Lightbulb goes on...

tyllwyd

How long have you been self-employed? My understanding was that you had three months from when you started trading to register, and if you didn't you got hit with a £100 penalty. So if you've only been trading for a few months, I'd guess it shouldn't be too bad.

LandyAndy

tyllwyd wrote: »

How long have you been self-employed? My understanding was that you had three months from when you started trading to register, and if you didn't you got hit with a £100 penalty. So if you've only been trading for a few months, I'd guess it shouldn't be too bad.

I became self employed in March 2005 and did nothing to register with HMRC. In March 2006 I took a part time 'employed' job to increase my 'provable' income for mortgage purposes and, of course, I soon got a friendly letter saying "What have you been up to for the last 12 months?" As my self employed business was still running (and still is) I simply filled in the relevant forms and registered the business. I had to pay the self employed NI contributions for the previous 12 months but there was no penalty and no suggestion of displeasure. Now my self employed tax is collected via my tax code from my part time employer so I don't have to think about the lump sum payments twice a year.

protector

Tyllwyd
Much more than three months. I'm aware of the 3 months or £100 fine thing - I just never came across a limit to that so not sure whether I'll get a £100 wrist slap which I could more than handle - I'm not ever sure I made enough money in that time to be taxed! Got lots of work for a while, then things dried up (or sometimes I just got lazy - not a very disciplined person sometimes)


Andy

Did you register a limited company, or register as a sole trader? I will be going limited as soon as I get things sorted out for a number of reasons (tax reduction being one of them - and I believe beyond the scope of IR35 as well which is handy)

When you had to pay the NI contributions was it an instant demand or did you have time to save up? (Assuming you even needed to) - what about back paying tax?

HelzBelz

For the national insurance you fill in form CWF1 - Becoming self-employed and registering for National Insurance contributions and/or tax or you can do this over the phone by calling 0845 915 4515 this will set you up as self employed, you could do the Ltd thing later. National insurance can either be paid via direct debit or via a bill you'll receive every 13 weeks for a class 2 NIC (National Insurance Contribution) which is £2.20 per week, but you can opt out of this if you think the income from your business will be below £4,635 for the tax year 6 April 2007 - 5 April 2008, but if you have no other income you'd be as well making the contributions.

Guess whos doing this at the moment and has the forms infront of her;)

LandyAndy

I registred as a sole trader thats why I can pay my tax via my PAYE code. A Ltd Co is a seperate entity and pays Corporation Tax and so pays tax separately. You'll have to be a sole trader up to the point where your Co is registered. The NI is just the basic contibution that all self employed have to pay (about £28 a quarter) the rest is calculated when you submit your tax return based on your profit for the period. You do have to pay fairly promptly but it isn't a large sum.

I told them I had started trading on 6 April 2005 and so I wasn't late with my return. I didn't ask to have the tax collected via my PAYE code they did it automatically. I presume to give them greater comfort that it would be paid.

protector

Thanks Belz
It sounded like you were some kind of authority on all things tax for a minute then - and you shattered the illusion with the bit about forms. Oh well. Haha.
Undecided on contributions so far - going to have to get my thinking cap on and see if I want to pay into it or go down some other route and make different provisions for earning.
Thanks for that - I'll make a note.


Andy
Been chatting to some people, about ltd companies. It was doing that when I realised just how much money I'd stand to save by going limited instead of sole. Basically the same reason IR35 came in, but I'm outside the scope of that because I don't have anyone that could be seen as an employer. If they extend IR35 things may well change, but for now I intend to pay as little as possible without breaking any laws.
Some people have suggested I get on the fiddle and underpay big time, but I don't fancy doing that, it's not my style.

LandyAndy

protector wrote: »

Thanks Belz
It sounded like you were some kind of authority on all things tax for a minute then - and you shattered the illusion with the bit about forms. Oh well. Haha.
Undecided on contributions so far - going to have to get my thinking cap on and see if I want to pay into it or go down some other route and make different provisions for earning.
Thanks for that - I'll make a note.


Andy
Been chatting to some people Are they accountants?, about ltd companies. It was doing that when I realised just how much money I'd stand to save I'm not sure you would save much if any for such a simple business by going limited instead of sole. Basically the same reason IR35 came in, but I'm outside the scope of that because I don't have anyone that could be seen as an employer. If they extend IR35 things may well change, but for now and for ever I hope I intend to pay as little as possible without breaking any laws.
Some people have suggested I get on the fiddle and underpay big time, but I don't fancy doing that, it's not my style. There's nothing like playing the system straight for a while to see where it could be bent:rolleyes: [/quote]

CharliesAngel

protector

... not being off the starting blocks and entirely missing your thread (think i was asleep lol) I can only agree with what's been said so far...

good luck and keep posting!

protector

Are they accountants?
No - that's my first step before I register one way or the other (sole or ltd), to get a decent accountant to deal with returns and the likes. I won't be doing anything that will get me in trouble (aside from the coming likelihood of a wrist slap that is).

I'm not sure you would save much if any for such a simple business
By taking a sizable chunk of income as dividends (company director) rather than regular wages, one pays a different rate of tax. Above a certain level of earning the savings start to stack up this way.
A long term client of mine and a good friend of my family has been playing the above-board tax game for quite some time and this is his basic mode of operation.
It isn't in playing the deductions game that the savings are made, but in structuring income. Of course, deductions would come into play, but short of note paper and maybe computer software, there's really not much to deduct with. As you said, a simple business.

If they extend IR35 things may well change, but for now and for ever I hope I intend to pay as little as possible without breaking any laws.
If by "forever" you're referring to the issue of staying on the right side of the law then yes. I know plenty of people who duck and dive all over the place with tax and I for one could not be bothered with the effort - let alone the morals of doing it.

There's nothing like playing the system straight for a while to see where it could be bent:rolleyes: Probably true. I've no intention of getting on the fiddle like the people I know though. I've come across some people who only pay the bare minimum they think they can get away with, the rest is all "a price for cash".

protector

Thanks for the encouragement CharliesAngel.



Other than the tax discussion that has arisen (something that isn't quite as pressing a matter as the possibility of defaulting with my bank) does anyone have suggestions?



One of the main things I need to know about are my options should I fail to clear my overdraft in 2 weeks (itself a tall order unless I work flat out and payment is forthcoming quickly)
The bank are telling me I either clear it or consolidate loan and overdraft into a managed loan – not something I want to do at all if I can avoid it.



So, looking ahead at the possibility that I don't have enough money ready for the overdraft facility removal – what are my most likely alternatives to the HSBC consolidation “offer”?