Income Tax - Working Full time and Starting a Business

gemma01

Wonder if someone can help.
I am currently working full-time and I'm in the process of starting my own business. My plan is to start my business on a part time basis and build up my customers base, and see what happens with regards to being completely self-employed within 12-18months.

I'm currently earn £30k annually, but I've had a lot of start up costs, i.e equipment, stock, website and training etc for the first 12months I don't plan on paying myself a wage, I want to use all profit to pay off the costs I've made for start up and to reinvest into other products.

How do I go about income tax? I'm already paying tax on my current £30k salary but I don't plan on paying myself anything. Will I still have to pay income tax??
gemma

jobbingmusician

You have to tell HMRI that you are self-employed, and fill in an annual tax return. (If you start now, your first return - April 2012-Mar 2013 - won't be due until Jan 2014 if you complete it online).

There is lots of good info in the first post on the mystery shopping thread - a sticky at the top of the 'up your income' board.

You pay tax only on profits. If you make a loss in your first year you won't have to pay tax - and you may be able to set the loss against your 2nd year's trading (altho I am not an expert on this).

heretolearn_2

You'll be a sole trader so yes, you have to pay tax on the profits. IT makes no difference whether you take them out for yourself or not, but obviously buying stock etc is an expense, so then comes out of your income and reduces your profit anyway. In theory it should be possible to keep a fairly neutral profit situation in first couple of years so you build the business up without paying much tax. It may even make a loss and then you'd get a refund of tax paid through your PAYE, very usual in first year or so.

Go see an accountant for some proper advice on your individual circumstances.