Small Side Business - Tax?

Big_Steve_5

Hi, Its the first time I have posted on here, so I hope I've got the right place.
I am thinking of extending my hobby as a photographer a little further, to try and make a bit of extra money. If I were to earn up to let's say £700 per year, what would I have to do in terms of tax?
For instance a friend of mine has asked me to take photos of jewellery for an online shop and others have asked me to do family portraits.
I already have a reasonably well paid job, and this would only ever be a little side venture.
If anyone can offer me advice it would be much appreciated.

PlutoinCapricorn

If you are not planning to expand until you get a significant second income, there is no real need to register as self-employed as this is a hobby not a business.

As your personal allowance will be covered by your main job, you really should pay tax on any profit from your hobby. This will be 20% unless it moves you into the higher rate or you are already paying it. The estimated amount means that you will not need to pay National Insurance.

If you write to your tax office asking them to send you a self-assessment form, you will be able to declare this additional income. This should not go into the official self employment section, but into the place for any other income.

fengirl_2

I disagree with Pluto. if you are trading with a view to profit, then you need to register as self employed, maintain records of income and expenditure, compile end of year accounts and self assess. This is either a hobby or it isn't, it cant be both.
Don't forget that if you make a loss, this can be set against yoour other income.

Big_Steve_5

I must admit to being a little confused now. I understand that as soon as I make money from my hobby it effectively stops being a hobby and becomes a part time job. The thing is I don't see it taking off yet. Are there any limits I should take into consideration for things like National Insurance? Thank you both for taking the time to respond, has anyone else got a view - to register as self-emplyed or not?

Big_Steve_5

Another thing if I may, I don't currently do my own tax return as I am PAYE if that is the correct expression. If I asked for a self assessment form, would I have to complete it for my main job too?

blue_monkey_2

I had a small business like yours, I only 'earned' about £20 a week, in the end I called the tax office and told them (I saw an ad and realised that I had best to as it was against the law) and they fined me £100. I explained that I did not realise I had to register because I was earning so little and they cancelled the fine for me.

You do HAVE to register if you are earning, no matter how much you are making. If you invoice someone and HMRC are investigating and you are found not to be registered but invoicing for work you'll get in more trouble.

However, you may want to have a rethink on this. Any expenses towards your job - even if you are not earning any money - will be deductable against your current wage, all of which you will enter on your self assessment at the end of the year. If your small business has made a 'loss' then you will be due a tax refund.

Don't forget that once a small business you can claim for everything business related and also petrol to and from jobs at 40p a mile, websites showing pictures, promos, stationary, rent and rates if working from home and you have a room set aside for this (pro-rata rate), everything related to your self employment - however if you have a mortgage get advice on this first as I rent and I am not sure how it works. I believe you can claim sone of your mortgage interest though.

When you fill in a self assement form it asks for your last years earnings and tax too and any loss will be deducted from that and if this then means you have overpaid your tax they will refund it back to you.

blue_monkey_2

Big_Steve wrote: »

I must admit to being a little confused now. I understand that as soon as I make money from my hobby it effectively stops being a hobby and becomes a part time job. The thing is I don't see it taking off yet. Are there any limits I should take into consideration for things like National Insurance? Thank you both for taking the time to respond, has anyone else got a view - to register as self-emplyed or not?

But a friend has asked you to take shots for his business, so will you be paid for it? If so then I think you have answered your own question. You are self employed and being paid for work.

I personally would register as if you are not, as you say, earning anything you can put your loss for materials and travelling through and get a tax refund. I you are not earning anything there will be no NI to pay. NI is (or used to be) capped so if you are well pai you might be paying up to that cap. However, as far as I am aware NI in not refunded on self employment.

Don't forget to take into consideration all of the camera equiptment you have bought to start your business. Have you kept the receipts as you can put them through.

Does that make sense?? I'd got for it, if not earning anything then there are advantages.

Savvy_Sue

Big_Steve wrote: »

Another thing if I may, I don't currently do my own tax return as I am PAYE if that is the correct expression. If I asked for a self assessment form, would I have to complete it for my main job too?

Your employer will carry on deducting tax through PAYE as they do now. The difference is that when you get your P60, you'll have to put those figures on your self-assessment form that you've asked HMRC to send you. And then add all your 'other income' (including bank interest).

As for the NI, you can ask for a small earnings exemption, I don't know what the limit is these days but it's definitely more than £4000 pa. And as you're paying NI through PAYE, there's no advantage in paying SE contributions if you don't have to.

One caution: check your contract of employment because some employers require you to tell them about any other work. Most won't mind if it's not in competition to them, but obviously some jobs are safety critical and they need to know you're not working as many hours out of their employment as you are in it.

Big_Steve_5

Fantastic advice from you all - Thank you. Looks as if I ought to declare myself self employed if I decide to take these people up on their offers. Where do I go for advice on what I can offset against tax, especially on depreciation of equipment, petrol, PC and Printer (and consumeables) etc? Not sure if it is going to be worth it, with all this extra paperwork etc.

moonpenny

blue_monkey wrote: »

Don't forget to take into consideration all of the camera equiptment you have bought to start your business. Have you kept the receipts as you can put them through.


How would he be able to claim for cameras and equipment he bought, even if he has kept the reciepts?
I thought you had to register within 3 mths and if he has been doing this for a while then he is going to be in trouble just showing the reciepts if they go back further than the 3 mths! Or have I got this wrong?

PlutoinCapricorn

If you are going to register as a sole trader, then have a look at https://www.business.link.gov.uk.

You could also search MSE for 'photographer': you will find some other people who do the same thing, although on a larger scale.

While I do agree that people who get additional taxable income should declare it via a self-assessment form so that they will pay income tax, registering as a sole trader when they have no intention of building up a business and do not expect to bring in very much seems like overkill. Different people say different things, and even HMRC staff do not always sing from the same song sheet!

As for expenses, what have you bought or spent that you would not have done if you had not had this business? That is the way to look at it.