I went self employed a few months ago and have just started to make a profit. Must sound really stupid but I'm not sure what to do next. I used to run a limited company and paid myself through PAYE, but how do I pay myself as self employed? And how do I pay tax? Got a slip for the NI so I've paid that at least. Would be greatful for help!

Have you told HMRC about going self employed?

I would get an accountant a good one is worth their fee.

Yes, I've let HMRC know.

Anyone know of a good accountant in the Stockport area?

Depends whether you are a sole trader or limited company.

If you are a sole trader the money is yours and you will have to pay tax twice a year based on a mix of future turnover and past turnover.

With a limited company the ideal way is to take the minimum wage out and maximise income through dividends (more tax efficient).

As bruneep suggests get a good accountant.

get good accountant for sure

but how do I pay myself as self employed?

You can pay yourself as much as you want as long as you/the business has the money however it may be prudent to pay yourself within the level of the profits you are making. Whatever you do keep a record of your drawings from the business as this will assist your accountant when they draw up accounts.

And how do I pay tax?

As you have registered s/e with HMRC you will get a Self Assessment Tax Return through the post after 06/04/2010 which you need to complete. Once the return is captured by HMRC you will need to pay any outstanding TAX/Class 4 NI that is due by 31/01/2011.

In this respect you may wish to start putting some money back now to pay your future tax bill, a good accountant should advise you to do this anyway.

Thanks crispy bacon. Does that mean that I don't have to worry about actually paying the tax in until in about a years time? I'll make sure I've got plenty saved for it by then.

Yes, as it's your first year of trading HMRC don't know your level of profits until you submit your 2010 Tax return & payment will be due on 31/01/2011, however you will also need to make a payment on account for the following year which is based on half of your current year Tax bill.

So if your 2010 tax bill was say £3,000 then you will need to pay the £3,000 by 31/01/2011 plus a further £1,500 on account of your 2011 liability a total of £4,500. You can reduce your payment on account if you know your profits in 2011 will be less but that's best left to your Tax advisor to sort out.

Thanks for that! It seems quite clear now. At least I don't have to rush out before Christmas to get an accountant!

another vote for accountant, its easy to do you own books if youre a sole trader and doing self assessment. I used to do mine, 1day hunt all receipts paperwork down, 1 day adding up and fillng in form.

however, limited is different, i got an accountant and now the only thing i worry abut is finding the money to pay the taxman, so they can give it to bankers

make sure you keep receipts for everything you buy ever

a good accountant will need them, a 'ahem' GOOD accountant will be creative with them

personally i pay my tax completely honestly, a lot of others in my industry don't, at small levels of turnover the consequences of getting caught aren't that bad, but i'm just honest

It's worth shopping around for accountants or asking anyone you know fo recommendations. Like many things in life, some are better than others, but generally, the bigger the firm the bigger the fee.

Oh, and do as much of the easy work yourself as you can. You don't want to be paying someone £50 per hour or more just to sort your receipts and bank statements into order.

What I dont understand is why you have not just carried on with the LTD company?

Surely you already have it in place as you said, why not run the new buisness through it so you get the benefits of the LTD company?

Best place to save for your tax is premium bonds

If you want details of a couple accountants send me an email. Details on profile.

Chris.

I'm an accountant. In Scotland though so not miuch good to you. Here's some free info though:

If you're self-employed on a sole trader basis (which is how it sounds), you need to notify the tax office straight away as you've probably already passed the deadline date. You'll get a £50 fine which they MAY enforce. IME they seldom do.

You're probably not going to have any tax to pay until January 2011 but you should be making provision already. As said above, premium bonds is a good idea but so is a separaste bank account.

If you don't fancy using accounting software get a spreadsheet template which records your income and outgoings.

Keep a separate bank account for all business transactions. Doesn't strictly need to be a business account as long as it is kept separate.

Yes, you should get an accountant and I'd do it now. Make sure you pick one who (a) comes recommended, and (b) works on a fixed price basis. You should expect to pay anywhere between £400 and £1,000 p.a. depending on what you need. Remember an accountant is an expert so use them as such. The money you spend on them should be for business advice and tax planning etc not sorting thru bags of petrol receipts.

Disclaimer: I only deal with ltd co contractors now so some of the above might be outdated.

Best place to save for your tax is premium bonds

That's a good idea.

My tax money is in premium bonds.

the best place to save your tax money is shiny bits on your bike and spangly electronic things

nothing quite beats the twice yearly panic to find £3k down the back of the sofa 🙂

We're limited and whenever we get cash in, put 25% into a deposit account.

This more than covers VAT, NI and corp. tax.

Or use premium bonds as stated – although how you actually account for a (big) win…

Tax free – isn't it?