Self Employed and sole trader etc...

Disjoint

Hi all,

It's a relatively simple question, and I feel like a fool asking it here; however, the advice I am getting on the internet is slightly conflicting.

My wife runs a small property management business that brings in roughly GBP 7,000 per year - There is an additional GBP 4,000 that she gets in fees from managing properties for direct family members.

To date we just declare this revenue on her assessment and just pay income tax on it. (She has property income of her own bringing her above the tax free allowance). I read that as a self employed trader she has to register as a sole trader otherwise HMRC would fine her GBP 100. The property management business only started two years ago so never really thought of the implication = pay your taxes, HMRC is usually happy.

Besides the fine - I am tempted to register a LLC for her so that the revenue can come in and we can tax it at company level and put some money in a pension to save on taxes and pay her some dividends out of the company when and if she needs cash. We have very little expense in the business so revenue is roughly equal to profit.

Sorry for the long winded post - I guess what I am trying to get at is:
Do we have to register as a sole trader when the business kicks in more than GBP 10,000 a year.
For a small business of this size, what is the ideal structure?
I want to keep filing for taxes and doing the accounting myself so don't want a structure that's too onerous either.

Thank you!!!:T

BoGoF

Depends what you mean by propertyy management business - but if she is self employed then yes she needs to complete a Tax Return.

Are you even in the UK - an LLC is not a UK entity. I guess you are as you refer to GBP.

Mistral001

Your wife is presently operating as a sole trader and paying income tax on the profit she is making from her business activities.

00ec25

yes she should register the fact she is operating a sole trader self employed "business", She does so by completing a tax return and telling HMRC that she is trading. So the question is where is she declaring her income on her tax return? On the self employment page then fine, on the other hand if she is declaring it as "casual" income that is wrong

unless she intends to pay 100% of the limited liability company's (we called Ltd in the UK) income into a pension, it would be tax inefficient for her to operate as Ltd with only a 7k gross turnover because of the impact of corporation tax before she takes any money out.

phill99

Do people not have '£' signs on their keyboards anymore?

Disjoint

I do really appreciate your guys' replies.

I guess the confusion stemmed from the words self-employed and sole-trader. Fortunately it seems that I have been doing things correctly to date!

I studied in the US and worked for US companies here in the UK so I tend to interchange LLC and Limited Company wrongly. Mea culpa!

Mistral001

Disjoint wrote: »

I do really appreciate your guys' replies.

I guess the confusion stemmed from the words self-employed and sole-trader. Fortunately it seems that I have been doing things correctly to date!

I studied in the US and worked for US companies here in the UK so I tend to interchange LLC and Limited Company wrongly. Mea culpa!

The UK is one of the few countries where there is no legal requirement to register a business. You can start as a sole trader or even a partnership and not have to register it with any authority. Many scammers have made lots of money out of playing on the urban myth that all businesses have to be registered by contacting sole traders and offering to register their businesses for a fee.

Of course you have to pay any income tax on profits you earn from the business and register for VAT if your turnover is expected to go over a threshold. HMRC like to be informed of your trading activities as soon as possible after you start to trade, but that is not registering the business.

Disjoint

Mistral001 wrote: »

The UK is one of the few countries where there is no legal requirement to register a business. You can start as a sole trader or even a partnership and not have to register it with any authority. Many scammers have made lots of money out of playing on the urban myth that all businesses have to be registered by contacting sole traders and offering to register their businesses for a fee.

Of course you have to pay any income tax on profits you earn from the business and register for VAT if your turnover is expected to go over a threshold. HMRC like to be informed of your trading activities as soon as possible after you start to trade, but that is not registering the business.

That would explain why a few website I went to said I needed to register the business or I would be illegally running my business, while offering their services to do it for me... Glad I stopped by the board to clear this out!