Paying Tax as a Self-Employed Worker

blue_monkey_2

Hi SS,

If you read back on the thread Jimmo has mentioned that it is not worth bothering if earning under the threshold - he has a note in his sig that he is a retired Tax Inspector and this was his advice - so have a read all the way back and see what he has said and go from there.

I did mentioned a few posts back that I always thought you HAD to register whatever you were earning (I was actually fined as I registered after 6 months of working and I had told them I did not think you had to) but Jimmo says different unless I did not read the thread he posted properly, it is his last one back before mine - if that makes sense!!)

The thing is, how many other people are working by selling stuff on eBay that don't register? There must be so many people out there now.

NewbieMoneySaver**

Thankyou very much Blue Monkey.

You have been a great help. I think there is no need to register as she will earn less than the threshold. The way she was going to expand is just by recruiting others and she would be a sales leader. Not to sure what to do with that now though.

Thanks again

talkinpeace

#24
Just a quick point
I have to disagree with Jimmo here.
He may be a retired inspector, but my experience (over 20+ years) is that no two inspectors agree with each other - even in writing.
If your or your and OH's businesses are expected to earn good money, register them now.
At least then you have losses to carry forward against future tax bills
(the bit they don't advise on the HMRC courses)
and I know I sound like a broken record, but read my eBay me page.

sleepless_saver

I have just looked again at the HMRC guidance, and am sure that she does have to register - there is no lower earnings limit. The HMRC self employed helpline is really helpful and is worth a quick call, just to make sure she is on the right side of the law. The number is 08459 15 45 15. Whether or not she has to actually pay any tax or NI is another matter entirely.

jimmo

I don’t follow the logic of your figures but try this:
To determine your gross profit
Money received from sales
Add any commissions or other payments from Avon
That gives your turnover.
If turnover is more than £15,000 and a Return is required then you will really need to produce accounts drawn up on a strictly professional basis. That doesn’t mean you need an accountant but it could be wise for the first year or 2.
To determine your gross profit calculate the “cost of sales”:
Value of opening stock (normally nil in the first year of business)
Add costs of purchase of items bought to sell
Deduct the cost any closing stock (items bought from Avon but not yet sold)
Then deduct your costs of sale from your turnover. That is the gross profit.
To determine the net profit calculate the other expenses like motoring, use of your home, postage etc. Deduct the other expenses from the gross profit to give the net profit.
If the net profit is less than £5,000 then the taxman really doesn’t want to know, but as I said before, no guarantees on NI, but if I can find the earlier thread I’ll post a link.

NewbieMoneySaver**

Thanks Jimmo and everyone really.I think I will phone the hmrc myself as there are a few different opinions.My wife will not clear £5grand.Hope I get the answer soon.

jimmo

The letter of the law is that for National Insurance purposes, you are required to register within 3 months of commencing self employment.
However the tax law is that you must notify liability within 6 months of the end of the first tax year for which liability arises.
Therefore you are legally required to register within 3 months
Having registered you then have to pay your weekly stamp or claim Small Earnings Exemption (SEE).
The registration of self-employment counts as a notification of liability for Tax purposes.
So, if you register, you may have to pay the weekly stamp until you SEE claim is accepted and then claim a refund. I really don’t know but you may be allowed not to pay until your claim is accepted or rejected.
Also you will get a 2007/08 Self Assessment Return to complete.
The taxman may take you out of Self Assessment once your first Return shows that you are not liable to tax but he may think that he wants to see a full year’s worth of income and leave you in the system until your 2008/09 Return has been completed.
In the strict letter of the law you must put up with all this red tape.
However what happens if you break the law and do not register?
This link shows that for National Insurance, if you are covered by the SEE you will not be liable to a penalty.
http://www.hmrc.gov.uk/manuals/nimmanual/NIM23008.htm
This link shows that you cannot face a tax penalty unless you are actually liable to tax and fail to pay it by the due date.
http://www.hmrc.gov.uk/manuals/emmanual/em4551.htm
This link shows the SEE limits.
http://www.hmrc.gov.uk/rates/nic.htm
I really don’t think it’s worth the hassle but clearly you also need to be vigilant to ensure that you register if the money goes up.

NewbieMoneySaver**

Hello there Jimmo,Thankyou very much for your help.So does she by law have to pay the national isurance as if it only covers sick pay and maternity pay then we dont need it.If we dont register now but expand later on and the earning go up, can we register then. It take a while to build up the earnings anyway.Thanks again.