I want to go self employed, but i'm scared

ACon

I'm scared I won't keep track of things, declare things correctly, and end up in big trouble
I want to start my own photography business. I have the skill, and been doing favours for so long Im more than ready to be charging and becoming self employed, but havent registered because Im so scared.

Also, the equipment Ive already bought, could I use this against earnings for my first tax year?
Im already insured (equipment and public liability) even, but havent taken that step to making it a business.

I'm also scared it will effect our housing benefit and tax credits so much with the potential of little income in the early months, and we could end up i more debt than we are already.

Can anyone help me in the steps I need to take!!

Northerness

Have you been unemployed more than a year? If so you could go onto the New Enterprise scheme, you'll get a small allowance per week, a £2k grant and most importantly - business support/advice for six months. Not amazing - but worth considering if you're unemployed.

ACon

my husband is working so don't think we would qualify? Ive never worked, as Ive been raising our 3 children.

ACon

But I would love to do courses etc to help me with book keeping and all that. Can't afford an accountant and want to get it right.

Northerness

ACon - do you yourself claim JSA and have you been registered as unemployed for more than a year? You should qualify in this case, regardless of your husband's employment

marybelle01

ACon wrote: »

But I would love to do courses etc to help me with book keeping and all that. Can't afford an accountant and want to get it right.

Even if you don't claim there are a host of organisations that can help and advise, and most do it for free. Most Councils have an enterprise officer or enterprise unit - the name differs from place to place, but they can point you in all sorts of directions from free courses, to business planning, to mentors (successful business people who volunteer to spend time with you advising and supporting). There's shed loads of help out there - you just need someone to push you in the right direction!

ACon

I've never claimed JSA, didnt think it was possible with my husband working. Ive been to the job center, and phoned Working Links but they wouldnt help me as I was not a claimant.

marybelle01

ACon wrote: »

I've never claimed JSA, didnt think it was possible with my husband working. Ive been to the job center, and phoned Working Links but they wouldnt help me as I was not a claimant.

They are not the only people out there!

And what is stopping you from becoming a claimant? You might not get money but you would get your NI paid (for your pension) and then you would be a claimant!

KiKi

Hi OP

Don't be scared - it's pretty simple.

1 - Call HMRC (or go online) and register as self employed

2 - You will have to pay Class 2 National Insurance Contributions at £2.50 ish a week (might have gone up this tax year); you can do this by direct debit, or pay every 6 months, there are different options

3 - When you do work for someone, you send them an invoice (plenty of templates online). This is simply a statement saying your name, address, contact details, and an invoice number (eg 001). You state the work you did (eg, "photography for wedding") and then how much you're charging them

4 - They pay you. This can go into your own bank account, or one you've specifically set up for business.

5 - You need to keep a spreadsheet or a record of all invoices, and a copy of the invoices themselves (can be on the computer, don't need paper ones). This is so you have a record of all the money that's come IN to you during the year. You must keep copies of these in case HMRC ever ask for them, and you need this total figure for your end of year tax return. But it doesn't need to be anything fancy. I just have a spreadsheet of invoice numbers and how much I charged them

6 - If you spend money on something for the business, like camera equipment, you can 'claim' this as an expense. So keep the receipts for all stuff like this. You should also keep a spreadsheet or other record of these, so you have the total figure of all the money that's gone OUT during the year.

7 - At the end of the tax year (April 5), you need to complete a tax return. You can do it online. You put in your personal details, contact number etc, and then the main things: the money that's come into you, and the money that you've spent on expenses.

8 - HMRC then calculate what you owe in tax and Class 4 NI contributions (if you earn enough), and you then pay that.


To explain how tax works, you have an allowance of £8105 which you can earn before you have to pay tax. This is referred to as tax code 810L. (Most people are on this code unless you have specific circumstances which mean otherwise.) Anything over £8015 is taxed at 20% - until you earn £42-3K ish then it's 40%. Class 4 NICs are 9% on everything over £5kish (can't remember exact figures).

What this means is that you should, to be on the safe side, put aside 29% of everything you earn. That way you will have it ready for your tax bill at the end of the year. And if you don't earn enough to pay tax or Class 4 NICs, then you have a nice little stash to spend on yourself!

The important reason to keep hold of your expense receipts (and to keep a track of the total) is because - assuming you earn more than £8105 and are therefore paying tax - expenses are deducted from your profit before you are taxed. So for example, let's say you earn £10k. You will have to pay tax on £1895 of it, at 20%. However, let's say you spend £500 on a camera for work. HMRC deduct that from your taxable income (so £1895 minus £500), and now you're only paying tax on £1395.

I don't know about the impact on your benefits I'm afraid, but I hope that helps reassure you on what you would need to do. The chances are that you won't earn enough in the first year to pay any tax, and when you've done it once it gets easier. The tax return is really, really easy to complete online, and you don't need an accountant.

HTH
KiKi

Savvy_Sue

KiKi wrote: »

2 - You will have to pay Class 2 National Insurance Contributions at £2.50 ish a week (might have gone up this tax year); you can do this by direct debit, or pay every 6 months, there are different options

Apart from this, KiKi is spot on. However it's worth also saying that if you don't expect your earnings from self employment to more than c. £6000 in your first year, then you can ask for a Certificate of Exemption from NI. And since I'm guessing you're getting Child Benefit for young children, you're also getting Home Responsibilities Protection so don't really get any benefits from paying the s/e stamp. (If you're going to have more babies, then pay it, btw!)

Only you can decide if you are temperamentally suited to this, but you have to think whether you'll regret it more if you do it and get it wrong, or don't do it because you're scared.

Also if you're already doing a lot of photography, why not start treating these as 'jobs' - record where you're going, what you're doing, how long you spend there, how many miles you drive, what supplies you pay out for etc etc etc. It's not so bad, is it?

Northerness

Wouldn't normally suggest this buy I'd recommend claiming JSA and getting you business idea/ proposal etc in ship-shape over the next year. Try applying for photography/creative jobs in the mean time and learn all you can, doing volunteering work to get you portfolio started. After 12 months you should qualify for the new enterprise scheme and they will help you with your concerns, training, tax etc and give you some extra cash to get the business up and running.