Setting up a new business help!

[HOFB]

Hi

I am currently employed and work a 9-5 job. I have been thinking recently of opening up my own on-line business.

I think setting up as a Sole Trader should be OK for me, should I also register for VAT? I believe the first year earnings will be less than £3k

Should I do my own account paperwork or hire someone to do it for me?

In terms of "expenses" I would probably have a few expenses where by the person(s) I buy a service from does not provide a vat receipt / invoice but the money would be paid on line via paypal. How would I track expenses like this? They would not really be working for me as they are a company of their own but I would be buying services off them quite regularly.

When being a Sole Trader does anything change at my existing employer? Do I need to inform them or anything?

Finally I assume I should create a new bank account and put some money into this as my initial investment and start spending this money for anything to do with the business?

I don't know why but it seems a lot more complicated then I thought and a bit too much hassle than its worth...

 

[Paul_Rosser]

Hi

I am currently employed and work a 9-5 job. I have been thinking recently of opening up my own on-line business.

I think setting up as a Sole Trader should be OK for me, should I also register for VAT? I believe the first year earnings will be less than £3k

...

No, you only need to register for VAT once your turnover hits 77k, unless you will be purchasing a lot of items from suppliers who are charging you VAT, then it may be worth registering before you hit this limit. You will however then have to charge your customers VAT.

Should I do my own account paperwork or hire someone to do it for me?

On that level of earnings then do it yourself

In terms of "expenses" I would probably have a few expenses where by the person(s) I buy a service from does not provide a vat receipt / invoice but the money would be paid on line via paypal. How would I track expenses like this? They would not really be working for me as they are a company of their own but I would be buying services off them quite regularly.

Just keep the paypal receipts

When being a Sole Trader does anything change at my existing employer? Do I need to inform them or anything?

Does your contract with your employer say you can work for someone else ? Run your own business etc. ?

Best to check

Finally I assume I should create a new bank account and put some money into this as my initial investment and start spending this money for anything to do with the business?

You can open a seperate bank account, but there is no legal reason why you can't use your own current account. But best to check with the bank as they may not allow this.

I don't know why but it seems a lot more complicated then I thought and a bit too much hassle than its worth...

If you go down the sole trader route it's not that difficult, but you will need to fill in a tax return every year.

Henry posted this item regarding sole traders and limited companies, which you may find useful - http://www.ukbusinessforums.co.uk/forums/showthread.php?t=281430

 

[Scalloway]

The only thing I would add to Paul's advice is that your bank may object to you using a personal account for a business. As a sole trader you and the business are the same thing but it helps keep personal and business expenditure separate if you pay money into the business account and use that for your set up expenses etc.

 

[HOFB]

WOW, quick responses

So if I dont get VAT registered I also dont need to charge for VAT right?

What about costs I would be working from home, so how would I calculate electricity, heating, light costs? Would probably be 4 hours of my time each day (inc weekends)..

So if I start my business on 1st feb then does that mean by 31st Jan 2013 I need to declare all of my income during that time (subtracting the expenditure)? i.e I buy a service for "£100" from a person / company and charge my client £120.. So I keep both receipts and my profit for this would be £20 which is declared in the accounts?

Do you actually register anywhere for being a sole trader? I would forsee this as simply just a side project from my main job and at max it would return 5k per year.

 

[ChrisKG]

WOW, quick responses

So if I dont get VAT registered I also dont need to charge for VAT right?

What about costs I would be working from home, so how would I calculate electricity, heating, light costs? Would probably be 4 hours of my time each day (inc weekends)..

So if I start my business on 1st feb then does that mean by 31st Jan 2013 I need to declare all of my income during that time (subtracting the expenditure)? i.e I buy a service for "£100" from a person / company and charge my client £120.. So I keep both receipts and my profit for this would be £20 which is declared in the accounts?

Do you actually register anywhere for being a sole trader? I would forsee this as simply just a side project from my main job and at max it would return 5k per year.

Hi,

Here's a pretty good article from HMRC about this issue - Google calculating electricity use at home business - 1st link.

As your income and expenses from the business are linked to you personally, you have to declare them on your self assessment form online. You declare all income and expenses earned/incurred during the tax year, which runs from April 6th to April 5th. So, on April 6th 2013 (in a few months), you'll have to complete an online self assessment form declaring all of your income and expenses from 1st February 2013 up until 5th April 2013.

You'll need to ring up HMRC, register your business name (doesn't take long) and then you'll be classed as self employed alongside your job. Remember that you'll have to pay Class 2 NI of £2.65 (i think) a week for every week that you're registered as self employed.

You would not need to charge VAT, but remember, don't say you are charging "0% VAT" as this is illegal. Say that you do not charge VAT.

Chris

 

[Scalloway]

How to register as self employed

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

If your self employed earnings are expected to be less than £5,595 in the tax year to 5 April 2013 you can apply for exemption from Class 2 NI.

http://www.hmrc.gov.uk/forms/cf10.pdf

You can claim £4 per week for the use of your home without having to provide any supporting evidence.

 

[HOFB]

Thanks guys... Slowly

What shall I do if for instance I start setting my business up now? So I have paid for hosting, domain name, articles, site design etc etc but they wont all come together just yet would take a few months and the business wont launch until 1st June (wont be selling anything until after this date, just spending money ). Do I still need to fill in this form for April even though I have made no money but just made a loss? Gets a bit confusing for me now.. Tax Year 12/13 I make no profit but spend "£400" on the set-up costs... Tax Year 13/14 I make clear profit of lets say £1,000 I would obviously want to claim back on my set-up costs.. So where do I stand?

Sorry for the questions I think I'm perhaps making this to be more difficult then it is :|

Thanks for the heating and elec info was a good read and that's now clear to me for how to do it

 

[Scalloway]

If you are only going to launch on 1 June I would hold off registering with HMRC until then. You can put your start up expenses through your accounts as at that date. No need to do a tax return for 2012/13.

 

[siteworker]

Hi, I'm a brand new member and have just been going through the same thing myself, although my turn over is likely to be a bit higher. The government gateway site to income tax and national insurance is a real minefield, but I managed to get an hours free advice from an accountant. Try Start Up Britain Site, they have a lot of free advisor's on there. Private message me if you want some more ideas or if I can help in any way.

 

[HOFB]

Thanks Scalloway