Self employed accounts and records

lijaloo

glider3560 wrote: »

So I'm assuming that if I work full time (and pay Class 1 NI in this job) but earn less than £5315 in SE, then it would be better to apply for the small earnings exemption?

That is correct.

Pennywise

lijaloo wrote: »

You can't claim back the class 2 national insurance contribution once paid, however you can claim a small earnings exception if you expect your earnings to be beloe the threshold You might want to pay though as they count towards your state pension (as long as the goal posts donlt move again) and they are cheaper than class 3 (voluntary)

I keep my own records (and those of my husband and several other sole traders) using excel spreadsheets. Much easier and cheaper than Sage. Don't bother with an accountant unless you really need to and I'd also avoid VAT registration unless its really necessary.

You can claim back class 2 if you're paid but later find that your profits didn't exceed the threshold as per the following:-

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/Refundscomplaintsandreportingchanges/DG_190117

Not widely known - it's that kind of knowledge that makes it worthwhile to have an accountant even if you think you can do it yourself - you don't know what you don't know!

You really should consider VAT registration whether you reach the threshold or not. The hassle is grossly over-exaggerated. Just had a new client in this morning where bad advice had just lost about £3,000 over the past 18 months since he started business by being led to believe that VAT registration was too much hassle (his book-keeper told him not to bother as it made things more complicated!!!!). His turnover was only £50k p.a. but all his customers were VAT registered so no cost to them - he'd have been better off by £2k per year if he'd ignored the bad advice and registered for VAT under the flat rate scheme from day one. Needless to say, we've now applied for VAT registration and the savings will more than cover my fees!

GlynD

I found an accountant's services to be more than useful. I also found Sage to be a wonderful program to use, a cheaper version would have been just as good however.

To me VAT registration was one of the greatest things I ever did. It saved me fortunes on purchases but then again I was in the service industry and you have to consider the effect it would have on your invoices if your customers are predominantly NOT VAT registered. If they are you may as well have the benefit of registration.

lijaloo

Pennywise wrote: »

You can claim back class 2 if you're paid but later find that your profits didn't exceed the threshold as per the following:-

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/Refundscomplaintsandreportingchanges/DG_190117

Claiming back an overpayment of NI is possible in certain circumstances. The OP is paying class 1 in employment and his turnover from self employment is expected to be small so the small earnings exception is a better option.

Having worked in an accountancy firm for many years previously, I saw far too many small businesses advised to register for VAT when it wasn't necessary. In the same way that many small businesses go to accountants for advice and are led to believe that they need an accountant to produce year end reports and the like when it just isn't always the case.

GlynD

OP may as well enjoy the fruits of his labout and have an accountant rather than slaving over accounts when he should be enjoying quality time. As accountancy charges are 100% reclaimable against earnings it is also a way of making HMRC work for you.

glider3560

GlynD wrote: »

As accountancy charges are 100% reclaimable against earnings it is also a way of making HMRC work for you.

It may well be reclaimable, but it will still cost me money. When you are talking about earning <£5000 per year, a few hundred pounds is several days profit!

The main customers would be 4 or 5 advertising agencies who need a monthly invoice. My only expenses would be on advertising and website costs. A spreadsheet should be more than adequate as there won't be a huge number of transactions.

pipscot

GlynD wrote: »

OP may as well enjoy the fruits of his labout and have an accountant rather than slaving over accounts when he should be enjoying quality time. As accountancy charges are 100% reclaimable against earnings it is also a way of making HMRC work for you.

Only the costs of preparing your business accounts are reclaimable (NOT the cost of filing your personal self-assessment tax return which is what most people find confusing anyway!)

Also, just because something is tax deductible does not mean that it is 100% free. If the bill is £500, your tax bill will be reduced by 20% of that (£100) so you are still paying out £400 out of the profit of your business. [Easy numbers for simplicity - £500 would be expensive for accountancy for a startup business]

GlynD

glider3560 wrote: »

It may well be reclaimable, but it will still cost me money. When you are talking about earning <£5000 per year, a few hundred pounds is several days profit!

The main customers would be 4 or 5 advertising agencies who need a monthly invoice. My only expenses would be on advertising and website costs. A spreadsheet should be more than adequate as there won't be a huge number of transactions.

You're talking about £25k+ pa then. Trust me, if you get to that then you'll be begging for expenses to get your tax bill down.

pipscot

GlynD wrote: »

You're talking about £25k+ pa then. Trust me, if you get to that then you'll be begging for expenses to get your tax bill down.

I can't understand the point of spending out on unnecessary expenses in order to reduce your tax bill! That's like asking for a pay cut at work so you pay less tax!!! Yes, you pay less tax but you also take home less.

GlynD

pipscot wrote: »

I can't understand the point of spending out on unnecessary expenses in order to reduce your tax bill! That's like asking for a pay cut at work so you pay less tax!!! Yes, you pay less tax but you also take home less.

I believe accountancy to be totally necessary. Wait til OP is on the threshold of 40% tax - then he'll be ultra-keen. Unless they've changed it that's only 32k.