Starting a Business

chib

Hoping someone can help with some questions I have that are stopping me from starting a business?

I work full time as a human resources manager and am a higher rate tax payer, my employer are aware though not formally informed of some extra work I do.

I previously worked for a number of IT firms and from time to time do some work for local firms such as desktop skills training, software support and web design. Currently this is paid in cash but I'd like to start issuing invoices as well as trade under a name such as "Chib IT Solutions".

I don't anticipate to take more than £2,000 a year doing this work, as a part time student I'm only able to do it six months of the year when I have time.

I spoke to business gateway but wasn't satisfied with the support and was confused with what they told me - he said I should pay national insurance and claim for mileage and stuff but I don't really understand why.

Could someone explain in really simple terms the process - lets say I do 10 jobs a year at £150 and have invoices sitting there - does tax need to be paid on that or can I simply keep the money and report it?

Also when registering my business, can I call it anything such as "Chib IT Solutions" but trade as "Green Grass Laptop Repairs"?

Would really appreciate some help anyone can offer.

Regards,
Chib.

engineer_amy

I can offer some advice on the tax bit -


After the end of each tax year, you will need to complete a self assessment form, you have 9months to complete this if doing online (i.e. 31st January). If your affairs are relatively simple you should be able to do this yourself.


You will enter details of your income from the paid employment, and income from the self employment, any interest received from savings and any other income you receive from any other source.


Then you will enter details of any expenses you have incurred that relate to the self employed business, these need to be incurred specifically for the business, receipts should show the business name, or you should be able to demonstrate if asked that the item/service was not for personal use. Things like insurance, advertising costs, travel costs/mileage, software licences are all allowable. Here is a link which explains in more detail https://www.gov.uk/expenses-if-youre-self-employed/overview


All allowable expenses come off the invoiced amount to give you the profit of the business and only the profit is taxable.


This would give you the calculation for total income, and the tax amount due. You deduct the tax already paid through PAYE in your main job, tax paid on savings interest etc and the balance is then your tax that needs to be paid.


Obviously, the higher levels of expenses you claim, the lower amount of reported profit and the less tax paid. But you must remember to keep good records, HMRC can inspect at any time, they recommend keeping records for 7 years.


If you are going to be issuing invoices and receiving payment by bank transfer, it may by worthwhile opening a separate bank account and making sure that all transactions relating to the business go through this account. it will certainly make life easier that trying to pick through your personal account and find business transactions.

Ozzuk

If you are a higher rate tax payer I'd don't know if I'd bother doing it for 2kpa, you'll pay tax on 40% of that as you are taxed on income as a whole.

I mean not doing the work as opposed to not declaring it. If the companies are paying you cash then there could be a traceable link there should the tax office investigate (unlikely though).

chib

Thanks both for the responses.

The tax thing is a bit of a pain but I think I'll go ahead with it, I'm concerned that one day I'll get caught as they often pay with a cheque.