starting a part time consultancy business advice please

paye

Hi,

I am thinking of setting up a consultancy business whilst still being employed at the same time. I will essentially be writing quotes for a company in my spare time such as after work and at weekends. Each month I would like to send them an invoice for my time spent. Can I set up the business as a sole trader or does it need to be limited, and what would be the tax implications of me working as an employee for someone at the same time. My misses is currently on maternity leave so I was thinking of setting up a company in her name.

paddyrg

Yes you can work as sole trader, unless you need to be a limited company for liability reasons. Tax is based on income, so for instance if you're successful and your consulting pushes your income up to the higher tax band, that bit over will be taxed at that rate. You will need to self assess each year, it is a bit boring to do, however it's not difficult and you do in the boxes on the HMRC website, and find out what you owe them (or get an accountant to).

Be sure though that this isn't against your current contract of employment, sounds like it is work in the same sector which may be covered in a non competition term or otherwise put noises out of joint.

Edit to add - I don't think using your wife's name will help you any, unless she is working as company secretary for the a limited company you set up, and takes a wage for that. The flip side of that is you no longer self assess, it becomes an accountant job and allow around a grand a year in accountants fees for that, more if they do the bookkeeping, paye and vat of course. Probably going to cost more than you make?

Annisele

If you're only going to have one client, it's *possible* HMRC would consider you to be employed by the client. There's a very basic guide here.

I agree that a key issue is whether your existing contract of employment allows a second job/self employment. Even if does, if you've less than two years service your employer can dismiss you for (pretty much) any reason. If you're working for the competition in your spare time, a lot of employers would dismiss.

colino

Why are you describing the new enterprise as a consultancy business? What you describe might be freelance writer or an extra pair of hands, when do you expect to start actually doing any consulting?
If there are no caveats in your current contract (big If) no reason not to tack on this self-employment and self-assess it each year without any more elaborate company set-up.
If you were going into business consultancy, biggest, most useful piece of advice was to treble my daily rate. Gets rid of the tedious, slow-paying rubbish work and you focus on more interesting, mutually beneficial, assignments.

paye

Thanks for the replies much appreciated :beer:. I've checked my employment contrat and there is no mention of being disciplined whilst working for myself and also being employed. I'm not working for a competitor but my business evolves around giving advice to small subcontractors on how to tender for work with main contractors and also how to put quotes together which I can do for them for them for a fee.

I have been reading up on the best way to start up my business and setting up as a sole trader is the best way to do it as my business requires minimum financial commitment. Also as a sole trader there is no corporation tax to pay. I.m going to ask an accountant tomorrow.

thanks

Savvy_Sue

the other reason NOT to set up a business in your wife's name while she is on maternity leave is that she CANNOT do any work for anyone while on m/l or her m/l ends, AFAIK.

And if you were thinking that you could claim the income was hers in order to reduce your joint tax bill, that's a big no-no.

paddyrg

Corporation vs income tax, the other side of that equation is that you can take a dividend from profits which is taxed at a much lower rate than income tax. It balances out roughly, there will be a few percent here or there but generally similar. That said, it sounds like you are better off self employed than seeing up a company, unless you are concerned about being sued.

As a consultant, you might give bad advice (or someone might accuse you of doing so). If a customer loses a £xM bid based on your work and on review thinks their lost profit was because you didn't xyz properly, they may pursue you for it. As a limited company your liability would be no more than the money in the company. As a style trader where you are the company, he can come after your house and car and any other assets. That's why people have limited companies.

colino

That's why every, especially sole-trader, Consultants have PI, which is surprisingly cheap for the cover.

j.smith1981

paddyrg wrote: »

Yes you can work as sole trader, unless you need to be a limited company for liability reasons. Tax is based on income, so for instance if you're successful and your consulting pushes your income up to the higher tax band, that bit over will be taxed at that rate. You will need to self assess each year, it is a bit boring to do, however it's not difficult and you do in the boxes on the HMRC website, and find out what you owe them (or get an accountant to).

Be sure though that this isn't against your current contract of employment, sounds like it is work in the same sector which may be covered in a non competition term or otherwise put noises out of joint.

Edit to add - I don't think using your wife's name will help you any, unless she is working as company secretary for the a limited company you set up, and takes a wage for that. The flip side of that is you no longer self assess, it becomes an accountant job and allow around a grand a year in accountants fees for that, more if they do the bookkeeping, paye and vat of course. Probably going to cost more than you make?

For setting up a LTD company you legally are obliged to do a financial summary report (I think it's called), my NEA mentor explained this to me when I was talking with him about the different types of businesses it's allot of work really.

Why most people have a seperate sec for this who sometimes liases with the accountants and physically submits the reports or a financial auditor (accountants). But there's no option with the 4 month financial reports, if you're an Ltd you must do this it's not optional by any means.

I liked this post too:

colino wrote: »

That's why every, especially sole-trader, Consultants have PI, which is surprisingly cheap for the cover.

Though not to be confused with Professional Indemnity insurance at all, PII is for if you gave someone advice and it wasn't correct they could potentially sue you for giving them wrong advice.

PII covers you for this and it's actually pretty cheap

NiceGuyEddie_2

j.smith1981 wrote: »

For setting up a LTD company you legally are obliged to do a financial summary report (I think it's called), my NEA mentor explained this to me when I was talking with him about the different types of businesses it's allot of work really.

Why most people have a seperate sec for this who sometimes liases with the accountants and physically submits the reports or a financial auditor (accountants). But there's no option with the 4 month financial reports, if you're an Ltd you must do this it's not optional by any means.

I liked this post too:

Though not to be confused with Professional Indemnity insurance at all, PII is for if you gave someone advice and it wasn't correct they could potentially sue you for giving them wrong advice.

PII covers you for this and it's actually pretty cheap

I'm sorry, I'm completely lost. Are you saying that a Ltd co has to submit financial reports every 4 months? To auditors? And most companies have a specialist secretary for this?

If NEA is the New Enterprise Allowance then I would assume that the limited company rules you refer to are actually specific rules for receiving the NEA benefit and are limited only to recipients of this benefit. There are no laws in the UK that says all limited companies have to do what you've explained.

I'd go and poke your mentor with a stick

Wywth

j.smith1981 wrote: »

For setting up a LTD company you legally are obliged to do a financial summary report (I think it's called), my NEA mentor explained this to me when I was talking with him about the different types of businesses it's allot of work really.

Why most people have a seperate sec for this who sometimes liases with the accountants and physically submits the reports or a financial auditor (accountants). But there's no option with the 4 month financial reports, if you're an Ltd you must do this it's not optional by any means.

I liked this post too:

Though not to be confused with Professional Indemnity insurance at all, PII is for if you gave someone advice and it wasn't correct they could potentially sue you for giving them wrong advice.

PII covers you for this and it's actually pretty cheap

I suggest you go back to your NEA mentor and ask him again to explain to you the facts.

If you still believe he is telling you it's a legal requirement, ask him which law he is referring to and post the details here