Employed and Self-Employed - Advice Please

KernowPhoto

I am currently employed full time and pay tax via PAYE.

For the past month or so I have been earning a bit of additional money from photography taking pictures at Weddings, and events etc principally to attempt to get my hobby to pay for itself.

I have decided to try and put this on a proper legal footing and register myself as Self-Employed, while also being employed full time.

I do not expect my turnover to exceed more than £4000 a year (it could very well make a loss on paper easch year), so its my understanding that I will not have to pay any additional NI contribituons - is this assumption correct?

Am I also correct in thinking that I can offset legitimate busninees expenses (including the purchase to new equipment) against any profit made? (this is the whole point of the exercise)

Since my accounts will be very simple and profits will be low (or non-existent), I intend not to employ an accountant but to do it all myself - is this feasbale do you think?

I understand that I will have to fill in a tax return annualy. Does anyone know what form this will take - will it be just the Self-Employment Short form that I have seen or will it be something more complicated?

Am I correct in assuming that I will not have to do anything in respect of my full time employment and arrangements for my Tax and NI will continue as they are now?

Sorry to ask so many questions, it all seems very complicated - I just want to do the right thing and keep it all as simple as possible.

Any answers, suggestions and other advice would be welcomed.

chrismac1

You can apply for NI exemption. You can offset business expenses - PM me if you want more details. DIY accounts are feasible if you take the time to learn how to put together suitable supporting files.

Your tax return will include all your income - so that is the employment section plus self-employment short form section plus any other income - interest and dividends being the 2 most common.

Pennywise

As with anything these days, all the information you need to do your own accounts and tax returns is available on the internet. Whether you have the time, inclination and ability to teach yourself to get it right is a question only you can answer.

Personally, as a practising accountant, I hate dealing with "hobby" businesses because, as you say, profit isn't your motivation, but you still have all the same (and more) complications as a proper business - it's just that the figures are smaller, and there is also the NIC position, relief for losses, etc., so ultimately, the job could be harder and more time consuming than a proper business. There is usually also a lot more "housekeeping" problems with the accounts as you'll probably not have a separate business bank and cc account, so the business and personal transactions will all be mixed together.

A few pointers:-

1. You can only claim business use proportions - i.e. if you buy a new camera, use it mostly for you own use, but occasionally for weddings etc., then you can only claim tax relief on your business use - i.e. if you use it 90% for private use, then you can only claim 10% against your business income. Same with overheads, i.e. your home telephone/broadband, your car mileage, etc.

2. Despite being a small "hobby", you still need to keep proper book-keeping, which means a "bomb proof" records of all business related in's and out's, properly split between business, personal and mixed transactions.

I'd go to see a few accountants now and get quotes and a few questions answered for free at the outset - most accountants give a free initial consultation. Far better, and cheaper in the long run, to get it right from the start rather than spending time and money in a years time once you realise your book-keeping wasn't up to standard or you've missed a time limit, or you've set up the wrong business structure.

jimmo

Just to present an alternative point of view I think you need to make a serious appraisal of how you expect things to develop in your personal world.
To deal with the red tape first, when you become self-employed you are required to notify the Government body responsible for collecting National Insurance Contributions but, at the same time, you can claim the Small Earnings Exception.
If you fail to notify the commencement of self employment you will be liable to a fine but the maximum penalty will be equal to the amount of National Insurance Contributions that you fail to pay on time.
If you expect your annual turnover to be no more than £4,000 there is no way that your annual business profits can exceed the Small Earnings Exception and whilst you will be breaking the law by failing to declare that you are self-employed, the maximum penalty that can be imposed is Nil.
Looking now at Income Tax if you are already submitting annual Self Assessment Returns you have to do the right thing. However, if you, like the majority of people, are outside Self Assessment, your only responsibility is to notify liability if you make a taxable profit.
Having said that, there are certainly opportunities for you to:
1) build up Income Tax losses to carry forward to be set against future profits from your business.
2) claim tax relief for your current business losses by setting them against current taxable income.
If your business takes off in a big way you could regret not taking professional advice earlier but if it doesn’t you could regret paying out.
Sorry but there is no easy answer.