Full Time Job + Self Employed - Expenses

dan~_2

Hi, I am in full time employed, problem is the salary isn't as high as I'd like it to be, so I'm thinking of becomming self employed aswell as my full time job and setup my own web designing company.

Can I claim expenses for my business as I'm i'n a full time employed job? If I can great!

When I claim 'expenses' is that basically getting the VAT back?

All that I would need to claim as expenses would be the following.

+ Apple Mac
+ Apple Ipod
+ Fuel for visiting clients

I wouldn't expect my profits etc to be more than £5000 (which is below a threshold for NIC?)

All I'm expecting to do for the first year or two, is most likely to be 8 websites @ £500 a year.

Tried looking in HRMC, not finding it helpful at all to be honest.

Thanks! :j

pitkin2020

You will be able to claim all the expenses involved with the day to day running of the business.

You would claim VAT back if you are VAT registered but unless there are some real benefits for you industry your turnover wouldn't make it worth it.

You could obviously claim for your computers, software, telephone etc etc. You do need to take into account what is used for personal and business and split those costs and claim the real costs to the business.

As your employed your obviously paying tax on your earnings so you will pay tax on any profit your business makes, any losses (maybe in year one with the purchase price of PCS, software, advertising etc) then you could get some tax back as your overall earnings will be lowered.

TBH a good accountant is worth their fee, and they should save you a few quid. I would suggest getting your accounts set up for the first year atleast as they will help with the values etc of bringing stuff into the business you already have (if anything).

Best of luck thats obviously a brief list above.

basscadette

dan~ wrote: »

Hi, I am in full time employed, problem is the salary isn't as high as I'd like it to be, so I'm thinking of becomming self employed aswell as my full time job and setup my own web designing company.

Can I claim expenses for my business as I'm i'n a full time employed job? If I can great! You can claim expenses for costs related directly and solely to your business, yes. You don;t actually 'claim' them - they are deducted from you turnover, leaving your 'profit'.

When I claim 'expenses' is that basically getting the VAT back? No. You only get vat back if you are vat registered. As a web designer, you would have to charge your cients more vat than you are likely to pay out - i.e. you'll send more to HMRC than you get back. Best not to register unless you have too or are dealing with big businesses who claim it back themselves. Charging VAT could make you uncompetitive or have to tak ea hit on your profit to keep prices in line with your non-vat registered competitors. Expenses means subtracting what you had to spend in your business from how much you made. It reduces your tax bill, that's all.

All that I would need to claim as expenses would be the following.

+ Apple Mac
+ Apple Ipod
+ Fuel for visiting clients

Fuel and Ipod yes, Mac, probably not as it is an asset of the business. THe rule of thumb is assets over £500 are assets. Ipod should be less than £500 so you can just deduct it from your takings. The Mac - you claim capital allowance relief each year.

I wouldn't expect my profits etc to be more than £5000 (which is below a threshold for NIC?) Correct but you will need an expemption certificate from HMRC - otherwise they will send you endless letters threatening to fine you if you don;t pay up! You need a Class 2 exemption form.

All I'm expecting to do for the first year or two, is most likely to be 8 websites @ £500 a year.

Tried looking in HRMC, not finding it helpful at all to be honest.

Thanks! :j

Hope this helps clarify it a bit.

HappyMJ

basscadette wrote: »

Fuel and Ipod yes, Mac, probably not as it is an asset of the business. THe rule of thumb is assets over £500 are assets. Ipod should be less than £500 so you can just deduct it from your takings. The Mac - you claim capital allowance relief each year.
Hope this helps clarify it a bit.

You can write off small capital expenditure off in the year it was incurred. HMRC has the exact figures but I think it's anything under £1,000 in total so the Mac would count.

dan~_2

Hi thanks for the replies, when I said Apple iPod I did actually mean Apple iPad, so both of them I would expect to be no more than £1500 (with Mac laptop).

So what exactly is capital allowance relief? Say I bought an Apple Mac @ £800, and I put it down somewhere with receipt etc that I spent £800 on the Apple, what happens next? Do I get some money back effectively?

Like I said earlier, I would only ever expect to be below the £5k small earnings (but does this count as I'm already employed in a full time job, which is above £20k)

Thanks,
Dan

pitkin2020

You never get any money as such, you write off the expense against your profit to reduce your tax liability. Capital allowance in basic terms mean you claim against a percentage of it in year 1 (can't recall figures) then you claim a subsequent percentage each year there after.

IIRC (and i maybe wrong as my accountant does all mine) but they increased the amount you can claim in year 1 a while back so upto a certain rate you can claim 100% against assests. Assests being things likes cars, vans, plant and machinery. Other expenses like pens, paper day to day expenses etc you claim 100% of those costs against your profit to reduce your tax liability.

Like I said if in doubt it really is worth speaking with an accountant who will give you proper advice and there fee is tax deductable. My accountant has always found stuff I have missed that has always covered his fee. You would probably be looking at anywhere between £150-£300 for that service, not a huge expense.

basscadette

dan~ wrote: »

Hi thanks for the replies, when I said Apple iPod I did actually mean Apple iPad, so both of them I would expect to be no more than £1500 (with Mac laptop).

So what exactly is capital allowance relief? Say I bought an Apple Mac @ £800, and I put it down somewhere with receipt etc that I spent £800 on the Apple, what happens next? Do I get some money back effectively?

Like I said earlier, I would only ever expect to be below the £5k small earnings (but does this count as I'm already employed in a full time job, which is above £20k)


Thanks,
Dan

Capital allowance relief - tax relief on assets you've bought. As someone pointed out above, the threshold is now £1000. To be honest, you're probably fine putting them as expenses as individually they are less than 1k.

The small earnings relief applies only to class 2 NI contributions, so you could apply for exemption from these. Adviseable as you are already covered for NI thorugh your main employemnt so you wouldn't lose out by not paying them. It does not apply to income, which will be taxed at your current tax rate. If you are on the 20% tax rate, then everything you have left afetr deducting your expenses will be subject to 20% tax, notifiable through your self-assessment tax return.

All of this applies once you have registered with HMRC. They will automatically put you in the system for self-assessment and send reminders. For the exemption certificate, you will have to find the form and do this yourself. One thing they do not send you is get-out-of-paying help - you have to know you're eligible and demand it. (At least that was my experience).

dan~_2

Ah, I think I see now. I was thinking of an accountant and I can see it would really benefit me, but paying what you said isn't a lot, but if I only manage to get 1-2 clients this year, then that money for an accountant seems really high, if I only manage to bring in £1000.

I'm sure there are HRMC advisors which come to my house and explain things to me, if I ring my local tax office. Is this correct or have I just heard wrong?

HappyMJ

dan~ wrote: »

Ah, I think I see now. I was thinking of an accountant and I can see it would really benefit me, but paying what you said isn't a lot, but if I only manage to get 1-2 clients this year, then that money for an accountant seems really high, if I only manage to bring in £1000.

I'm sure there are HRMC advisors which come to my house and explain things to me, if I ring my local tax office. Is this correct or have I just heard wrong?

You need to go to the HMRC enquiry centre yourself and ask when the next advice courses are on. They will help you at their premises. Get an accountant when it is clear you will save money. If you didn't claim any expenses you would pay 20% tax on your £1,000 so an accountant is not worth it but if you took £10,000 and didn't claim anything then an accountant would be worth it to clarify what you can and cannot claim.

pitkin2020

dan~ wrote: »

Ah, I think I see now. I was thinking of an accountant and I can see it would really benefit me, but paying what you said isn't a lot, but if I only manage to get 1-2 clients this year, then that money for an accountant seems really high, if I only manage to bring in £1000.

I'm sure there are HRMC advisors which come to my house and explain things to me, if I ring my local tax office. Is this correct or have I just heard wrong?

Its not a high fee at all in reality. If you only take £1000 and have all those expenses your likely not to make a profit and will likely get a tax refund. IF you don't get your figures right you may not get as much tax back as your entitled to.

You use an accountant as a business tool, same as any other service you employ skills where you need them or you fall short of those skills. Would you service your own car if you didn't feel you had the correct skills or weren't prepared to learn them? I'm by no means saying you can't do the books yourself but don't expect to be able to read a few pages off an internet forum/website and expect to complete a tax return fully and claim for every allowable expense.

IrishGypsy

pitkin2020 wrote: »

Its not a high fee at all in reality. If you only take £1000 and have all those expenses your likely not to make a profit and will likely get a tax refund. IF you don't get your figures right you may not get as much tax back as your entitled to.

You use an accountant as a business tool, same as any other service you employ skills where you need them or you fall short of those skills. Would you service your own car if you didn't feel you had the correct skills or weren't prepared to learn them? I'm by no means saying you can't do the books yourself but don't expect to be able to read a few pages off an internet forum/website and expect to complete a tax return fully and claim for every allowable expense.

This. I'm in the same scenario as you OP (FT job + a business with a similar turnover per year) and I paid £400 to my accountant but they were worth every penny as they ensured their fee was accounted for from knowing what I can deduct and how much by. And they file them for me and send me a hard copy that I can keep each year. Search for a few based on recommendations and work from there. Bets of luck.