Fully employed but planning side business

[CraigAMT]

Hello everyone.

This is my first post and im hoping to get my head around the tax side of being self-employed yet still working full time.

Ok, so here go's. My workmate and i have both been printing t-shirt designs as a hobby and it now seems that we have alot of interest from potential customers. Im pretty passionate about this project to say the least and weve decided we'd like to have a go at.
Ive bought the domain and built the site and we also have a small stock from two designs labelled and packaged which weve both contributed to.

Basically, i want to get this right from the offset. Neither of us want to take the plunge to quit our jobs as at the moment this is still at hobby stage but im quite positive in our product and if they do sell then we will continue to re-stock.

Ive had some business advice but alot of seems to cause confusion at this stage as its a world totally alien to us.
We are hoping to set up a Partnership and take it from there.

The first question: Has anyone any pointers for a starter business account?

2: What type of costs am i likely to incurr for banking?

3: Will our tax and NI be paid seperately beside our current PAYE employment?

4: Would it be better to contact the TAX office prior to registering in to state that our tax and NI for the business be treat seperately[is this even possible?]

I probably have a million and one questions but none of the answers up to now seem straight forward enough. As im sure alot of you onboard are aware of, this situation is very daunting to us

Kind regards

Craig

 

[RedEvo]

Hire an accountant, you won't regret it.

d

 

[MyAccountantOnline]

Hi Craig

You need to first of all decide whether you are going to trade as a partnership or limited company - it depends on many factors. A good accountant can help you with this. In the meantime this might be useful to read -
http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&r.l1=1073858805&r.lc=en&topicId=1085161962

You will pay tax on the profits from the business but how will depend on the business structure you use.

You need to register with HM Revenue & Customs and again how and when will be dependent on whether you are a partnership or limited company.

Good luck with the new venture

 

[MyAccountantOnline]

2: What type of costs am i likely to incurr for banking?

Free if you choose the 'right' bank - most banks will give you the first 12-18 months free business banking and some internet banks are free.

 

[CraigAMT]

Free if you choose the 'right' bank - most banks will give you the first 12-18 months free business banking and some internet banks are free.

Thanks for the prompt response Nichola,

I'd love to get an accountant and if this takes off im sure i will. But i would guess that they dont come cheap and cash is not something we have to hand.

On the subject banking, would you reccoment internet banking? We will be using PAYPAL for all sales to start with but we will have to pay some of our suppliers cash[with a receipt of course] Im guessing that withrawals of cash would not be possible with this type of banking. And i'd really prefer to keep all the business transactions though one seprate account to simplify the end of year situation

 

[MyAccountantOnline]

Thanks for the prompt response Nichola,

I'd love to get an accountant and if this takes off im sure i will. But i would guess that they dont come cheap and cash is not something we have to hand.

They arent all expensive - have a quick look at my website

On the subject banking, would you reccoment internet banking? We will be using PAYPAL for all sales to start with but we will have to pay some of our suppliers cash[with a receipt of course] Im guessing that withrawals of cash would not be possible with this type of banking. And i'd really prefer to keep all the business transactions though one seprate account to simplify the end of year situation

Its personal preference.

I only use internet banking. I dont remember the last time I went into a high street branch or had the need to, but I do most things online.

Nothing stopping you withdrawing cash from a cash machine if you need cash.

 

[CraigAMT]

They arent all expensive - have a quick look at my website



Its personal preference.

I only use internet banking. I dont remember the last time I went into a high street branch or had the need to, but I do most things online.

Nothing stopping you withdrawing cash from a cash machine if you need cash.

Ive just been doing some research online regarding banking. And the other problem i know im going to stumble accross is my poor credit score. I have several defaults[which are all 'satisfactory/paid off' through experian] from when i was with my ex wife who ran various debts up in her name,leading to problesm with the bills. But i do know that this will serve an obsticle as i had problems just aqquiring a current account some 3 years back after we had split. Im hoping[determined more like] to get around this, as i can print my report showing it satisfactory. I just dont want to dive in and damage it more by getting loads of credit checks done.
Nothing comes easy.....nothing worthwhile at least

 

[gordano]

Ive just been doing some research online regarding banking. And the other problem i know im going to stumble accross is my poor credit score. I have several defaults[which are all 'satisfactory/paid off' through experian] from when i was with my ex wife who ran various debts up in her name,leading to problesm with the bills. But i do know that this will serve an obsticle as i had problems just aqquiring a current account some 3 years back after we had split. Im hoping[determined more like] to get around this, as i can print my report showing it satisfactory. I just dont want to dive in and damage it more by getting loads of credit checks done.
Nothing comes easy.....nothing worthwhile at least

3 years is a long time ago although data will stay on your credit file for 6 years. You do have the option, with respect to your ex's debts, of publishing a notice of correction to your credit file, this will have some limited benefit for you.

As to opening a business account, if the "negative" data is 3 years or so ago then I am sure you will find a bank to provide you with a business account.

 

[CraigAMT]

3 years is a long time ago although data will stay on your credit file for 6 years. You do have the option, with respect to your ex's debts, of publishing a notice of correction to your credit file, this will have some limited benefit for you.

As to opening a business account, if the "negative" data is 3 years or so ago then I am sure you will find a bank to provide you with a business account.

Im hoping so my friend. Im not super positive on the subject as ive only got a standard account at present with no overdraft[not that i want one] and a visa debit card. It serves the purpose but i would have thought something like a business account would be even harder come by. Still, i think i will arange a sitting with my current bank to at least explain my situation and my plans to see if they can offer me anything. I'd rather take that approach than start filling in online forms for bank accounts i'll most probably be rejected on.

Thanks for the advice. If its worth me logging into my Experian to add a correction on anything possible,then i'll do just that. Every little helps.

 

[tigeredwards]

you need to hire an accountant to help you

 

[furniturebuyer]

Hire a proper accountant.

 

[MyAccountantOnline]

Im hoping so my friend. Im not super positive on the subject as ive only got a standard account at present with no overdraft[not that i want one] and a visa debit card. It serves the purpose but i would have thought something like a business account would be even harder come by. Still, i think i will arange a sitting with my current bank to at least explain my situation and my plans to see if they can offer me anything. I'd rather take that approach than start filling in online forms for bank accounts i'll most probably be rejected on.

Thanks for the advice. If its worth me logging into my Experian to add a correction on anything possible,then i'll do just that. Every little helps.

From what clients tell me some of the online banks seem quite fussy with applications from people with less than perfect credit files.

I do remember a posting a while back where someone mentioned Natwest offer a basic business bank account for people with poor credit history so that, with your own bank, may be worth considering.

 

[steve23]

Hi,

The main thing I would say is - dont let these sorts of issues get in the way of doing business !

Bank acount - there are a few free ones out there - yes, in the long term they may not be the greatest deals for you, as nothing is ever really free - but get launched.

Apply for one and see how you get on - you'll either get it or you wont !

I've used Alliance and Leicester myself (now Santander ?) - and found it very good.

If you cant get a business account, just operate from a personal account - at this stage you are taking payments via paypal anyway - so the customer wont care.

Yes, I know it is not the best idea to mix personal and business, but a lot of people do it, and if thats your only opton - so be it.

Your aim (i should imagine) is to get sales 'off net' - but trust me, if you present yourself well there is no reason why the fashion T shirt store in Covent garden (or wherever) wont pay you a cheque made out in your name and not to some company !

Accountants : Hmmmmm....... I cant say they are not handy, they are - but its not the be all and end all of life. If you cant afford one when you kick of, well, then kick off anyway.

There is tons of free advice on the net about tax and if in doubt you can ring the tax office direct and they will tell you what to do - no charge at all!

They wont tell you how to save money - like a good accountant would - but at least you will not fall foul of the law.

As soon as you have the cash - then get an accountant.

Set yourselves some targets - how much profit you need - how much turnover that is and how many sales to equal that turnover - then sell, sell sell !

And as I hinted at above - dont sit infront of a computer letting your web site do the work - there must be loads of outlets for this sort of thing !

Oh - I can see the possibilities already - you really have something be excited about - get that passion going, get those T Shirts out there - and pretty soon you'll be quitting the day job !

All the best

Steve

 

[MyAccountantOnline]

.. if in doubt you can ring the tax office direct and they will tell you what to do - no charge at all!

They wont tell you how to save money - like a good accountant would - but at least you will not fall foul of the law.

Steve a great bit of advice - just a word of caution though be very careful asking the tax office for advice. The HMRC call centres are manned by staff with limited tax knowledge and you really cant be sure the 'advice' given is correct.

If you cant afford an accountant its better to use the HMRC website and keep what you have used - again this isnt always up to date and correct but in my opinion it's much better than calling the tax office.

 

[harryboon]

Santander do 2 years free business banking

Free if you choose the 'right' bank - most banks will give you the first 12-18 months free business banking and some internet banks are free.

 

[Newcott]

Craig - Firstly best of luck to you on this

I was in a similar postion when I started and only recently made the jump to full self employed.

I've been working with a good friend of mine on projects and now we're just starting to look at getting an accountant - my recommendation is get one from the start they will help! Wish I had one from day one but hindsight is a wonderfull thing.

 

[butterfm]

Hi,

I can only comment on the experience I have gained over the past year while trying to look after the money / employee side of things for my wifes business. I'm not in any way an accountant so i'm only speaking from the little experience I have. I'm sure the accountatnts on here will pick me up on anything that is incorrect.

Firstly I would concur that you would benefit from empoying an accountant. They aren't as expensive as you might think if you can manage the day to day stuff yourself. The only time we really use the accountant is at the end of the year to prepare the accounts and file the tax returns however he is available on the phone anytime to offer advice should I need it. An accountant will probably end up saving you as much money as they cost and will take away a lot of the headache.

If you are employed and doing this part time then I assume that your tax allowance will be eaten up by full time job and therefore you'll need to put away approx 30% (for tax and NI) of all profit made on your side venture (assuming with total income you're not exceeding the higher rate tax bracket) . If you are a partnership (i.e. you are not a limited company) then you will not make weekly/montly PAYE payments as you would if you were an employee. You will be taxed on the profits your business makes at the end ot the year. I don't think you actually get the tax bill until the January following the end of the tax year. It's therefore important to keep a reasonable good eye on what profit you are making, what drawings you are taking from the business etc. A spreadsheet can help with this.

Matt.

 

[MyAccountantOnline]

If you are a partnership (i.e. you are not a limited company) then you will not make weekly/montly PAYE payments as you would if you were an employee. You will be taxed on the profits your business makes at the end ot the year.

Matt.

Hi Matt - the only thing which isnt correct is the PAYE for a partnership.

Partnership tax is paid just the same as a soletrader so its Income tax and class 4 NIC based on profits and payable in January/July each year and monthly class 2 NIC

PAYE is only paid if you employ people.

 

[butterfm]

Hi Nicola,

I think you might have miisread my post

"If you are a partnership (i.e. you are not a limited company) then you will not make weekly/montly PAYE payments as you would if you were an employee. You will be taxed on the profits your business makes at the end ot the year. "

Matt

 

[MyAccountantOnline]

Hi Nicola,

I think you might have miisread my post

"If you are a partnership (i.e. you are not a limited company) then you will not make weekly/montly PAYE payments as you would if you were an employee. You will be taxed on the profits your business makes at the end ot the year. "

Matt

I do apologise Matt - I did indeed misread I somehow didnt see the 'not'.:redface:

 

[butterfm]

Hi Nicola, No worries.

I don't want to hijack the post but while we're discussing could can probably help with a related question.

In the situation the OP talks about where you are earning above your tax allowance in one job and then are self employed at the same time how do the HMRC calculate the tax bill due to be paid as a sole trader (or partnership). I assume they need to have an overall view of total earnings somewhere. What i'm getting at is how do they know where the tax allowance is being applied (i.e. in a job where they are employed or their own business)?

Lets say my wifes business partner is also working another job part time (it was her full time job before starting the partnership, but she still does ocassional weekend work). As I understand it she should have told her employer that the part time job is not her main job and se should have a BR tax code for that job, then her tax allowance gets applied to the earnings from the partnership.
However i'm not convinced she has done this.

So how will her tax get calculated from her share of the profit in the partnership ? Does HMRC have sight of the TAX and NI she's paid in her part time job and consider this in her partnership tax an NI bill ?

Also as I understand it you can do the tax returns online and this will give a figure for each individuals the tax bill there and then (or is this not the case ?). If it is done online does it account for money earnt / tax / NI from other jobs or is it that you have to add this information when filling in the tax return from teh P60 supplied by her part time employers?.

Apologies if these are simple questions, i've never seen a tax return but this question has been bugging me for a bit.

Matt

 

[MyAccountantOnline]

Hi Nicola, No worries.

I don't want to hijack the post but while we're discussing could can probably help with a related question.

In the situation the OP talks about where you are earning above your tax allowance in one job and then are self employed at the same time how do the HMRC calculate the tax bill due to be paid as a sole trader (or partnership). I assume they need to have an overall view of total earnings somewhere. What i'm getting at is how do they know where the tax allowance is being applied (i.e. in a job where they are employed or their own business)?

Lets say my wifes business partner is also working another job part time (it was her full time job before starting the partnership, but she still does ocassional weekend work). As I understand it she should have told her employer that the part time job is not her main job and se should have a BR tax code for that job, then her tax allowance gets applied to the earnings from the partnership.
However i'm not convinced she has done this.

So how will her tax get calculated from her share of the profit in the partnership ? Does HMRC have sight of the TAX and NI she's paid in her part time job and consider this in her partnership tax an NI bill ?

Also as I understand it you can do the tax returns online and this will give a figure for each individuals the tax bill there and then (or is this not the case ?). If it is done online does it account for money earnt / tax / NI from other jobs or is it that you have to add this information when filling in the tax return from teh P60 supplied by her part time employers?.

Apologies if these are simple questions, i've never seen a tax return but this question has been bugging me for a bit.

Matt

Hi Matt

What happens when a tax return is completed is that all income from all sources is taken into account - the gross income.

Tax is then calculated based on the total income to arrive at an amount payable.

The tax deducted from various sources ie PAYE, bank interest, etc is then taken off leaving a balance to pay or to be refunded.

Doing a tax return online (if done correctly) will mean any tax under or overpaid throughout the year is sorted out. Its actually one advantage of doing a tax return.

You will see the tax calculation online when you do the tax return if you are doing it yourself.

The tax return relies on you entering correct figures but checks later may pick up errors if for example you missed off a source of income or income didnt agree to a P60 etc.

 

[butterfm]

Thanks Nicola, that makes perfect sense.
Presenty I try to make a reasonable guesstimate on the tax and NI that each partner will need to pay (based on their tax code) and put this aside. However in the case where one of the partners has another job and may not be on a BR tax code I guess I could get caught out with this.
I guess the best ioption is to pay each partner their gross wage and make it their responsibility to put aside their own tax and NI.

 

[MyAccountantOnline]

Thanks Nicola, that makes perfect sense.
Presenty I try to make a reasonable guesstimate on the tax and NI that each partner will need to pay (based on their tax code) and put this aside. However in the case where one of the partners has another job and may not be on a BR tax code I guess I could get caught out with this.
I guess the best ioption is to pay each partner their gross wage and make it their responsibility to put aside their own tax and NI.

Yes I agree or it could become very difficult/time consuming.

 

[butterfm]

Thanks for your advice.

Doing this combined with the employee stuff (PAYE, Wages, Holiday Pay etc) is a fairly steep learning curve.