Being Self employed AND employed at the same time

lcheater

This is my first post on this forum after finding and using the bank charges article on the main site.

Right here is the situation... I have been PAYE my whole working life and i am currently in a full time job as an IT Technician. I am considering starting up a very small, part time car sales company in addition to my full time job. To do this i understand from researching on the net etc that i will need to register as self employed / a sole trader (think its the same thing?).
My first question is how do i stand being self employed whilst being employed in regards to tax and national insurance etc.

I am going to set up a business account and keep ALL my business related finances in that account, and I wont be taking a salary until i have paid a £6000 loan off (antipate 6 months max to pay back). In regards to turnover, i anticpate selling a maximum of 4 cars a month (i.e one a week), only ever having one car 'in stock) i.e buying one car at a time.

I will be operating from home, and i have heard this can affect council tax on the property in certain circumstances. Will this affect me?

The other issue for me is VAT. I have a had quick look on the Inland Revenue website and found something about not having to register for VAT if you earn under £64000 pa. Well i wont be earning over £64000, even if you combined it with my PAYE salary so what will i need to do about VAT?

The last question is about the order in which it is best to do things. I am planning to register as self employed with the Inland Revenue, setup a trading name with Companies House (if required??) and then take a visit to my bank to set up a business account and ask for a loan. Is this the only steps i will need to take and do you think i have it in the correct order?

Any advice is much appreciated.:beer:

Regards,

Luke

lcheater

Can anyone help?

Cute_'n'_Quirky

You can be both self-employed and employed at the same time, that is not a problem.

Mine was the other way around. I was self-employed for over 18 years and started working part-time for an employer - the local County Council.

Att the end of the year the employer sends me a P60 which lays down the amount paid to me and the amount of tax paid. This goes on my tax return and is calculated as 'tax paid'. The self-employed side then has that tax deducted from the taxable profit and I pay the difference.


You don't need to set up a name with Companies House - this actually complicates matters since they want full trading accounts every year. I have never had that and have been self-employed for 24 years, nearly 25.

If you are below the threshold you don't need to register for VAT either, I never have done.

My business has never affected my council tax but it may be a good idea for you to check yours.

You need to set up a business account, though, that is important.

lcheater

Cute_n_Quirky wrote: »

You can be both self-employed and employed at the same time, that is not a problem

Yeah, i have read that on the Inland Revunue website but what i am trying to find out is if my income tax and national insurance on my PAYE job will change (i.e will my band change) and what tax will be payable on the self employed job / company. Everyone seems to be able to say you can be self employed and employed at the same time but no one seems to know what implications / conditions there are (if any) and any processes which maybe out of the ordinary because of this setup.

Cute_'n'_Quirky

Ask the tax office!!

I was only ever employed part-time so I didn't come across this problem.

Your PAYE ought not to change, but you will be paying tax on your self-employed income and extra NI contributions dependent on the income from that self-employed business. This would be paid directly to the IR, not through your PAYE.

swanny65

lcheater wrote: »

The other issue for me is VAT. I have a had quick look on the Inland Revenue website and found something about not having to register for VAT if you earn under £64000 pa. Well i wont be earning over £64000, even if you combined it with my PAYE salary so what will i need to do about VAT?

The last question is about the order in which it is best to do things. I am planning to register as self employed with the Inland Revenue, setup a trading name with Companies House (if required??) and then take a visit to my bank to set up a business account and ask for a loan. Is this the only steps i will need to take and do you think i have it in the correct order?

Any advice is much appreciated.:beer:

Regards,

Luke

Firstly check with the Local Authority that you are allowed to trade in this manner from home. Might be perfectly OK but neighbours are likely to complain if you are regularly selling vehicles at your home. Obviously people can run a business from home but no one wants a second hand car dealership nearby.

I believe VAT is calculated on turnover (not you PAYE + S/E earnings.) Therefore if you sell 1 car a week at £2000.00 you should register for VAT. I would guess 99.9 of legitimate second hand car dealers are registered for VAT.

Your final point is contradictory. If you are a self employed sole trader then you are responsible for the debts of the business. If you decide to form a limited company then company house need be notified. The advantage of being a limited company is your debts of the business are limited, normal to £1.00.

If you are going to ask a bank for a loan then i believe the bank will want to see your business plan.

lcheater

lcheater wrote: »

Yeah, i have read that on the Inland Revunue website but what i am trying to find out is if my income tax and national insurance on my PAYE job will change (i.e will my band change) and what tax will be payable on the self employed job / company. Everyone seems to be able to say you can be self employed and employed at the same time but no one seems to know what implications / conditions there are (if any) and any processes which maybe out of the ordinary because of this setup.

Sorry, i read your post before you added all the other paragraphs! Thanks for your input, so if i register with the Inland Revenue as self employed, then set up a business account, that it really. I will be keeping a very detailed record of the business account activity and therefore when it comes to doing a tax returns i can assure my figures are accurate. One term you mentioned 'taxable profit' - I understand profit is obviously taxable, but how do you work out profit when everything is operating from one account? If i buy a car for £4000 and sell it for £5000 and i have £250 of expenses against that car, how do i prove i made a £750 profit? I maybe missing something here!?

swanny65

lcheater wrote: »

Yeah, i have read that on the Inland Revunue website but what i am trying to find out is if my income tax and national insurance on my PAYE job will change (i.e will my band change) and what tax will be payable on the self employed job / company. Everyone seems to be able to say you can be self employed and employed at the same time but no one seems to know what implications / conditions there are (if any) and any processes which maybe out of the ordinary because of this setup.

Your S/E earnings are added to your PAYE earnings and taxed at the appropriate rate. If the S/E earnings take you into the 40% tax bracket then your tax will be calculated accordingly. Your PAYE code will change if you decide to pay your S/E tax (owed from previous years) via your PAYE code (this is what i do). However you can only do this if your PAYE earnings are 80% or more of your total income, otherwise i believe you will have to pay on account.

S/E NI is paid by direct debit and is a few pounds a week. Check HMRC website. Class 4 NI is assessment with your income tax liability and paid as per para 2 above

zfrl

You don't need a business account but you do need accurate records - these will show you have Expenses £4000 + £250 & Income £5000 the difference is Profit/Loss - if you have a look at a tax return you will see what information the tax office wants. The IR also have various downloads available to help you.

sondheimsoc

Up until last year I was employed and self-employed. The tax situation from my self-employment didn't impact at all on my tax code for my employment, they were dealt with as two separate things. I just sent everything to my accountant and she told me how much tax I owed on the self-employed bit, which I pay every July and December 31st.
Lynne

lcheater

swanny65 wrote: »

Firstly check with the Local Authority that you are allowed to trade in this manner from home. Might be perfectly OK but neighbours are likely to complain if you are regularly selling vehicles at your home. Obviously people can run a business from home but no one wants a second hand car dealership nearby.

I believe VAT is calculated on turnover (not you PAYE + S/E earnings.) Therefore if you sell 1 car a week at £2000.00 you should register for VAT. I would guess 99.9 of legitimate second hand car dealers are registered for VAT.

Your final point is contradictory. If you are a self employed sole trader then you are responsible for the debts of the business. If you decide to form a limited company then company house need be notified. The advantage of being a limited company is your debts of the business are limited, normal to £1.00.

If you are going to ask a bank for a loan then i believe the bank will want to see your business plan.

So what you are saying is if you are self employed then you dont register a name with companies house? I wouldnt want to go limited at this stage but i am interested to know more about the VAT registration. As i said in my original post, about not having to register for VAT if you earn under £64000 pa, if i am turning over less than 64k i dont need to register?

If i ask a bank for a loan, cant they secure the loan against my PAYE income as a personal loan (or as a home owner i could secure it against my house couldnt I?)