register self employed now or wait until the new tax year?

qw3rt7

Hi, i have been offered a commission only sales contract which i would like to take up. I also intend to do some freelance work of a similar nature, so will need to register as self employed. I currently work 25hrs a week PAYE to cover bills, and will continue to do so for the next year or so i don't expect to be making a significant profit to start with (est £3000 1st year) due to the structure of the commission.

My concern is about timing, as i will be registering at the end of the tax year.
Will this cause alot of complications, especially considering the fact i am on PAYE as well?
Would it be better to wait until after 06 april to register?
Sorry this is a rambling post, but i dont want to screw this up!!!

fengirl_2

You have to register within 3 months of starting self employment, there is no choice in this, unless you want a fine.
There is no complication re your PAYE job - they arr both separate. When you complete your self assessment at the end of the year, you will include your as/e accounts as well as your PAYE pay and tax.

tyllwyd

One thing to bear in mind - you need to fill in a tax return for the tax year, then pay your first tax bill in the following January (plus possibly half as much again as a payment in advance depending on the size of the bill).

So if you start your freelance work before 5 April, you will have to complete a tax return for 08/09 and pay tax in January 2010. If you start your work in the next tax year, your first return will be for 09/10 and you pay your first tax bill in January 2011.

If you are near to any tax thresholds, it might have an implication for you. Or if you have start up expenses. I'm not an accountant, so I'm not qualified to give advice, but if when you start your new work is flexible, there might be some pros and cons to consider.

qw3rt7

thanks for the replys. My quuestion was partially answered by tyllwyd, in the statement about tax returns. My problem is that if i started tomorrow, i would not see a penny for at least 6 weeks, so what would i put on my 08/09 tax return? Or would i be able to start tomorrow but not register until april 6 (under the 3 month requirement) and thus avoid having to fill in a 08/09 tax return for 3 weeks worth of work?
Its all quite confusing. Presumaly the 3 month deadline means you still have to declare the date you started, even if its 3 months ago (eg if i start on 20/03/09 and declare on 20/06/09 i still give march as my start date?)
It does seem it would be all round easier to wait until april 6, but i am keep to get going. This board is very helpful in things like this,
Thanks alot

fengirl_2

The key date is when you start, not when you register. If you start tomorrow, part of your first year's accounts would fall into the 08/09 tax year, even if you didnt register for 3 mths.
Never do anything for tax reasons. If you have the chance to start now, then you should, imo.

qw3rt7

Ok, thanks for that. Taking a deep breath......

John_Pierpoint

I would disagree:

If your turnover is below the basic class 2 NI payment level, I would call that casual.

If you get lucky and make a sale or two this side of 6th April either put them down as casual earnings on the standard Self Assesment return (are you already doing one of these?).

Alternatively hold off invoicing them until 6th April unless you want to claim expenses before then.

Get your current account organised so you won't fall into the trap of comingling the business with your ordinary living expenses.

At your level of turnover you will only have to report sales and expenses unless you need to get involved in serious investment and depreciation.

That said, do we all expect the tax rate to go up on 6th of April, when we eventually have a budget to back date it:eek:

tyllwyd

Oh, and remember, if you don't make a profit, you have to fill in the forms but there won't be any tax to pay.

(Again with the proviso that I'm not an accountant) if you start immediately, and at the end of April you get paid, maybe you should allocate some of that money as income earned in the 08/09 tax year - perhaps if it covered earnings in the first four weeks, split it 50:50 between this tax year and the next, but in any case you'd have the money in your pocket long before you have to pay the tax man in January. I don't think it matters that the money won't actually be in the bank until next tax year, you can just enter the figures in your tax return and keep a record of what you've done. If you talk to an accountant, this is bread and butter stuff for them, so they'd be able to get it all straight for you.

John_Pierpoint

(est £3000 1st year)

DIY. with a few tips from us good friends on here?

It is not rocket science

qw3rt7

ok, looks like i might as well take the plunge, filling in an extra tax return for 08/09 doesnt seem that difficult, especially as it will only have a few expenses and almost defiantly no income/profit.
I have a separate bank ac ready to receive commission (standard private account with a HSBC) but until there is money in it, my expenses (petrol mostly, plus maybe toner, paper and portion of phonebill) will be paid from my regular current account (Barclays) or maybe even my mastercard :eek: , how would i go about recording this? Would copying statements and highlighting the business expensise do?

Also (really big also!) it appears for the first time in my life i may be entitled to something for nothing in the form of about £65pw working tax credits (based on expected profit of £3000 and PAYE earnings, according the tax credit telephone guy i just spoke to).
Do you pay tax on tax credits?? i wouldn't have thought so, but its to much money to turn down (should cover my expenses) but another massive complication.
Anyone know where i can get clarification on this?
Thanks again all, i'm sure an accountant would have charged me for what ive learned from this thread alone!

fengirl_2

You should really keep your business income and expenditure separate, so you should pay for business expenses from your business account. If there is not enough money in the business account to cover expenses to start with, then transfer some of your own money into it. You record this as capital introduced.
Its a good idea to keep a simple cash book of income and expenditure, rather than rely on sundry bank statements. You can do thie manually or using spreadsheets. Highlighting bank statements doesnt prove anything - you need to keep receipts and put all transactions through the business account.
Tax credits are not taxable.