Freelance Business Advise

runner20k

Hi

I have a full time job during the day and as a way of boosting finances i have started doing a bit of freelance work in the evening and weekends.
I have all the equipment already so have no over heads at all.

The freelance work is more successful than i expected and as such i need to look at tax and small company status etc.

1) Is it better to be a ltd company a sole trader or plc etc or ltd with guarantees ( what ever that means)
2) Do i have to have a different bank account or can i use my current account.
3) How do i calculate the tax side is it 40% of all earnings as its a second job.
4) do i need to register for VAT
5) The freelance site i use take a fee how do i include this in the tax aspect.
6) Some accountants offer to set up a company for free if you use them for the tax returns etc is this a good idea or usually an expensive alternative.

Any other advise greatly appreciated.

Thanks
Mark

Suarez

I'll answer the ones I know.

2. I'm not sure if you legally need to use a separate account but it's generally good practice to keep business expenses separate from personal. And easier to do the bookkeeping this way.

3. It depends on how much you are earning on you F/T job and how much you will earn with your freelance work. (Look on the HMRC site for the latest tax brackets)

4. Not unless you will turnover £79,000 or more per annum.

5. The fee is an expense which you offset against profits (With other expenses).

6. It's not free, they will absorb the cost into the other fees for the tax returns.

Wywth

runner20k wrote: »

Hi

I have a full time job during the day and as a way of boosting finances i have started doing a bit of freelance work in the evening and weekends.
I have all the equipment already so have no over heads at all.

The freelance work is more successful than i expected and as such i need to look at tax and small company status etc.

1) Is it better to be a ltd company a sole trader or plc etc or ltd with guarantees ( what ever that means)
2) Do i have to have a different bank account or can i use my current account.
3) How do i calculate the tax side is it 40% of all earnings as its a second job.
4) do i need to register for VAT
5) The freelance site i use take a fee how do i include this in the tax aspect.
6) Some accountants offer to set up a company for free if you use them for the tax returns etc is this a good idea or usually an expensive alternative.

Any other advise greatly appreciated.

Thanks
Mark

Allow me to also respond to your numbered questions

1. Speak to an accountant
2. The terms of most personal accounts prohibit them from being used for business purposes. But you could use a business account for personal purposes Banks may make a personal account a business one if they have reason to believe it is being used at all for buiness purposes.
Of course if you operate as a limited company, you will need a different bank account in the name of that company.
3. That depends on what you earn, and how you set up the business. Again an accountant will assist you
4. Not necessarily, unless you expect your business income to be over £79k per annum. But it may be worthwhile registering anyway. Again an accountant will assist guide you in this decision.
5. The fee ius an expense. Give the receipt to your accountant and he'll take care of it for you
6. There is no such thing as a free lunch. But an accountant will usually save you a lot more than what his fees cost you (which would also be considered an expense).
You can set up a limited company for less than £20, but with the lack of knowledge you have in this area, I suggest you take the advice of your accountant.

imoneyop

Suarez wrote: »

3. It depends on how much you are earning on you F/T job and how much you will earn with your freelance work. (Look on the HMRC site for the latest tax brackets)

You also need to factor in NI payments, depending on how much you earn from your self-employment see here for info.

trailingspouse

PLEASE use an accountant. I know the answers to all of your questions - for my own business, but not for yours. And I still use an accountant. Go to two or three different ones (most will give you 30 minutes of their time for nothing), ask loads of questions, and ask them how much they will charge you. It's not a secret, so don't be shy.
I do most of the bookkeeping myself, but they do the accounts at the end of the year, and they're at the end of the phone if I have a problem. It's worth every penny, not just because they've saved us money and hassle but also because I can sleep at night without worrying if I've done it right.

polr

Can only respond with my own experience.

1) Is it better to be a ltd company a sole trader or plc etc or ltd with guarantees ( what ever that means) // Can't say which is better but as a Ltd company owner I'd say think very hard before you do this because you then get caught up in copr. tax etc. If I was staring again I'd use 'baby steps' and know I could move up a level, not so easy the other way.

2) Do i have to have a different bank account or can i use my current account. // I was told to use a different bank account as it's better to keep everything apart on the chance you get investigated. I've also just found this a much cleaner way of doing things from when I was a sole trader.

3) do i need to register for VAT // http://www.hmrc.gov.uk/vat/start/register/

4) Some accountants offer to set up a company for free if you use them for the tax returns etc is this a good idea or usually an expensive alternative. // Setting up a company is easy - about £35. A lot of my friends do their own accounts but I'm useless at maths so I have an accountant who's worth his weight in gold.

Another tip I was given as a sole trader was to take any money coming in and instantly put 40% into a savings account to cover any tax etc at the end of the year without having to struggle to find the money.

podperson

runner20k wrote: »

Hi

1) Is it better to be a ltd company a sole trader or plc etc or ltd with guarantees ( what ever that means)

It depends on what kind of company you're running. Sole trader is simpler to set up, unless you're trading on a large scale you can probably manage your own accounts/tax returns etc. Personally if just starting out I would go with that option. A limited company offer less personal liability - but this is reduced now as most suppliers/companies tend to ask for director/personal gurantees (which I assume is what you've come across in your other option). They can sometimes offer benefits in terms of NI contributions etc but you would need to discuss this with an accountant. In return though you need to submit returns to Companies House and there is more general paperwork.

2) Do i have to have a different bank account or can i use my current account.

It depends on what you set up as. If you're trading as a limited company then you would need a business bank account in the name of the company. If you're a sole trader you could probably manage with a current account - although check the terms and conditions on the account and it would be advisable to keep business expenses/trading separate to your own personal account in terms of book keeping.

3) How do i calculate the tax side is it 40% of all earnings as its a second job.

Again it depends on what you are trading as.

4) do i need to register for VAT

Not unless you reach the trading threshold.

5) The freelance site i use take a fee how do i include this in the tax aspect.

This isn't tax it's a fee and should go through your books as a business expense.

6) Some accountants offer to set up a company for free if you use them for the tax returns etc is this a good idea or usually an expensive alternative.

It depends again on what you want to trade as. It's not hard to set up as limited company, I did one several years ago for about £20 and it didn't require an accountant. You may be better looking for one who would offer a free advice session on setting up and the best ways for your business in terms of tax etc. If you're a sole trader then the tax return isn't complicated and I never used an accountant when I was registered as one.

Any other advise greatly appreciated.

Thanks
Mark

Tbh I think you need to be putting some research in yourself. Accountants may be helpful but they will want your business so are unlikely to advise you that you don't need them. There is a lot of support and information out there, check the government site for a start or look for local business gateways etc in your area as they often run short courses or workshops.