new business but work fulltime

MrYorke

Hi,

not really sure if this is in the correct place but here goes....

I am a joiner and work fulltime by a company. I don't earn a massive amount and one day would like to start my own company.

Is it possible to start my own company whilst still being employed by someone else? I have been asked by alot of friends and family to do some jobs for them. I would not pay myself through the company but put the money back into the company by buying more and better tools until one day that i am busy enough to leave my current job and pay myself a wage.

Would it have any implication on the tax i pay at the moment?

Cheers, Yorkie

Elaine_Wilson

It wouldn't affect the tax at your present job but I would check your contract of employment to make sure there are no restrictions which might cause you hassle with doing this.

You use the word company but I doubt it would be beneficial for you to form a limited liability company at this stage. If you did, and didn't pay a wage, then the company would pay corporation tax on any profits at 21%.

It would probab;y be simpler to register as self employed. In this case you would pay income tax on the profits. Since your personal allowance will have been used up against the earnings from your main employment the self employed income will suffer tax at the basic rate (20%) until your total income pushes you into the higher rate bracket.

MrYorke

Thanks for that Elaine,

i don't have a contract of employment i'm afriad. The boss has been around for a while and none of the staff have got one (3 of us in total). Yup, know this is daft but is how it is!

Sorry, used the word company but understand that I could start something up self-employed. I wouldn't actually want to pay myself anything for some time. I would be looking to keep in full time employment for atleat a year until I build myself a good customer base to one day be able to leave my current job.

Yorkie

MrYorke

First thing I find interesting is why people say things like ...
Why not? Are you not worth anything? Is your time not worth anything? Aren't you starting your own business to make money? Or is this all just for fun?

Hi nickles

those are fair questions. The reason why I wouldn't pay myself a salary is that the profit i make, after costs etc are paid, will be put back into the business to buy more tools and machinery. I need to buy a van at some point so would like to save anything I can to get it without dipping into my fulltime jobs salary. I am lucky at the moment to be able to live off what I earn, which isn't alot in all fairness, but would like to use any money I make to improve the business until such time as i can pay my own wage and not have my boss making all the money ;-)

I understand that this will take time as my friends and family will have a limited amount of work for me. I have already started giving out my contact details to people I met when i'm fitting the windows and doors that I make (all from hard and soft wood incase anyone needs a quote or advice by the way)

I just need to make sure that its ok to have a fulltime job AND be self-employed on a part-time business without compromising the amount of tax etc. One of the other main reasons is that, like all DIYers, I have to buy materials at full price instead of trade. I've been doing up my own house and if i could buy at trade, which is usually 40% cheaper, I could save a huge amount. So when I look to start jobs for people, i want to be able to pass these savings to my customers or i'll simply price myself out!

Cheers, Yorkie

CLAPTON

just to add

1. you need to inform the HMRC that you are starting self employment within three months of starting.
2.unless you have small earning exemption you will need to start paying class 2 NI contributions by DD.
3. If you start this tax year then you will need to fill in a tax form next tax year (after 6th april 2009) and pay any tax owing by 31 January 2010.
4. tax due is worked out on your profit

profit is your earnings less allowable expenses
what you do with profit is your own business but it will be taxed at 20% and class 4 NI contributions
-allowable expenses are things like cost of materials, advertising, cost of running your van, phone etc. and you need to find out what is allowable for buying tools (I don't know the details here)
- keep records of everything you buy and store the details safely... this will make doing your tax return much easier.

There is no problem in having a fulltime job and a parttime job..lots of people do this. The tax on your fulltime job is unaffected but you will pay 20% tax on your profit from the parttime job.

whether you can get trade prices is between you and the outlet you are dealing with.. you will need to find out what they require (if anything).

Pont

Apologies for hijacking this thread but I think there are similarities with my plans (and noticed that Clapton is online so looking for advice/information :-)
I'm employed and pay tax/NIC through PAYE but am also looking to see if I can make a go of self-employment too. My questions are:-

1) Is a person taxed as an individual (all employments lumped together) or separately as in all employments are taken in isolation of each other? For example if I made a loss in my self-employment is this taken into account when looking at PAYE?

2) When filling in tax returns at the end of the year for your self-employment do you also enter your salary/tax paid/NICs paid through PAYE?

3) If you've paid NICs through PAYE do you also have to pay the extra NICs for your self-employment?

4) If, for argument sake, I earned £25,000 in my salaried job, but made a £2,000 loss in my self-employment would tax credits be awarded on a total income of £23,000?

Thanks in anticipation.

ceeforcat

The answers to your clear and well explained questions are:

1) Yes - and loss has to be claimed to be set against other income.

2) Yes - definitely

3) Yes - unless you pay the maximum by way of Class 1 NIC (on employment) at which point other NIC payments can be deferred

4) As far as I know this is indeed the case.