Self employed, earning less than minimum wage

oldestrocker

baza52 wrote: »

you claim £84 to collect a few laptops????
You could have a pallet load of em delivered for less than that.


Ahh i get it. you earn more than you make out on paper so you can get more benefits....

how can you earn £0 on paper but bank money each money to your personal account.

Yes, that is quite common! In fact the art is to create a loss, which can be carried back against a previous year that you paid tax in and claim a repayment!
I'll give you an example.
Turnover for the year £30,000
Less Cost of Sales £20,000
Gross Profit £10,000

Less Direct Overheads £3,000
£7,000
Less Indirect Overheads £2,000
Net Profit £5,000
· Indirect Overheads would include use of room at home as office, heat & light for office etc – These payments would not actually be paid out of the business account as you would normally pay your Council Tax, Mortgage, Electricity & Gas as everyone else does. This is a ‘charge’ to the business for the ‘use of’.
· Effectively there is a profit of £7,000 which you would then pass over as drawings into your personal account – that is your money.
· In this example you would only pay tax on £5,000 – not the £7,000.

Let us say that there are assets in the business. Your car for example, computer etc. You can claim Capital allowances on these.
Say the capital allowances add up to £10,000 per year, but only half of the asset is used for business purposes – therefore you would claim £5,000 Capital Allowances.
This would reduce your net taxable income to ‘0’!
And as such, without an income you would then maximise the use of benefits including WTC!
Although you have actually lived on £7,000, the taxable profit is ZERO and therefore you pay no tax and you enter 0 income on your Tax Credit claim.

Obviously the total income for the year WILL include WTC, but the tax bill is mitigated. The idea is to create a loss sufficient enough when you take into account ALL of your taxable income and Personal Allowance for the year - there is no tax to pay.

Any good businessman will know by month 11 of his year what the likely position will be at the end of the year. He has the last month to take remedial action to make sure that he 'loses' any profit, by maybe changing his car or buying a new computer or buying any other asset that could be used for business purposes as well as for private use, maybe a another car for his wife who happens to be his secretary in the business!

oldestrocker

MrsManda wrote: »

How much he gets paid is irrelevant I think, WTC is dependent on how many hours you work.
There's a quick questionnaire on direct.gov.uk which will give you an idea of what tax credits you or your husband may be able to claim.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCreditsandChildBenefit/TaxCredits/Gettingstarted/whoqualifies/index.htm

That is correct. You could work 50 hours and have no profit at all - officially on paper!

baza52

best i start selling on ebay then and kick of the tax credits claim then.

oldestrocker

baza52 wrote: »

best i start selling on ebay then and kick of the tax credits claim then.

Yes there is no reason at all why you can't. The only proviso is the hours spent in running the business which can include all of the time spent doing admin, looking for work, packing up parcels etc etc.

I have no idea why more people don't go down the route of self employment. The only drawback is the 'paperwork' side of it and ensuring that you comply with HMRC regulations. Even that is helped by the fact that HMRC run free workshops for the self employed and they are always there to advise + there is a wealth of info and advice on their website.

It really is that easy, and the benefits far outweigh the disadvantages.

The trap that a lot of people fall into is trying to be self employed and keeping it quiet (cash jobs)! Why?? If they put in as much effort as they do in trying to keep a lid on it in running it properly, they would make more money.

Indie_Kid

MrsManda wrote: »

How much he gets paid is irrelevant I think, WTC is dependent on how many hours you work.

It's also based on how much you earn.

If he does claim WTC, this may cancel out some council tax & housing benefits.

Hammyman

baza52 wrote: »

you claim £84 to collect a few laptops????
You could have a pallet load of em delivered for less than that.

Indeed I could. However I don't get to see them beforehand or test them and would be buying completely blind. Would you spend £6000 on something you'd not seen with no guarantees or comebacks? That's what a pallet of them costs and it gets you 60 units....

Ahh i get it. you earn more than you make out on paper so you can get more benefits....

Who says I get benefits? Wife is a manager at a sign company.

how can you earn £0 on paper but bank money each money to your personal account.

Quite easy and you've been given an example. Its not my problem you're completely incapable of summising from that.

Hammyman

oldestrocker wrote: »

Yes there is no reason at all why you can't. The only proviso is the hours spent in running the business which can include all of the time spent doing admin, looking for work, packing up parcels etc etc.

I have no idea why more people don't go down the route of self employment. The only drawback is the 'paperwork' side of it and ensuring that you comply with HMRC regulations. Even that is helped by the fact that HMRC run free workshops for the self employed and they are always there to advise + there is a wealth of info and advice on their website.

It really is that easy, and the benefits far outweigh the disadvantages.

The trap that a lot of people fall into is trying to be self employed and keeping it quiet (cash jobs)! Why?? If they put in as much effort as they do in trying to keep a lid on it in running it properly, they would make more money.

Exactly. I've never done "guvvie" jobs because quite honestly there is simply no point. Even in my last business that had comparatively little I could offset against tax I didn't bother doing guvvie jobs. Too much like hard work and I'm not dishonest. No doubt someone will now say that avoiding tax is dishonest....

tracytaxi

Hi I am in the same boat, I am a carer for my daughter and work 30 hours as a self employed taxi driver, and I earn less than the nmw as I cant always work the busy periods due to the care needs of my daughter. I have high overheads such as office rent £150 a week insurance £29 fuel £150 a week and if you take £400 a week there is nothing much left. I get working tax credits and working is about my pride as much as anything else, I would be better off on income support but choose to do this. goood luck claiming tax credits and yes I declare every penny as I fear the tax man would laugh at my takings if I did not !!! If income that low even with carers allowance you should not end up paying tax.xxxmerry christmas