Being self employed with no outgoings, will this cause problems?

kr15snw

Well due to my lovely ex boss sacking me on the 23rd December I have decided to bite the bullet and go for something I've always wanted to do, go self employed!

I've managed to get myself in with another designer who has more than enough work for 2 of us on offer, and by using our skills (we're different types of designer) we know we can get more work. So yay.

My only issue is my tax return. I am going to have no out-goings when it comes to my tax return. Unless I claim for the bus fare into my office, lol.

We're very lucky to have a rent free office (its for ex students of the uni we attended) and we get computers with all the software, unlimited printing, free postage and everything else we could need to run our business!

Due to the nature of the business I am basically only going to be paid labour, there isn't material costs.

Is this going to look weird if I file my self assesment as earnings of say 20k, but no outgoings? Will the tax man think this is weird? Or will this make my tax bill stupidly high.

Help, Im a tad confused!!

dzug1

He might or might not think it's weird but he won't mind - it's all the more tax for him.

TM1976

I'm not sure what the taxman will think but if you are going self employed there will be additional expenses that you can set off against your taxable income so it would be to your advantage to do this and reduce your tax liability.

You won't have to put your tax return in for more than a year however you need to inform HMR&C that you have started to trade within 3 months of starting to trade.

It's best for you to seek professional advice from an accountant regarding your new venture.

PlutoinCapricorn

This is an interesting issue.

One of the biggest advantages of self employment is that you are taxed on profit not income so expenses help to bring your tax bill down. But if you really have no expenses then you lose this opportunity.

I don't think that you can claim for travel to your main place of work. What time of day do you get this free access? Self employed people often work at home, and out of hours and at weekends, this is another major advantage. Could you do some of the work at home? Are there any professional publications that you could buy or organisations that you could join? How about a business diary and some pens?

HMRC might expect that a designer might have fewer and lower costing expenses than someone who was buying and selling things, but there would normally be something. There is a comment box or two on the tax return: these can be used to explain your situation. This might help to avoid an investigation.

PolishBigSpender

Why would the taxman investigate a situation where someone is paying *more* tax than they normally would for their profession?

fengirl_2

For a self employed person to declare earnings with no outgoings would be a risk factor for HMRC. It points to either poor or lax record keeping (ie, not bothering too much with book keeping), or else an attempt to reduce income by hiding expenditure. HMRC doe snot look at everything in terms of getting in more tax - their job is to get the right amount of tax, something they are told on day 1.

TM1976

When I look at the original post I'm not sure whether you are self employed or employed by someone? Who will be paying for your time and for doing what?

kr15snw

I will be self employed, there will be 2 self employed workers working together (sharing the work).

For all work that we get paid for the money goes into the main business account and then we will pay ourselves (by invoicing the 'business'). For all jobs we will keep 10% in the business account which we will then use for all business expenses.

Would it make more sense for me to pay for my own expenses (although these will consist of a few pens and note pads as most of our design is web based so we dont need to buy anything).

The office is available from 7-11 7 days a week throughout the year. As its such a major uni its open all year

TM1976

Actually this is a partnership. Really you should have partnership agreement to agree which of the profits are yours and which are your partner's. Or are you trading through a limited company?

MushyPeas

kr, wow you're lucky - great you have some work! You could claim costs for a mobile phone (if you use any of it for work purposes), stationery, perhaps travel for meeting clients and don't forget CPD (Continued Professional Development).

If you do any work at home you'll be able to claim % of internet costs etc.

Good luck in Plymouth!

shelovestobuystuff

You could also claim relief for any trade papers,books,industry mag subscriptions etc as long as you need them for ideas and inspiration.Also addition courses or training to define certain skill areas can be set against earnings.
I once worked in a design studio in a carpet factory and they had a fantastic library the artists used for ideas for their designs,all of those thousands of art books on every artist,era and subject you could imagine and fashion and interior design mag subscriptions too were tax deductable.
Do you have business cards?Pencils?Networking or advertising costs?Travel expenses to trade or business events?I am sure there must be something you are buying which is used in your work which is tax deductable.