Changing from employed to self-employed,effect tax credits?

cybermum

Hi,
My husband has been given the chance to start his own business in catering and given that his job now is very insecure(literally no work contracts coming in) we have talked and talked and decided we should go for it.

We would be paying for the cost of the equipment and unit over a year as we don't have the funds upfront(it isn't a huge amount but just we don't have it to pay all at once).

I know we need to register with HMRC asap.
We currently receive WTC and CTC and are worried we will lose this.
We will be taking very little in earnings as we are going to have to work hard to build up a customer base.
The tax credits would be a huge lifeline.Will they automatically stop any payments we now receive when we ring and tell them of the changes?
I have no idea what happens with regards to it.
Would they need to have the HMRC self employed ref number before they re-calculate award?I have been told that it could be up to six weeks for HMRC to send it.


Thanks for any help in advance.

Hammyman

You will not lose WTC and CTC and if you've a fair whack of expenses in the first year you would most likely end up with more WTC. They don't need a UTR number when they recalculate the award but what they will need is projected income until April 5th. What this would be is what he has earned on PAYE plus any profit or minurs any loss.

So for example if he earned £10,000 PAYE, his new business startup costs were £5k and it was only forecast a £2k income thus resulting in a £3k loss, he would say his income for 2010-2011 is £7000 (£10,000 minus the £3k loss). On renewal he gives them a projected profit for 2011-2012. I'd ring them around November if it looks like being wildly different.

When he fills in the Self Assessment form for 2010-2011 he carries forward that £3k loss so if the business makes a profit of £10k then you deduct that carried forward loss from the previous year so the gross taxable income is £7k.

I would suggest getting in contact with your local Business Link before the LibCons close them.

cybermum

Hammyman,
Many thanks for your help,and we will be getting in touch with Business Link asap.
Thanks again