have heard of people having to send off receipts to HMRC to declare their spendings, etc. but how fine a line is it? For example, at the moment, I'm looking to invest in a few "training aids" for my dog training side of the business, if I did this, would I get my money back on all my purchases? And if so, when? (April?)

As you can see, I'm very new to all of this!

fengirl_2

You need to keep accurate records of all your self employed income and expenditure, backed up by receipts if possible. You would only send your receipts to HMRC if you were investigated, but you retain these records for 6 years.
You dont get any money back on business purchases - but by including these expenses in your return, you pay less tax on your profits.
You will make your first accounts up for one year from when you started, so your 08-09 return will just show an estimate of your profit for this tax year. You then amend the return once your accounts are done.
Rather than ring HMRC, you can download the self employment registration form from https://www.hmrc.gov.uk

SarahLou

Thanks for all the info! EEK, 20-30% is a hefty chunk isn't it! Well thankfully I'm saving ALL my receipts now and I'll class everything I possibly can as business related. Handy really as I bought a bit bag of dog food the other day for my two but that might also get used (slim chance, I know!) by a "client" so sod-it, that receipt is being filed too! ;D