Advice on starting up a business

Yep, did it myself at the end of 2009

You need to talk to the taxman and register as self-employed > when you take that first fee <, and not before. They'll send you details about workshops for record-keeping, claiming expenses and so on. Don't get into Limited Companies or anything like that just yet, it's not worth the cost until you're motoring.

I offset all my strings, advertising, printing, music books, PC costs, and website/ e-mail costs against gross revenues to derive pre-tax profit. If you still earn some money on PAYE then just add the self-employed page to your tax return (you WILL be sent one, first post on April 6th.) You don't need to worry about VAT until you gross something over £65K so that won't affect you yet.

Make sure you keep meticulous records, in case you're asked about anything.

I don't know about the UK, but in Germany we have tax software that includes sole trader book keeping - enter all your receipts and expenditures and it calculates your tax liability, prints out all your tax forms and really annoys tax inspectors.

thanks guys - much appreciated.

Greybeard - i will do a google search on that software, im sure it will come in handy.

Alan, who do you "tell" that you have started a business in the uk? and how did you do it? or is it something the accountant does for you? (I really have no idea what im doing here :oops: ) Can you also claim back against the money you pay an accountant, if you deem them necessary for starting up?

thanks.

Al

You phone the HMRC Self Employed helpline - start here

http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858808&r.l2=1073859218&r.s=tl&topicId=1086244520

Your money-grabbing accountants will charge you a lot of money to do it for you - you don't need them to do it, so do it yourself. Remember, they might help you with your accounts, but they're in their business to make profits for themselves and will charge you accordingly. Most people I know who've used accountants reckon it would have been quicker and easier to do their own tax forms - they send in all their receipts and stuff and the accountant phones them with questions like "This receipt from Chappell's Music Shop says Sheet Music, what's it for?"

Accountancy fees can be offset against tax, but initially all you need to do is keeps records of your income and expenditure so you probably don't need an accountant. Not yet anyway.

You know where we are. Keep us posted.

Don't forget that as your income is likely to be on the low side to begin with, you can claim "working tax credits" from HMRC. That's a tax free weekly sum paid into your bank account. The amount you get is based on your expected earnings for that tax year (6 April to 5th April of the following year) and also on the number of hours per week that you work. Just be careful to keep them informed if your income goes up more than expected, as you may then be getting more from them than you're entitled to and they'll want back any overpayments.

The other department of HMRC that you're obliged to inform that you are now a sole trader is the National Insurance people. You will be liable to pay class 2 national insurance contributions.

There are also business start up grants available in different regions at different times. I got £1000 from one of them. Citizen's Advice Bureau and your local Job Centre can give advice on any you may be eligible for.

I agree with Alan that you don't need an accountant because being a sole trader is simple, (unlike a company where you employ people). And you can file your tax return online these days which is pretty straightforward.

I agree with Alan that you don't need an accountant because being a sole trader is simple, (unlike a company where you employ people). And you can file your tax return online these days which is pretty straightforward.

I'll echo that as well, Al. I'm Canadian but the 2 systems obviously work in a similar way.
I've been self employed 11+ years and have never incorporated or used the services of an accountant. It would be more time and expense than it's worth.

Don't know if you use credit cards; if so, consider applying for a new one and use it exclusively for business purchases and costs.
If you don't get some account tracking software, at least have a special shoebox, where you toss all your business elated expense slips. :lol:
Just makes sorting things out at tax time so much easier.

All the best. Curious to hear how it goes.

One thing that I forgot to mention - you need to keep receipts for everything. If it's going on your tax return, it needs proof.

The other thing about tax software is that it tells you what you can and can't do and why you can't do it. The software suppliers are in it to make money. They do that by selling lots of software. If they don't help you get money back, they go out of business - unlike a tax accountant.

The other department of HMRC that you're obliged to inform that you are now a sole trader is the National Insurance people. You will be liable to pay class 2 national insurance contributions.

There is an exemption on NI if you are only generating small amounts of revenue. I've got an exemption. I forget what the exact figure is, but £6K rings a bell. The Self Employed Helpline will tell you the latest threshold.

Thanks for all the useful advice, it really is appreciated!

Alan, I now have that number stored in my phone and so will be calling them ASAP tomorrow!
Thanks for that.

Greybeard, i am googling for that software you mentioned as we speak.

I will certainly keep you guys informed how things pan out. I know it will only be small potatoes to start with, but its exiting to think that just maybe, in ten years or so i could end up doing this for a living and give up my day job all together :D

Thanks again for all the encouragement everybody :D

Good luck with the business Al.

Thanks cnev - but it will only be a very small thing, not really a business at all, with i imagine 2 or three private pupils, all total beginners - i just want to be fine with the tax man thats all :D

luckily working in a school, i have got to know lots of parents etc who have been out in the area when we have played live, and i have been approached by some to teach their children in the past- so i dont think i will have to look hard for the small number of kids i will need.

What the tax man doesn't know won't hurt them if you are talking that few students, in my opinion.

I had a regular video client on year, had made about $5,000 in a year doing video production and didn't claim it. It was all under the table, and the only year I had that much success. But the tax man never came knocking on my door regarding it.

Now my advice is most likely BAD advice regarding this, but I don't think it would be that big of a deal to have a few students under the table.

Joe normally i would agree, however at the minute i am also tutoring for GCSE science exams and am in two bands. All this is hard work but all extra income and luckily, at the minute it adds up to a not insignificant amount of money each month, which is why i thought i should start to be covering myself and doing things legally.

I would hope that the business would cover all my extra incomes and then as the years pass, i could slowly give up the science tutoring and take on more guitar students and focus mainly on that. Also during the duration i could perhaps take advantage of the legal tax avoidance this country offers and start to claim back on lots of things i currently fork out for regularly.

Joe glad you brought it up I went through the same thing many years ago when my wife had a dance studio, you know the tap, jazz, ballet stuff all little girls seem to do.

For many years we filed taxes etc by the book then one year for some reason our lawyer did the taxes for the business, well he did some funny stuff and I got audited and had to pay back around $3000 in taxes. She barely made that much.

Anyway after that I decided (OK not a great idea) to not fill for the next few years. I figured no one can claimt he lessons as a deduction so it didn't see where the taxman would ever find out....well he didn't and it saved me alot of stress going forward.

I'm not advocating doing that except maybe for the first year until you sort everything out the money from the lessons wouldn't add up to that much.