Start new business

rafhelp

If you were claiming benefits say JSA, you then decide to start your own business because you cant find work, I know that you would have to stop claiming JSA.

However if for some reason the business did not work out and you were looking for work again what would be the proceedure to follow? Would they require evidence of any sort?

Second question if you were running your own business and to begin with most businesses are very slow. Income is low. In these circumstances would you be able to claim additionalm benefits like tax credits or income support?

Notmyrealname

Assuming you're a sole trader you contact HMRC to tell them you're no longer self employed and sign on JSA stating that the business failed as the reason your previous employment ended.

Whilst in business you are entitled to income based benefits such as housing benefit, council tax benefit and tax credits. HB and CTB are a pain as you'll be required to submit books every few months but on the bright side it makes you do them. With tax credits you give them an estimation of PROFIT. That is the amount you expect to make after tax deductible expenses, not the money you take. If you have startup costs for equipment, fitting out premises etc it isn't unrealistic to tell them zero for the first years income.

There are also some benefits available if you've been unemployed for some time such as the Return To Work Credit if its still on the go.

First before deciding to do anything do a proper business plan with proper research on market, suppliers etc and make an appointment with Business Link to get them to take a look.

rafhelp

If u claim JSA I know u can get about £65 a week. And then £75 ish weekly Housing benefit and council tax paid.
Till u find a job. After that u can get tax credits of £50 a week on top.

If u start your own business to start with it will be slow, u'd prob be making like couple of hundred a month to begin with which is not good but u can always work up from there. But would u still get the full housing benefit and council tax paid. Do you have any idea of how much Income support would be?

It not good to become dependent on benefits but I suppose It will support u till u get things sorted and is better than taking expensive loans.

goodz

As you mention, one of the main issues will be whether or when you can actually draw some wages out of your start up business. As you say, this could well take some time to build up to.

So in the meantime really you'll be needing the benefits and I would have thought that you'd be eligible as well. But that is one of the questions arising, at what point does the eligibility change. And in what ways, yes, as you say, perhaps tax credits is one to research and consider applying for.

Perhaps one way of looking at it is that although you may be trying to start a business until it actually makes some regular and reliable profit/wages it's not really a business as such, it's just an attempt at one.

Not quite the same as your situation but this experience of mine might be worth considering in this context :

About 30 years ago I borrowed £25k against my flat and attempted to start a business.

Although I put in lots of effort and got some sales and a fair bit of turnover the whole thing was so expensive to run all the time that really there wasn't any profit/wages possible. The whole effort was funded off the borrowing and never managed to fund itself let alone pay me any wages out of it. On the contrary, I got myself into rather a mess.

And ran the risk of losing the flat which I came fairly close to several times due to not having sufficient cashflow and therefore being late paying the mortgage and repaying the loan. Rather stressful, nearly lost the lot and got myself homeless and on the street. Which would have been awful.

So I just carried on signing on and job hunting the whole time, that was the only option, I would have probably gone under if I hadn't have. Well, in fact pretty definitely, if I hadn't had the benefits then really there's no way any of it would have been at all doable.

Then eventually I packed in the attempt at the business as really I was just digging a rather deep hole for myself, what with all the overheads and costs and particularly having to repay the killer loan every month all the time.

I kept accurate records and accounts of all the income and expenditure so if benefits had ever queried it I was ready to explain the pickle that I'd got myself into.

And that, look, this was all just a genuine attempt at sorting out some proper work but I'm afraid all I've managed to achieve so far is get myself into heaps of debt and having rather a hard time of it, despite all the effort I've put in.

So you can hardly say that it's viable or proper work as such. Really it's just a disaster and a nuisance, there's no wages, just a lot of headache and stress and the distinct prospect of being homeless at any moment.

Yes, unfortunately I wasn't really much cop at business plus it was a rather difficult kind of business that I was trying to do. And without any help and without knowing enough about it, not really. A brave attempt but a bit too reckless and foolhardy. I was a bit too hopeful.

Well, it was valid to at least try, better than nothing. I couldn't get any normal ordinary proper work at the time so I might as well try and do something with myself, better than just sitting about being useless and being turned down for job applications all the time.

Re the benefits querying what I was up to, as it happens it never came to this so I was ok.

Of course perhaps this was a risky strategy, what if they hadn't accepted my explanation. Well, luckily it never came to that.

So I'm not suggesting trying to do this, really I'd say it would probably be sensible to avoid doing it the way I did it. Like I say, it didn't work for me and I nearly came a cropper as a result.

I'm just offering you the example of how I went about it and to explain that as I couldn't have survived without the benefits then why I considered that it was reasonable of me to be trying hard to create work despite still signing on the whole time. If you follow what I mean.

Anyway, I hope this is possibly of some use to consider in this context. Good luck with whatever you decide.

Notmyrealname

goodz wrote: »

Yes, unfortunately I wasn't really much cop at business plus it was a rather difficult kind of business that I was trying to do. And without any help and without knowing enough about it, not really. A brave attempt but a bit too reckless and foolhardy. I was a bit too hopeful.

This is a very important point or two being raised. In business you have to remember you're not a charity and you have to be hard nosed and remember that most people are trying to screw you over whether it be someone trying to get the rate knocked down for a job or a customer bringing something back they've knackered but want you to refund them.

And the people that do succeed tend to start a business in something they know. My first business was as a self employed lorry driver. I'd done agency work for years and had a good reputation, usually being asked for by name when a client made a booking. I learned who was the person doing the booking at the companies I'd gone to and found out what the agency were charging on a few jobs. I made some comments about going alone and several places said they'd use me. That was the point I started and I made money from the off and it did quite well even at one stage having a couple of friends I knew who wouldn't stuff the job up doing the odd weeks for me as well during busy times.

rafhelp

The only thing that really matters is the figures. Which ever way round you do it it will be associated with long forms. I know the figures for JSA and tax credits (based on 40 hours a week on min wages), the HB, but not the income tax (or actually hasnt that been replaced by work based tax credits?)

goodz

rafhelp wrote: »

The only thing that really matters is the figures. Which ever way round you do it it will be associated with long forms. I know the figures for JSA and tax credits (based on 40 hours a week on min wages), the HB, but not the income tax (or actually hasnt that been replaced by work based tax credits?)

The threshold for income tax is about £7.5k and it goes up a bit most years. So, obviously, one aspect to consider is how much of the business expenses are eligible for tax relief. So particularly check how much if any of phone, broadband, computer purchase, electricity, travel, stationery etc can be counted as business expenses and how to assert this ie what documentation you need to supply if any. So keep a file with all the paperwork so that you can always get at it efficiently if it's ever needed.

Notmyrealname

rafhelp wrote: »

The only thing that really matters is the figures. Which ever way round you do it it will be associated with long forms.

No it won't be. There are no forms to fill in at all when setting up as a sole trader. Unless your turnover is over 70k, the tax return is no more than a few questions - virtually all of it you don't need to fill in.