Sole trader - how does it effect benefits?
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muddyl
Posts: 579 Forumite
Hi all,
Not sure if this is the right place but I'll try anyway.
I currently work full time but on a relatively low income (basically minimum wage). I'm thinking of going self employed but rather than taking the jump in one go, I intend to continue working full time during the week and try to build my business at weekends.
I have looked at how to register as a sole trader etc. but the one part I'm struggling to get information on is how this will affect my current benefits.
At the moment we (my wife and I) receive council tax reduction, child tax and working tax credits.
If I register as a sole trader I will be issued with a Unique Tax Reference. But how will that affect everything else? I've read that my normal tax code will be adjusted and the amount before tax reduced, effectively meaning I'd pay more tax on my full time job. Is that correct? And what sort of knock on effect will it all have with the tax credits?
Just like most people here I aim to better myself and provide a better lifestyle for my children. My main concern is that starting up will have a negative effect on my current income & benefits meaning my family may suffer if this doesn't work out and potentially put a stop to the whole thing before it's even had a chance.
Could anyone shed any light on any of this for me please or point me in the direction of where I may find the relevant information?
Many thanks, Muddy
Not sure if this is the right place but I'll try anyway.
I currently work full time but on a relatively low income (basically minimum wage). I'm thinking of going self employed but rather than taking the jump in one go, I intend to continue working full time during the week and try to build my business at weekends.
I have looked at how to register as a sole trader etc. but the one part I'm struggling to get information on is how this will affect my current benefits.
At the moment we (my wife and I) receive council tax reduction, child tax and working tax credits.
If I register as a sole trader I will be issued with a Unique Tax Reference. But how will that affect everything else? I've read that my normal tax code will be adjusted and the amount before tax reduced, effectively meaning I'd pay more tax on my full time job. Is that correct? And what sort of knock on effect will it all have with the tax credits?
Just like most people here I aim to better myself and provide a better lifestyle for my children. My main concern is that starting up will have a negative effect on my current income & benefits meaning my family may suffer if this doesn't work out and potentially put a stop to the whole thing before it's even had a chance.
Could anyone shed any light on any of this for me please or point me in the direction of where I may find the relevant information?
Many thanks, Muddy
0
Comments
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You’ll complete a self assessment each year that will take into account all of your taxable income to determine how much tax you pay. It’s your choice whether you want to pay the tax through your tax code or just pay it directly to self assessment.
How much tax you pay is relevant for benefit purposes, it’s our taxable income that they will want. You’ll declare your P60 income as you already do. Any profit you make from your self employment will need to be declared to tax credits. You can deduct losses from any other household income you have. Roughly speaking your tax credits are reduced by 41p for every £1 earned.0 -
That's helped to clarify the situation somewhat. Thanks.0
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