Start up sole trader - losses..

Mistral001

butterflydreams wrote: »

Thanks for further comments. WHA, yes, re only being able to put forward my contribution towards granted items...rather than at total cost..good point.

Dolly - I have savings, am mortgage-free and have low living costs. The last two of these are down to keeping my expectations low when it comes to where and how I live. If I had a mortgage and a less frugal lifestyle, there is no way I'd be able to consider this venture.. ~bd~

Having money (savings) is very important when in business. It means a lot. It means security and more choices. You can buy equipmentand and sell it secondhand when you want to change it rather than hiring expensively. With money in the bank you can negotiate the best rates from a strong position. It is no accident that the richer businesses get preverential rates. They can walk away from a supplier and absorb the disruption and expense of finding a new supplier at cheaper rates. You can also be able to experiement a little with your business model until you get one that works really well and be profitable.

dd101

Hi,

I am not sure if theres a limit as such but I hope it goes well for you. 3/4 years at a loss is not that long in the scheme of things so do not be disheartend if you can afford to do this, although I would aim to be breaking even into the second year. If by the second year your still runinng a loss but have exhasted advertising/ netowrking ideas and funds then it may be best not to continue into 3/ 4 years etc.

My friends set herself a goal of break even by year one (not including wage, probably just £400 to herself every month) Advertise small, low cost etc.

Year two, breaking even and a minimum wage of at least £1,000

Year 3, use saved money, any profit to advertise more effectively

Year 4, After advertising has been completed the previous year, a target is set of profit equal or more than her wage.

If you have enough money to spend on advertising at the beginning then great but I like the above method as it gives you a chance to break even whilst finding your feet and testing the waters before going all out on advertising and then once advertised, if your not in a better position, time to think about calling it a Day. Worked for her but everyone has difference circumstances when setting up their small business.

Mistral001

The OP is not making any profit and not likely to make any profit in the near future so tax is not an issue in theory. However if your trading came to the attntion of the HMRC and they saw that you wre trading for 4 or 5 years without having paid tax, they might become suspicious and open an investigation into your activities. Thus you would need to keep very good records, making sure that all cash dealings were recorded properly, reciepts and copies of invoices kept etc.

simplydevine05

Hmrc don't have any rules about how long you can run at losses as such, but the previous poster made an excellent point about it looking a bit iffy. Do you really Ned to spend so much to begin with? New businesses either need to start very small or have a plan in place so that you're breaking even by the second tax year. Otherwise it probably isn't worth it. Grants are extremely hard to get for start ups to I'm interested as to how you managed to get one for so much.
If you are claiming any tax credits then if you make a loss for two tax years running (don't have to be full years either), then your tax credits will cease. Good luck!