thinking of going self-employed as sole trader a few questions / advice required!

radicaledward2012

Hi all,

After much reading and rooting around in the forums for bits and bobs of advice, I've finally signed up! I'm considering going self-employed and have spent the past week and a bit researching everything I'd need to do, but am still a little confused and could do with some sage advice from those in the know.

Bit of background: I graduated in July 2010 (qualified physiotherapist) and since then spent about 7 months looking for work (competition ridiculously fierce) and managed to get a fixed term post in the NHS for 10 months. This wasn't renewed and so I've now moved back in with my parents and am looking for work locally (not to much avail). I really don't want to take a job doing *anything* as I'm proud to be a physio and I enjoy what I do...but the opportunities here are few and far between (and I can't afford to move to NZ/Aus/London/up north).

I've applied for a few temp jobs (e.g. admin / clerk in NHS) and part time jobs that seem relevant as well as contacting all local practices to see if I could volunteer to keep my skills up. However, I'm now looking into working privately as a physio locally (mobile initially as I don't have the room to set up a treatment room in my house) and building a client base so that I can eventually rent a treatment room locally.

I've researched all I need to know from a physio POV and my professional union insurance covers me for public liability. My questions are relating to the business side of things:

1. I've read on several posts (this site and others) that sole traders aren't legally separate from their business and so not not "require" a separate business account although this is recommended for making it clear at end of tax year which money is going where from business etc to HRMC. All the banks that I have looked at don't allow personal current accounts to be used for business, and I can't envisage that I will be making a very large income - or even if I will get many clients to begin with - so what should I do about this? I don't want to open a business account and then find I have no business and this venture isn't worth it...I'd mainly be dealing in cash and the odd few cheques. Would I be able to deposit these in my current account while I saw if the business took off or not or would this be seen as using my personal account for business?

2. With regards to record keeping, I've got a cash receipt book (with counterfoils), when taking payments from clients and keeping track of these for HRMC, is this enough proof or do I need anything more?

3. I'd be using my car to travel to people's houses initially (I know I'd need to amend my insurance to include business purposes) but how do you prove what mileage you've done? Is it enough just to keep a record of the date, purpose of journey and miles done for business written down? Or do I need to keep fuel receipts etc?

4. With regards to NI, I know I'd have to pay class 2 NI contributions (if I was earning over 5k or whatever it is - which I doubt I will be)...when do you pay class 4 contributions? is it at the end of the tax year when you calculate your profit/losses/total income etc?

5. if business does go well, how do I know how much to set aside to pay tax at the end of the year?

6. I was considering selling physio equipment to clients if business did improve e.g. heat packs / cold gel etc...if I do this, do I need to do anything extra other than keep track of it or will I be charged more or is there anything else I need to consider?

and finally! (sorry for the mega long post) if I do get a part time job doing something different e.g. temp physio work in the NHS / with an agency or another job and was earning on PAYE....if I carried on doing private work as self-employed, would I be taxed more on my private income in conjunction with my PAYE? (e.g. as a band 5 physio I was earning £21k a year, so if I only made say £3000 in private income on top of this, would I have to pay increased tax and extra NI on this, aside from paying tax and class 1 NI on my PAYE salary?

one final question (sorry!) - I have a small student loan that I am still paying off from uni - if I go self employed, how will this affect repayments? (as they were being taken out of my PAYE salary because I was earning over £21k - I don't expect to be earning anywhere near this in the next few years if I just carry on with private work).

many thanks for any replies in advice, sorry if my questions are a bit basic, trying to get my head in a business mode!

thanks

Fi.

LittleVoice

radicaledward2012 wrote: »

Hi all,

After much reading and rooting around in the forums for bits and bobs of advice, I've finally signed up! I'm considering going self-employed and have spent the past week and a bit researching everything I'd need to do, but am still a little confused and could do with some sage advice from those in the know.

Bit of background: I graduated in July 2010 (qualified physiotherapist) and since then spent about 7 months looking for work (competition ridiculously fierce) and managed to get a fixed term post in the NHS for 10 months. This wasn't renewed and so I've now moved back in with my parents and am looking for work locally (not to much avail). I really don't want to take a job doing *anything* as I'm proud to be a physio and I enjoy what I do...but the opportunities here are few and far between (and I can't afford to move to NZ/Aus/London/up north).

I've applied for a few temp jobs (e.g. admin / clerk in NHS) and part time jobs that seem relevant as well as contacting all local practices to see if I could volunteer to keep my skills up. However, I'm now looking into working privately as a physio locally (mobile initially as I don't have the room to set up a treatment room in my house) and building a client base so that I can eventually rent a treatment room locally.

I've researched all I need to know from a physio POV and my professional union insurance covers me for public liability. My questions are relating to the business side of things:

1. I've read on several posts (this site and others) that sole traders aren't legally separate from their business and so not not "require" a separate business account although this is recommended for making it clear at end of tax year which money is going where from business etc to HRMC. All the banks that I have looked at don't allow personal current accounts to be used for business, and I can't envisage that I will be making a very large income - or even if I will get many clients to begin with - so what should I do about this? I don't want to open a business account and then find I have no business and this venture isn't worth it...I'd mainly be dealing in cash and the odd few cheques. Would I be able to deposit these in my current account while I saw if the business took off or not or would this be seen as using my personal account for business?

2. With regards to record keeping, I've got a cash receipt book (with counterfoils), when taking payments from clients and keeping track of these for HRMC, is this enough proof or do I need anything more?

3. I'd be using my car to travel to people's houses initially (I know I'd need to amend my insurance to include business purposes) but how do you prove what mileage you've done? Is it enough just to keep a record of the date, purpose of journey and miles done for business written down? Or do I need to keep fuel receipts etc?

4. With regards to NI, I know I'd have to pay class 2 NI contributions (if I was earning over 5k or whatever it is - which I doubt I will be)...when do you pay class 4 contributions? is it at the end of the tax year when you calculate your profit/losses/total income etc?

5. if business does go well, how do I know how much to set aside to pay tax at the end of the year?

6. I was considering selling physio equipment to clients if business did improve e.g. heat packs / cold gel etc...if I do this, do I need to do anything extra other than keep track of it or will I be charged more or is there anything else I need to consider?

and finally! (sorry for the mega long post) if I do get a part time job doing something different e.g. temp physio work in the NHS / with an agency or another job and was earning on PAYE....if I carried on doing private work as self-employed, would I be taxed more on my private income in conjunction with my PAYE? (e.g. as a band 5 physio I was earning £21k a year, so if I only made say £3000 in private income on top of this, would I have to pay increased tax and extra NI on this, aside from paying tax and class 1 NI on my PAYE salary?

one final question (sorry!) - I have a small student loan that I am still paying off from uni - if I go self employed, how will this affect repayments? (as they were being taken out of my PAYE salary because I was earning over £21k - I don't expect to be earning anywhere near this in the next few years if I just carry on with private work).

many thanks for any replies in advice, sorry if my questions are a bit basic, trying to get my head in a business mode!

thanks

Fi.

1 You could open another current account or even a savings account just for your physio earnings. You'll be trading in your own name so there would be no probolems in paying in a few cheques - it won't raise suspicions. You could also pay the cash into the same account.

2 For a small business write the detail of what is being paid for - not just the amount. Annotate your copy with the related costs (eg mileage).

3 Claiming mileage expenses rather than sums of money for petrol and repairs, a notebook with mileage records as you suggest will be sufficient.

5 See Martin's recent comments about setting aside 30%.

6 Keep track of it so that you can declare your profit on that too and to make sure you don't make a loss!

Wherever your income originates, you won't pay more tax whether it comes from self-employment or self-employment and PAYE type work.

radicaledward2012

thanks very much for the clarification - that really helps!

Notmyrealname

1) Talk to your bank. My parents don't have much to pay in from their business and their bank agreed to allow them to pay in cheques. BUT if you trade as a business name it looks fairly amateurish asking if cheques can be made out to Bob Smith. Paying cash in is a non issue. Its also good to have a business account because if you want to borrow money to grow your business you can prove turnover.

2) A cash receipt book is not enough. You need a set of books, whether a ledger or a spreadsheet, showing monies in, out, what they're for. Contact Business Link as HMRC frequently run small book-keeping courses.

3) It is just enough to do what you've said. If you forget the distance, HMRC will accept distances from Google Maps/AA routeplanner etc.

4) You pay Class 4 NI when you pay your tax. You will be sent a bill for both if you file online or before end October if by paper. I would pay Class 2 NIC regardless of whether or not you qualify for small earning exemption as it entitles you to sickness benefits such as Contribution Based ESA.

5) Set aside 35% of the profit to cover tax/NI but personally I'd work out how much you need to live on and bank everything else. That way in lean times you can continue to pay yourself something.

6) This combines with 2). You would enter the cost of the stock as an expense and the sales as income.

7) You pay tax on both. When you fill in your self assessment there is a page for PAYE income. The gross PAYE and net profit are added together to show your gross income. A tax bill is calculated from that, the amount of tax you have paid through PAYE deducted and you are sent a bill for the rest. If you show a trading loss and therefore have paid too much through PAYE job you'll get a refund.

8) Student loan repayments work the same as if you were on PAYE.

mikey72

You can normally get free banking for a year on start up.
You need a business account to set up trade accounts anyway, so it's well worth having.
You can normally then get a "trade" discount on most things, and set up costo, makro etc as well.

It's a common mistake to put all stock in expenses, anything left at the year end has to be taken off the expenses, it's cost of sales, (opening stock - closing stock plus the spend in the year), so try to buy as you sell, and keep stock at zero, or charge it all out to the job as you buy it.

Notmyrealname

mikey72 wrote: »

It's a common mistake to put all stock in expenses, anything left at the year end has to be taken off the expenses, it's cost of sales, (opening stock - closing stock plus the spend in the year), so try to buy as you sell, and keep stock at zero, or charge it all out to the job as you buy it.

This is incorrect if stock normally sells as first in, first out.