Starting up a business while working notice - tax implications?

tutorinbucks

Hi, wondering if anyone's done this and could tell me how it really works. I've handed in my notice at work (teaching), and will tutor after xmas. Obviously, I'd like to have some income straight away, so have been networking for business. I've had about 4 enquiries so far. If I start these now, while I'm still employed, will it really muck up my tax etc for 2014, given that I'll then be earning less than my personal allowance, even at full capacity? How does it all work - what would the tax return to be submitted in Jan cover, and would I have to pay tax on my SE income initially then get it back, or...? Have read and read the website and am not entirely sure still how it all works!

Savvy_Sue

No, it won't muck up your tax at all. You need to register as self-employed with HMRC ASAP: they will invite you to start paying s/e NICs via a DD, you can ask for a certificate of exemption if you expect your profit on your self-employment to be less than c. £6000 in this tax year (BUT note that the certificate is probably valid for two years, so if NEXT tax year your profit is likely to be more than that you need to tell them and start paying).

You'll continue to pay tax on your employed earnings through PAYE.

If you're wise, you'll put aside at least 1/4 of your income from tutoring in the best savings account you can find, ready for the tax bill. (There may not be one for your first tax return, but best to be in the habit.)

Then, any time after 6 April next year and before roughly this time next year, you'll complete a tax return on which you will report ALL your income for 2013-14, and how much tax you've already paid, and what expenses you can legitimately deduct from your self-employed income.

If you do this online your tax liability will be calculated for you, and you may well be due a refund.

PlutoinCapricorn

Many people do self employed work alongside or on top of their PAYE jobs.

You just need to register as a sole trader once you have actually got some work as a tutor.

To repeat, the return due next January related to the 2012/13 tax year so does not apply to you.

This is the 2013/2014 tax year, and the tax return will be due between April 6th 2014 and Jan 31st 2015 so you have plenty of time to learn the rules.

Keep a record of all income, expenses and running costs. You need to think about paying Class 2 NI even if you qualify for exemption on the grounds of low earnings.

tutorinbucks

Thank you so much, that makes it much clearer! I'll register asap with HMRC and get started.

I read something about the first tax bill being double, because it's partly the next year's 'on account' payment? Will I have enough if I save 25% of all takings?

PlutoinCapricorn

You are only liable for these if the tax for the previous year exceeded £1,000:

http://www.hmrc.gov.uk/sa/understand-statement.htm