Unsure of whether I would earn enough as sole trader

arvindsond

Hi guys, this is my first post on moneysavingsupermarket, and I just wanted to get some info on setting up as a sole trader whilst also working in full time employment.
Basically, I know that if I set up as a sole trader I need to register the compnay with HMRC, thats fine, and I know about the class 2 NI contributions a week and also the exemption form that you can fill in so that you don't have to pay it if your earning under a certain amount each year, but here are my questions:

- What happens if after expenses you don't earn a profit at all, or even make a loss....do you still need to may tax and NI contributions?

- I need to purchase a couple of bits of kit can I claim back the VAT on these items if they are for business purposes, and what happens if you buy this kit and don't make enough of a profit in that year (as I will just be starting out)

- Do I need to combine all wages at the end of the tax year when filling out my tax returns forms (both sole trader and full time employment) or are they calculated separately?

Thanks in advance guys

Kayalana99

Hiya in short

- you only pay tax on profits so no profit no tax
- No if you are not VAT registered you can't claim it back
- I don't know for sure but you do only get a certain amount of tax relief per person not per person/business..so if you already earn over threshold in your current job you will pay full tax on your business profits.

warwicktiger

Kayalana99 wrote: »

Hiya in short

- I don't know for sure but you do only get a certain amount of tax relief per person not per person/business..so if you already earn over threshold in your current job you will pay full tax on your business profits.

Your tax return will need to show all income, ie self employed, employed, interest received, pensions, dividends, in short everything.

Often accountants will give you 30/60 minutes free consultation, ring a few or ask for recommendations from friends.

arvindsond

Thanks for the spedy reply guys, ok so that answers most of my questions.

- Can I become VAT registered as a sole trader, so that I can claim the VAT back on kit to help with costs as I start this all up?

Kayalana99

arvindsond wrote: »

Thanks for the spedy reply guys, ok so that answers most of my questions.

- Can I become VAT registered as a sole trader, so that I can claim the VAT back on kit to help with costs as I start this all up?

If you become VAT registered you have to charge VAT on all your sales to - unless you are going to be selling a vast amount I would stay clear and if you do - talk to an accountant (and you will need one with VAT registered business)

arvindsond

Sorry for being a total newb about this.... so lets say I earn 30,000 a year as employed, and I make 100 a year as sole trader, but have 2000 worth of kit to buy for the compnay under the sole trader and I have all the receipts to prove this and I fill out the tac forms at the end of the year, can I claim back the VAT on the 2000 worth of purchases if I register for VAT as a sole trader even though Im not necessary selling anything to anyone but offering a design service?

Thanks again guys

Suarez

You would be selling a design service though...

zygurat789

arvindsond wrote: »

Sorry for being a total newb about this.... so lets say I earn 30,000 a year as employed, and I make 100 a year as sole trader, but have 2000 worth of kit to buy for the compnay under the sole trader and I have all the receipts to prove this and I fill out the tac forms at the end of the year, can I claim back the VAT on the 2000 worth of purchases if I register for VAT as a sole trader even though Im not necessary selling anything to anyone but offering a design service?

Thanks again guys

If this were the scenario your business would be out of pocket having purchased the kit. Be aware that if there is any private us of this kit then you should only claim the business proportion of the capital allowances.

Kayalana99

arvindsond wrote: »

Sorry for being a total newb about this.... so lets say I earn 30,000 a year as employed, and I make 100 a year as sole trader, but have 2000 worth of kit to buy for the compnay under the sole trader and I have all the receipts to prove this and I fill out the tac forms at the end of the year, can I claim back the VAT on the 2000 worth of purchases if I register for VAT as a sole trader even though Im not necessary selling anything to anyone but offering a design service?

Thanks again guys

Just to explain... if you make £100 a year as a sole trader you *need* to charge VAT on however you made that £100.

Can I also point out now, that to become VAT registered it is not as easy as just filling in a forum - and you will *need an accountant which will probably cost more then the £400 you would save.

*Based on another posts I have seen on this forum recently so best to check into it.

martindow

Kayalana99 wrote: »

Just to explain... if you make £100 a year as a sole trader you *need* to charge VAT on however you made that £100.

Can I also point out now, that to become VAT registered it is not as easy as just filling in a forum - and you will *need an accountant which will probably cost more then the £400 you would save.

*Based on another posts I have seen on this forum recently so best to check into it.

No, you are not obliged to use an accountant, but you do need to keep your books in order and up to date. Many people find it helpful to have some input from an accountant when setting up even if they propose to handle the books themselves. You want to be confident that you are doing things correctly.

As a rule of thumb, if you are selling to private customers you probably should not register for VAT until you reach the threshold and have to, as it will make your prices 20% higher. If you are selling to VAT registered businesses it can be a good idea to register from the start as it makes no difference to them and you can set off the VAT element of your expenses.

arvindsond

Thats absolutely fine, I can charge my customers the 20% etxra and state it on my invoice, but if I become VAT registered I need ti buy kit and get a discount to get me going as its expensive pc equipment....but in the first year I may not make a profit so I didnt want to get questioned by the government on this as I am a total newb in this area

Thanks again