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Free tax help for business owners and the self-employed. ... rules for self-employment taxes, IR 35 etc
by Dreadenthax Tue Jun 30, 2015 11:35 am
Greetings.

I am not going to put all of my questions into one post as I want to keep it clear and more organised.
I am currently employed full-time with a salary of ~£16k per annuum. I pay tax from this income with PAYE.
Next to that, I want to start my own business without quitting my primary job.

I already know that the estimated income from my business will be £35.00 per month making the income of less than £500.00.

1. Do I have to pay any tax at all with such a small income?
2. Do I have to establish a separate business bank account for the business regardless of small or no income?
by Ray Tue Jun 30, 2015 1:22 pm
Hi,

Both forms of income will need to go on a personal self assessment tax return each year, one on the employed pages and one on the self employed pages. So you will need to register for self assessment.

Answers to your questions:

1. Yes, everyone can earn approx £10k per annum. You only get one such allowance so all additional income will be taxable at 20%. The income will also be subject to class 4 national insurance of 9%.
2. It's best to use a separate business account but I question whether it is worthwhile on the level of income you receive. To be honest, it's probably more beneficial to have decent bookkeeping records.

Hope that helps!

Ray
by Dreadenthax Wed Jul 01, 2015 4:36 pm
Thank you very much! It does :)

I have some more questions though:
1. If the allowance is £10k, and my main job salary is £16k and tax is being payed through PAYE, should I ever worry about paying tax "manually" for this income ?
2. Does it also mean that I will always pay 20% tax for the self-employment income ?
3. National insurance Class 4. Does it mean that I pay it once per year as 9% of my additional income and nothing else?
4. What about my primary job national insurance ? Can I have them both at the same time ?
5. How much does registering for self-assessment cost ? Is it the same as establishing a single-person company ?
6. After I register for self-assessment, will I need to pay for it, or anything else, regularly ?
Or do I pay only tax and nothing extra?

To-do list:
1. Register for self-assessment.
by Ray Thu Jul 02, 2015 9:45 am
Hi,

Answers as follows:

1. no, tax is collected via your employer and passed to HMRC on your behalf. When processing your tax return you can tell HMRC to collect any underpayment of tax/ni (which will be your self employed income) via adjusting your personal tax code. So you could be opting to pay the tax/ni on your self employment as you go along during the year rather than in one lump sum each january/july.
2. Yes
3. Yes, you pay class 4 national insurance with the income tax to HMRC
4. No, class 4 national insurance is paid by self employed people via their tax return, class 1 is deducted at source from your employer. Opting for HMRC to collect your tax via your paye code should sort this.
5. It is free if you do it yourself. Some accountants charge for this service, but obviously you have the piece of mind that is everything is done that should be done if an accountant does it.
6. the only other thing to note is that when you register for self assessment HMRC should send you forms to register for class 2 national insurance.

thats all

Ray
by Dreadenthax Mon Jul 06, 2015 8:04 pm
1. Should I know how to adjust my personal tax code or will HMRC do it for me? Will it change my tax code and should I notify my employer about it?

2. What I meant by two national insurances is:
a)
Will I pay both national insurance class 1 from my employer?
and
national insurance class 4 only from my additional income?
(Both but separately for each type of income)

OR
b)
When I register for self-assessment, does the national insurance class 1 get replaced by insurance class 4 so I pay it from both employment and self-employment income?

3. National insurance class 2. It's already clear for me I will pay national insurance class 4. Why should I also pay national insurance class 2?..
by Ray Tue Jul 07, 2015 10:55 am
Hello again,

1 - HMRC will adjust this for you, on your tax return there is an option to select whether you want this collecting via your taxcode or whether to just pay the tax/ni each year in one lump sum
2 - a is the answer
3 - this will be payable also, you need to look at HMRC's website about this https://www.gov.uk/voluntary-national-i ... tributions

Hope that helps

Ray
by Dreadenthax Mon Jul 13, 2015 9:41 am
So I actually don't have to pay National insurance class 2 ?

What about the VAT ? I am planning to sell both services and products.
Does VAT depend on the type of a product or service? I tried searching for information about VAT but some people told me that I don't have to worry about it, and some told me that I have to pay VAT. Is there a reliable information source about paying VAT in UK ?
by sash100 Mon Jul 13, 2015 11:32 am
Hi

It can be complex when starting a business and it is a steep learning curve. Important to get it right.

I would suggest you engage an accountant or I suppose someone like Ray can help you.

Kind Regards

Sash

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