Self employment questions from confused individual.

muddyl

I work full time but i'm thinking of taking on some work on the side to help out. Would not expect to exceed 5k a year, and would prefer to be legal and above board.
What would be the benefits of going self employed (as opposed to just declaring it as extra income) and how hard is it to go self employed?
Thanks, mark

Hammyman

1) You can claim your expenses against your income, not only the self employed but PAYE as well as its treated as one lump so if you trade at a loss on paper, you get a tax refund on part of your PAYE.

2) Very easy. Phone the HMRC self employment registration number, keep a basic set of books. Once a year do a self assessment which for you will be about 3 pages, maybe 20 questions, and take about 10 minutes to do. Do it online and its all worked out for you there and then.

3) Remember that you will need to inform tax credits. The figure for income from self employment is NET PROFIT, that is profit after expenses. You need to work out what your set up costs are, running costs for the business, deduct that from what you estimate you will earn and the resulting figure is the estimation you'll give them. Remember that if you start now, you're only going to have just over 3 months trading before the end of the tax year so if you reckon on £6k profits in a 12 month period, for this year it will be 1/4 that.

muddyl

Many thanks for your reply, some very useful information there.
Set up costs wont be much as most of the tools I already have and so didn't keep receipts for them, though I will need a few more. Wont be too much in the way of consumables. Most would be fuel, telephone and maybe advertising costs I think.

I might have a look for a book, maybe small business for dummies or similar to help me out.
Again, many thanks for your help.

muddyl

A couple more questions that I cant seem to fine the answers to if anyone can help please.

To spread the cost I was thinking of starting to buy some of the tools I need now, but wont be registering self employed until feb/march time.
Could these still be put down as expenses when its tax time or should I wait till after registering?

Also, I have a private car but will need business insurance. Can the insurance on a private car be put down as an expense?

Lastly, what about fuel for work journeys?

Any help appreciated. Just trying to get my head around it all. Thanks, mark

PlutoinCapricorn

I can't help with the mileage aspect, but want to say that you register as a sole trader when you have some definite work. You can certainly claim expenses incurred before this date, as you may not be able to get work without being set up with whatever equipment you need. Just keep the receipts.

Have a look at https://www.businesslink.gov.uk and HMRC's self employment pages. You can get free courses on tax, expenses and the tax return.

Hammyman

muddyl wrote: »

couple more questions that I cant seem to fine the answers to if anyone can help please.

To spread the cost I was thinking of starting to buy some of the tools I need now, but wont be registering self employed until feb/march time.
Could these still be put down as expenses when its tax time or should I wait till after registering?

Yes you can claim them retrospectively. There is a time limit though but its several months.

Also, I have a private car but will need business insurance. Can the insurance on a private car be put down as an expense?

Lastly, what about fuel for work journeys?

I've lumped these two in because they are interdependant. When it comes to your car you have two choices:

Option 1: Claim for all expenses. That is insurance, tax, MOT, servicing, fuel etc. However you can only claim the percentage of these that is business use if you also use the car for personal use as well. So if you use your car 50% personal and 50% business, you can only claim 50% of the expenses. Problem with this is if you claim too little personal use, HMRC have a tendency to challenge it and its up to you to prove it.

Option 2: Claim mileage at HMRC rates. By far the easiest. You only claim for business mileage at 45ppm for the first 10,000 miles then 25ppm after that. It is quite easy to keep records of business mileage - I use a simple spreadsheet where I put in the date, what the mileage was used for, destination, mileage and any parking costs. HMRC will accept distances based on route finders such as the AA and Google Maps if you do a journey and can't remember it.

You need to work out what it costs you a year to run your car in insurance, tax, MOT and servicing and petrol for the business mileage you expect to do and then compare it to what you'd get if you claimed HMRC rates to see which works out the best for you.

tigeress289

On the insurance side, phone your insurance and explain what you intend to do, ask about class 1 business cover to be added, Mine was an extra £60 a year and covered. The last thing you want is to be stopped by some jobsworth and be done for insurance. Any tools equipment bought can normally be claimed by 6 months. Good luck

muddyl

Thanks for all the great info.
Intend to do this early next you so all the info will help me to set up with confidence.
Cheers.

Hammyman

Get in contact with your nearest Business Link before the Govt closes them all down. They have a wealth of information and help.