We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Working Tax Credits for a self-employed start-up
marinot
Posts: 16 Forumite
Hello, I am a single and childless person who wants to set up an online business as a sole trader. I have never been a sole trader before, so I currently have no Unique Tax Reference. I want to register as a sole trader with my local HMRC within next several days.
However, although I will be working for 50-60 hours per week on my online business from the very beginning, it will take no less than six months before I can start earning any income.
So, by 05/04/2013 (i.e. for the Tax Year 2012-2013), I will have a zero income from my self employment (and £7,781.06 of gross income from my previous employment that I quit in September 2012). Moreover, even from 06/04/2013 (the starting date of Tax Year 2013-2014) it will take several more months before I can start making any self-employment earnings.
Now, the Law says that the Working Tax Credits can be granted only to someone, who does some “qualifying and remunerative work”, which means - in the case of self employed people - any work that is (or is expected to be) for payment or profit.
In my case, will the quite considerable, circa 6 months’ period between setting up my business and first earnings not make any problems? Will I not be told by the HMRC something like “show your income first and only then we will be paying you any Working Tax Credits”? Or will my Working Tax Credit application or entitlement not be investigated, after I show my zero self employment income for the Tax Year 2012-2013 after 05/04/2013?
The bottom line: will it not be more practical for me to sacrifice any Working Tax Credits until the end of Tax Year 2012-2013, and apply for the Working Tax Credits only after 05/04/2013 instead?
Thank you in advance for your practical advice, experience or opinion.
However, although I will be working for 50-60 hours per week on my online business from the very beginning, it will take no less than six months before I can start earning any income.
So, by 05/04/2013 (i.e. for the Tax Year 2012-2013), I will have a zero income from my self employment (and £7,781.06 of gross income from my previous employment that I quit in September 2012). Moreover, even from 06/04/2013 (the starting date of Tax Year 2013-2014) it will take several more months before I can start making any self-employment earnings.
Now, the Law says that the Working Tax Credits can be granted only to someone, who does some “qualifying and remunerative work”, which means - in the case of self employed people - any work that is (or is expected to be) for payment or profit.
In my case, will the quite considerable, circa 6 months’ period between setting up my business and first earnings not make any problems? Will I not be told by the HMRC something like “show your income first and only then we will be paying you any Working Tax Credits”? Or will my Working Tax Credit application or entitlement not be investigated, after I show my zero self employment income for the Tax Year 2012-2013 after 05/04/2013?
The bottom line: will it not be more practical for me to sacrifice any Working Tax Credits until the end of Tax Year 2012-2013, and apply for the Working Tax Credits only after 05/04/2013 instead?
Thank you in advance for your practical advice, experience or opinion.
0
Comments
-
In theory you can claim WTC however you will need to have credible evidence that you're working the hours you say you are. HMRC do investigate low income self employed as a lot of people have "hobby" jobs which they never intend to make real money from. So because of them genuine startups do get investigated.
Search this forum, there've been loads of threads on this with specific advice0 -
Also consider Universal Credits and the impact of this program on your benefits.
If and when this is introduced it will ruin your chance of claiming, but maybe you will be sorted by this time?0 -
Hello, I am a single and childless person who wants to set up an online business as a sole trader. I have never been a sole trader before, so I currently have no Unique Tax Reference. I want to register as a sole trader with my local HMRC within next several days.
However, although I will be working for 50-60 hours per week on my online business from the very beginning, it will take no less than six months before I can start earning any income.
So, by 05/04/2013 (i.e. for the Tax Year 2012-2013), I will have a zero income from my self employment (and £7,781.06 of gross income from my previous employment that I quit in September 2012). Moreover, even from 06/04/2013 (the starting date of Tax Year 2013-2014) it will take several more months before I can start making any self-employment earnings.
Now, the Law says that the Working Tax Credits can be granted only to someone, who does some “qualifying and remunerative work”, which means - in the case of self employed people - any work that is (or is expected to be) for payment or profit.
In my case, will the quite considerable, circa 6 months’ period between setting up my business and first earnings not make any problems? Will I not be told by the HMRC something like “show your income first and only then we will be paying you any Working Tax Credits”? Or will my Working Tax Credit application or entitlement not be investigated, after I show my zero self employment income for the Tax Year 2012-2013 after 05/04/2013?
The bottom line: will it not be more practical for me to sacrifice any Working Tax Credits until the end of Tax Year 2012-2013, and apply for the Working Tax Credits only after 05/04/2013 instead?
Thank you in advance for your practical advice, experience or opinion.
Why do you expect to have no income within the 1st 6 months?0 -
Why do you expect to have no income within the 1st 6 months?
Because I am setting up an online business. First I must build a website and get some traffic for it, and only afterwards I can monetise.
Monetising prematurely would damage the targeted traffic for my website, that way reducing the future income potential.0 -
Because I am setting up an online business. First I must build a website and get some traffic for it, and only afterwards I can monetise.
Monetising prematurely would damage the targeted traffic for my website, that way reducing the future income potential.
Why will it take you 6 months to build a website?0 -
Horseunderwater wrote: »Why will it take you 6 months to build a website?
And why can't you do it part time while working another job?
I doubt it took 6 months to set up Amazon!!Trying to be a man is a waste of a woman0 -
5-60 hours a week for 6 months just to set up a website.... well that is a very bad start alone as that certainly would trigger investigation, that is you are either lying, or you are being extremely inefficient and if that is the case, you are very unlikely to ever manage a business successfully. Have you done a detailed business case to assess the value of your project?0
-
I'd recommend taking a part-time employed job while you are building up the website and giving yourself a longer lead time to make the website profitable. That way, you are less likely to get flagged for HMRC attention so you won't be worrying about compliance investigations for tax credit claims, AND you'll have extra income during this period.
For those who seem to think you can "set up a website", get considerable (and worthwhile) traffic AND monetise it to a good level in five minutes flat - well, you can't. And I speak from experience.
Here are some very rough figures for one of my businesses - the one that is based on a website:
Year 1 - Profit under 1k + 30-40 hours per week
Year 2 - Profit under 2k + 30-40 hours per week
After Year 2, things got more profitable quickly because all the one-off work was done, leading to
Year 8 - Profit about 16k + 10-15 hours a week
The web is going to be - is already - a great source of profit and we need people to be starting worthwhile businesses there. And worthwhile businesses don't take ten seconds to start up. Not everyone running a website for profit and claiming tax credits is doing it so they don't have to get a "proper job".0 -
I'd recommend taking a part-time employed job while you are building up the website and giving yourself a longer lead time to make the website profitable. That way, you are less likely to get flagged for HMRC attention so you won't be worrying about compliance investigations for tax credit claims, AND you'll have extra income during this period.
For those who seem to think you can "set up a website", get considerable (and worthwhile) traffic AND monetise it to a good level in five minutes flat - well, you can't. And I speak from experience.
Here are some very rough figures for one of my businesses - the one that is based on a website:
Year 1 - Profit under 1k + 30-40 hours per week
Year 2 - Profit under 2k + 30-40 hours per week
After Year 2, things got more profitable quickly because all the one-off work was done, leading to
Year 8 - Profit about 16k + 10-15 hours a week
The web is going to be - is already - a great source of profit and we need people to be starting worthwhile businesses there. And worthwhile businesses don't take ten seconds to start up. Not everyone running a website for profit and claiming tax credits is doing it so they don't have to get a "proper job".
8 years before you start earning £16k......not exactly successful really is it?0 -
8 years before you start earning £16k......not exactly successful really is it?
Bit harsh. He does say it's only 1 of his businesses. If he works a 60 hour week (as most self employed do, assuming it's not hobby, extra money type of self employment) and each business he works at earns the same then he'll be generating 64k per year. Not bad when you look at it like that.....0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.4K Banking & Borrowing
- 254.4K Reduce Debt & Boost Income
- 455.4K Spending & Discounts
- 247.3K Work, Benefits & Business
- 604K Mortgages, Homes & Bills
- 178.4K Life & Family
- 261.5K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards