Help with Tax (Self Assessment)

everlastingspirit

Ok need a bit of advice for my partner. She worked in a florist and when it closed set up working from Home as a sole trader. A few months afterward she started working full time and does the floristy on the side. She pays tax & NI for her full time job. She hasnt and doesnt plan to take a wage from the money the business earns unless it picked up drastically to make it worth doing full time. The business is roughly £1000 in profit with £400 of deposits currently being held for wedding flowers later this year.

1) Does she pay a rate of tax even though she doesnt draw money from the business or do HMRC treat it all as earnings?
2) Is she likely to pay any tax due to the low amount of money earnt.
3) Does the fact she also works full time have any effect on this (i believe we still need to declare it on the tax return)
4) What classes as savings? I presume ISA is tax free so doesnt need to be declared?

Thanks for any help, we are supposed to be doing the tax return tonight. It was meant to be done several months ago but funerals and moving house have taken a huge priority recently.

Appreciate any input.
Ben

Loopy_Girl

1 - Yes. She has a profit and whether she takes a wage is irrelevant to
HMRC

2 - If she works full time then she will be over her tax free threshold
yes, I would imagine so. She will be taxed at 20% (unless a higher
tax payer)

3 - You do declare it. The only bearing is as above. If this was her only
job then she would not pay tax. There are questions asking about
your/her PAYE employer and she should have her P60 from last year
to hand.

4 - I'm afraid I don't know this as I very rarely have savings!! Look on the
HMRC website as they have a phone number and they are very helpful.

As she has a full time job she will not need to be paying NI on the SE work...has she completed an exemption certificate? Covers her for 3 years. Obviously should the business take off and this becomes her main income then she will need to pay her NI.

Hope that helps

rupee99

everlastingspirit wrote: »

1) Does she pay a rate of tax even though she doesnt draw money from the business or do HMRC treat it all as earnings?
2) Is she likely to pay any tax due to the low amount of money earnt.
3) Does the fact she also works full time have any effect on this (i believe we still need to declare it on the tax return)
4) What classes as savings? I presume ISA is tax free so doesnt need to be declared?

1 All of the income, after deduction of business expenses is earnings.

2 Remember the tax return now due covers the year to 5 April 2009, was your partner working self-employed before then? Was she employed before then? Depending on the answers to those questions she may be liable to tax. If she was not self-employed before April 2009 she does not need to fill in a tax return.

3 Yes, effectively the income from employment will be treated as her "first" income and her allowances will be used against that, and therefore any other income will be taxed at 20% (unless her income exceeds £43,000 which, if it does I) she will pay tax at 40% and II) you should really be talking to an accountant)

4 It is not savings that are taxable but the income (usually interest) that you get from them. Any income from bank deposits etc not in an ISA is subject to tax.

On a separate note has your partner told HMRC of her self-employment? And has she applied for the Small Earnings Exemption for paying class 2 National Insurance contributions?

everlastingspirit

Hi,

Yes she started self employment oct 08 and started full time employment aswell end jan 09.

Thanks for all your advise. Helps alot

Ben