Made redundant, so now gone self employed help please.

paulwf

w0rkaholic wrote: »

i dont think i need a accountant, its not very much money going on lol
im ok with maths and have a good head, just need to cross the t and dot the i s

This is a common mistake, thinking that once you get an accountant you are handing all the finances over to them and getting a huge bill in return. It doesn't have to be like that, spending an hour with them to get your structure in place would be most valuable, and if you then do a majority of the book keeping yourself their bill will be minimal...or you could just pay for an initial consultation and leave it at that.

Anyway, as others have pointed out the Business Link website will give you most of the information you require and you can book on their startup courses which are free, and if you call them they can answer any questions, again for free.

Make sure you register with HMRC immediately or you risk getting fined.

Hammyman

paulwf wrote: »

This is a common mistake, thinking that once you get an accountant you are handing all the finances over to them and getting a huge bill in return. It doesn't have to be like that, spending an hour with them to get your structure in place would be most valuable, and if you then do a majority of the book keeping yourself their bill will be minimal.

As well as echoing the Business Link advice, they also run basic book-keeping courses from time to time.

As for the above quoted, typically if you keep a good set of books and receipts in order, it should cost around £250 for an accountant to go through them at the end of the year.

dave2

Oops, got a bit carried away with this post. Well this is the part of my job I like and I've just been revising for tax exam Anyhoo...

w0rkaholic wrote: »

went self employed Monday just gone.

Notify HMRC you have commenced self employment and start paying Class 2 NIC (£2.30/w; if you can show taxable income will be under £5,075 you can apply not to pay this but you'd lose certain benefits - IMHO it's worth paying). There are penalties for failing to do so.

Now for tax I know you take out fuel for travel to customers, but not your work place?
Is that correct?
I use my car for business and own personal use.

Claim mileage at 40p/mile for first 10,000 miles a year, 25p/m thereafter. Mileage is from your primary place of work, cannot claim home to work. If you leave work, visit a customer then head home the mileage is the additional miles over and above what you would have travelled had you gone straight home.

Keep a log in the car showing date, from, to, brief explanation and then the number of miles claimable.

I take out anything I have to buy for buisness?
What about mobile phone, even tho its for business and private.
Rent I pay for premises?

Technically you can only claim for expenses that are "wholly and exclusively" for the business. The reality however is more reasonable: when you have shared expenses the tax man generally lets you have whatever amount is attributed to the business.

Sometimes this is straightforward, like in the mileage situation above it is relatively easy to show what the business element is.

Sometimes however you have to just use a flat %. So your mobile phone for example if you pay £30/m and reckon it is used 60% personally, you can claim £12/m. Beware the tax man usually makes a quick judgement decision on whether this looks reasonable in the context, if he decides it's likely too much he will call you out for evidence to support that %. Don't get greedy!

As you are renting premises "wholly and exclusively" for the business, it will be fully tax deductible.

Entertaining is specifically blocked. If you take a customer out for lunch you cannot claim for this.

Do I take out my wages, I guess I will be paying myself minimum wage at least to start.

No, when you are self-employed you do not get wages, the amount you take out is called drawings. Think of the entire business as being a pool of your assets - when you take money out for personal use you are merely moving money from one bank account to another.

There is kind of a doublethink here, on the one hand it is good practise to think of your business like it is an entity, and you need to keep financial records specific to the business, on the other hand the business is part of you. You are taxed on the profits of the business regardless of how much you actually move into your personal bank account.

So is my net profit after ive taken out my fuel, [STRIKE]my wages[/STRIKE], my rent, phone, things i buy, anything else?

Noting my comments above, basically yes.

In theory you need to make adjustments for transactions outstanding at the year end, like including bills and sales invoices that haven't been paid yet, and excluding any stock. But I'd just ignore these if less than £100.

I assume you'll be buying some equipment, like a sewing machine. For things that cost more than £100 this can be a bit more complicated as it is capital expenditure which is treated differently. Right now there is the Annual Investment Allowance so it doesn't matter so much (you can claim everything right away), but when that ends you may find yourself having to spread your claim over a number of years.

Remember your computer. Bring it into the business at whatever you think you'd get for it on ebay, as usual adjust for private use.

I cant see me doing any more than 10,000 this year if that makes a difference?

£10,000 in sales? you're well under the VAT threshold, but just in case you start looking like making anything like £70,000 of sales (not profit!) in any 12 month period you need to monitor it very carefully. If your customers are VAT registered there can be advantages to voluntary registration, but it seems clear in your case the hassle is unlikely to be worth it.

And where can I get free ermmm expenses in, out, wages, balance sheet thingy lol

Google for a cashbook. There's lots out there, for your needs it really should be immediately clear how to use it and what it does, otherwise ditch it and find another. Do a check to make sure it is working as expected. TBH I did a quick look and many are crap or inappropriate - this was pick of the bunch but doesn't reconcile the bank. Probably worth more looking.

Write your books up to 5 April each year, other year-end options are available but it's more hassle and unlikely to be advantageous for you.

If you do open a business bank account, the pros and cons of which are fairly obvious except HMRC tend to see it as a good sign, reconcile your books to the bank balance. This is a basic check and will quickly flag many types of possible errors. If you get investigated, HMRC will see a bank rec as a very good sign and instead of wading through everything they'll probably instead examine say 1 month's records. Some places do "free" small biz accounts, I think co-op. Of course if you start incurring bank charges the account is going to start looking like a bad idea!

You will need to complete a Self Assessment Tax Return for the year to 5 April 2011 and submit it by 31 January 2012. I suggest doing it in advance of October 2011 however as this way they'll help you do the calculations if you hit problems. If there is tax to pay, it will be due 31 January 2012. I would be susprised if you end up needing to make payments on account (i.e. in advance) for next year. There are penalties for a late return (instant £100 and gets worse form there) and late payment (instant interest, plus a 5% surcharge from 1 month, and it gets worse from there).

Please be aware the tax man can come knocking at any time and does not require a reason. They could take a pin and pick you at random, though you're much more likely if you hit certain triggers like risky industry, tax return figures that are different either from previous years or industry averages and so on. You are legally obliged to maintain appropriate records to support your self-assessment tax return and that includes keeping documents/receipts for expenditure for 6 years. They're also empowered to do things like ask the dry cleaners how much they paid you.

You say you are doing work for a dry cleaners. Try to obtain work from other sources too. OK so that's kind of obvious to make more money, but otherwise HMRC can claim that what is really going on here is that you are an employee of the dry cleaner and this arrangement is merely a way to reduce tax. The dry cleaners would bear most of the fallout from this but still.



Disclaimer: this is not advice, I have limited info, I take no responsibility for anything, etc etc, there is no substitute for getting an accountant, which I would recommend.

FOURCANDLES_2

You can get most info on going self employed 0n line tax office or business link also run small workshops on how to do your books. I would not think you would need an accountant we have done ours on line since going self employed and if I can do it most people can . It was an accountant who told me at our local college I would not need one basic book keeping skills is all that's required although our income has risen from the 20 k starting year and we are getting a little more difficult as we have now taken on staff. But good luck I used to get crc I had to estimate earnings and provide actual figures by the end of jan , however mr C has stopped my ctc so that is not an issue for me any more .

w0rkaholic

hi thanks for the info guys, and im just doing my first months book keeping.
Gonna do it every month to keep on top of things