any advice? any accountants? etc....do i need to set up as sole trader or business?
my head is buzzing
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starting up as self employed
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Posted 2 years ago #
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I have no idea, but congratulations, what are you doing?
Posted 2 years ago # -
sole trader is easiest, depends on what you're doing tho
an accountant should give you an initial meeting for free, that's prob your best first port of call
go for it
Posted 2 years ago # -
Do you mean sole trader or limited company?
In very simple terms - a sole trader or partnership is easier to set up but will be more difficult to get credit (because no-one can see your history because it isn't public information). It is also cheaper to account it as there is less, well, accountability. A car is a tax deductable expense.
A limited company costs more to account (in time and money) and will be better from a tax perspective if you have high earnings as you can pay low salaries and take bonuses which attract lower tax. A car is a taxable benefit.
Plus a million other pros and cons for either...
Good luck!
Posted 2 years ago # -
Also think about VAT registration - how much you turnover may take that decision out of your hands (above ~66k I think and you have to register). Get an accountant, pay his fees on time and he/she should become your new best friend. I did it 18 months ago and I still get confused.
Just can't imagine ever working for somebody else again...
Posted 2 years ago # -
From bitter experience (twice) if you have high overheads - i.e. you are going to have to invest a lot - then limited might be best if you need to get out of it. But if as I think may be the case you won't need much overheads / credit then sole trader might be best.
Had personal experience of sole trader going bust twice in my life and gets messy if you owe lots of money to people. Limited is slightly safer.
Posted 2 years ago # -
mmmmmmmmmmm.....
Posted 2 years ago # -
I just had a training course on this at work (they are making lots of people redundant) so they are trying to help people work out what to do.
Do you want me to email you a pdf of the official notes?
Basically it comes down to this (as far as I can remember):
Sole Trader: You work for yourself, you don't need to register with anyone, or use an accountant but you pay full tax and NI, which you have bear in mind you have to pay company NI as well as personal which will account for 24.8% of your revenue each year, and have to complete a self assessment form.
Partnership: This can be 2 or more Sole Traders trading under a single name, however both are liable for any issues so don't do it, unless it is with your wife, so you can reduce your tax overheads.
Ltd liability company: You need an accountant for this (will be around £1200 a year), to setup the company will cost you £34.99 +VAT (http://www.companiesmadesimple.com/) basically this means that you can pay yourself a salary (of say £6K) to minimize tax & NI implications, however you will end up paying 21% corporate tax on any profit, and an additional 10% tax on dividends (ie: single bonus payouts), unless you go into the 40% tax barrier in which case you pay 20% tax. The Ltd liability thing also means that if it goes tits up you won't lose your house, but you should be factoring in insurance anyway
Don't worry about VAT if you don't think you are going to break the 68K as its a ball ache.
As others say, you need to find a good small business accountant, and when picking them interview them, and if you aren't 100% comfortable with them keep looking, and also check they will give free advice so if you are wondering about *anything* you can give them a call for a 10 minute chat without incurring a bill.
In your case jedi, you should qualify for IR35 (which is good) as you are a company providing a service to a client which is for a single quantifiable task and time period. So the advice we were given was:
Set up a limited company for £34.99 + VAT, find an accountant, and direct debit the £100 a month. Pay yourself around £6K a year (to minimize tax and NI implications) buy yourself a car, and claim back the 40p a mile mileage allowance, then pay yourself bonuses via dividends whilst trying not to break the 40% tax barrier, everything else should go into the company reserves and then bleed them out with expenses (which you need to keep on top of everyday to stop them getting out of hand).
Finding a good accountant is key, but what I took from the course was it isn't hard to do this, but it is time consuming and a little intimidating, however if you find the right accountant you will be fine, and its well worth the effort of setting up a Ltd company if you qualify for IR35.
Oh yeah, and don't **** with the IR as they don't piss about, so if you don't qualify for IR35 but tick the box anyway and they find out, expect to get a hugggggggggggggggggggeeeeeee tax bill as they can claim for 6 years of back taxes on your companies gross revenue at 65% + interest and they want it in a few weeks.
Posted 2 years ago # -
It's free (and cheap to run)to set up an LLP.
VAT registration can save you quite a bit of money (claim it back on all your bills etc) and makes your company look a bit more established.
Posted 2 years ago # -
yes please richc!
Posted 2 years ago # -
See we got told with VAT that you are best claiming back on a flat rate, ie: you charge 15% VAT, however only pay 11% VAT to the IR (your return rate varies depending on your job classification, so you need to make sure you have the right title, or else you can screw yourself).
However you need to add that 15% to your overheads which if you don't register, you don't need to, which keeps your prices down.
Also its another thing to keep on top of as late payment of VAT is a £2K fine each time, with no negotiation. So if he isn't going to break the 68K barrier, more than likely isn't worth it.
Posted 2 years ago # -
Jedi YGM.
Also another thing we got told was to think about your pension contributions, as they are tax free (if you setup a Ltd company, you claim them back if you are a Sole Trader). Apparently the best and easiest one to use is the Government managed/ran Single Premium contribution scheme, as you can pay in up to 3K a year, and the broker/management fee's are fixed at 1%, unlike lots of private companies. That way if you are having a good year you can pay in lots, or if you are having a bad year, you can pay in a little and you don't have to decide until the end of your financial year.
Posted 2 years ago # -
Rich, I was made redundant recently but went under a compromise agreement and hence got no support. Any chance of a copy of that PDF too please? Email in profile.
Posted 2 years ago # -
richc - pretty good advice I'd say. The flat rate VAT scheme is a doddle and can add to profit rather than detract.
I was confused by the "bleed them out via expenses" comment when related to profit reserves - what do mean by that?
Posted 2 years ago # -
Remeber to register with the National Insurance and tax people asap after you have set up otherwise you get a £100 fine.
There are often courses for people trying to set up in business - contact your local Business Link for details.
Also depending on what business you are hoping to set up don't forget appropriate insurances (e.g. public liability, professional indemnity).
You can also include things like bikes as tax deductable expenses and the depreciation of them each year is also set against tax.
It might be worthwhile setting up as a sole trader initially and then becoming a limited company once you are up and running.
Registering for VAT is also an issue - you can do voluntarily below the £66k threshold, but it's probably only worthwhile if you ae purchasing lots of VATable products and you have to pass the cost on.
Posted 2 years ago # -
Insurance - Public liability and Professional Idemnity. Don't do a thing without them.
Posted 2 years ago # -
How do the rules differ for a 2nd job?
I've sold a few of my battery holders, and my wife is keen for me to be all above board and pay tax etc.
As I'm already paying NI on my main job, do I still have to pay it again on a small 2nd income (pocket money really).
I see where dropoff is coming from with insurance, but I would expect that would mean that it wasn't worth my while trying to sell anything
Any thoughts appreciated.
Cheers, Rich
Posted 2 years ago # -
jedi - Are you receiving redundancy pay-off/JSA and do you have a mortgage with payment protection?
Unless you have an established base of customers getting it off the ground will take time.
I'm trying to build a business as a freelance trainer, been at it for 7 months now, and there are legitimate ways of earning and claiming at the same time.
I won't go into specifics but if you want a bit more detail my email is in my profile.
John
Posted 2 years ago # -
jova54, ygm
Posted 2 years ago # -
jedi, I worked as a self-employed for years, moved to Ltd recently and it's a bit easier - my accountant does everything for me. And I'm more disciplined with cash too. Enjoy!
Posted 2 years ago # -
And I'm more disciplined with cash too
I NEVER, repeat, NEVER get paid in cash
Posted 2 years ago # -
deadlydarcy - Member
And I'm more disciplined with cash too
I NEVER, repeat, NEVER get paid in cash
???? is that good????
Posted 2 years ago # -
I started my business as a sole trader - basically you just open a bank account and make sure you notify the revenue within 3 months of your starting trading.
When my partner came into the business we opened a limited company - partly at our main client's request - which I definitely think lowers the tax burden.
I'm based near you and found the Business Link East introduction workshop was very useful for getting really basic info.
Only done one lot of returns, but my accountant does seem to have saved us paying a lot more tax than I'd have thought. Can give you his details if you like, he's based in St Albans and works from home, travels out to visit clients.
Drop me a line if you want any more info, or a ride and chat sometime. Email in profile. I'm in Cheshunt btw.
Posted 2 years ago # -
Jedi
After countless advice we started Rivierabike up as a partnership (i.e sole trader)
It is the easiest and simplest way, and you can put a lot of things up against tax, bikes etc..
our business is now heading to the VAT bracket, so we are going to be an Italian registered business as there is now way we can claim Italian VAT back!!!!
Posted 2 years ago # -
???? is that good????
No, that's what you tell the revenue...keep repeating over and over while sat in the tax office. It helps if you do that leaning-forwards-and-backwards-on-the-chair thing after a minute or so. They tend to stop asking then.
Posted 2 years ago # -
our business is now heading to the VAT bracket, so we are going to be an Italian registered business as there is now way we can claim Italian VAT back!!!!
Should be possible if you are both in EC. EC business to business supply of goods are not subject to VAT if both parties registered in their respective countries. You effectively pay UK vat on receipt of goods (acquistion) and recover it on the next return. No payments actually made. The delightful Sch5 rules....
Posted 2 years ago # -
Lol @ DD
Posted 2 years ago # -
Posted 2 years ago #
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I was told not to VAT register until you legally have to because you can backdate claims but they don't backdate your VAT owed.
Posted 2 years ago # -
they don't backdate your VAT owed.
I think you'll find that the very second you even sniff that you might be headed over the VAT threshold that unless you tell mr taxman, you will be strung up by the googlies. Being late with your income tax payments is one thing but mess about with VAT and you're in serious trouble...and no negotiations either.
Posted 2 years ago # -
I'm merely stating that if you're not going to take the £66k that requires registration, don't VAT register until you are going to take that amount. When you do finally need to VAT register, I have been led to believe, by an Accountant, that you would be able to claim VAT back on receipts up to 6 months old but would only start paying VAT on things from the date of registration. Our family business didn't take that for over 2 years but we registered from the start so couldn't take advantage of this perk.
I'm happy to be corrected on this, but it's just what I was told...
Posted 2 years ago # -
I'm going this way as well...
As a "sole trader", wouldn't it save me more money to employ an accountant to argue with the IRS re: expenses and such, rather than doing a straight self-formfilling procedure?
Posted 2 years ago # -
Mr Woppit...I'm a sole trader, non VAT registered (for now) and what I paid my accountant last year was about half of what she saved me in income tax. So yeah, unless your turnover is very small or your books are very very simple, I'd say, yes, go for it. They're much better at claiming for things like cars, depreciation etc etc. I figure I'd make in a day or two what I pay her to do. It would take me more than a day or two to do my books as well as she does them. If you know what I mean...
Posted 2 years ago # -
I'm a sole trader and have been for years. I do my own books because my business (writing) is small and simple but I started off with an accountant to get things sorted from the outset. Start out safe and learn what you can claim for - it's money well spent and you can always change later. As for VAT, I don't think you have a choice if you're likely to go near the threshold. Think about a pension plan and critical illness protection too.
Posted 2 years ago # -
As stated above a good accountant will save you far more than they cost no matter how good you may think you are at doing the books. Also it is far better to have the IR coming after you via your accountant than knocking on your door if they want to audit your books.
Posted 2 years ago # -
I was confused by the "bleed them out via expenses" comment when related to profit reserves - what do mean by that?
Basically what we were told was expense everything, and anything related to your business regardless of how trivial that way you get the cash out, for things you need without paying additional tax (eg: entertainment, lunches, coffee, office supplies, professional supplies etc).
Only expense we got told to be very careful with was claiming for a home office, as if you take the piss the IR are known to claim business capital gains tax for any rise in your homes worth over time.
Also another gotcha that we were told about was the 68K threshold for VAT is a sliding 12 months Window, so in any 12 months of accounts you must not exceed the 68K. The IR don't give a shit about financial or calendar years, so you cannot do a trick of delaying paying stuff in until January thinking that because its in a new year it doesn't count, it does.
Also Jedi you have to register your company within 3 months of setting it up/trading. So you can count your first day with a paying customer to be day 1, and you have 90 days from that point.
Posted 2 years ago # -
ajc & deadly - thanks, that's more or less what I had supposed. I'll be looking for work as a Domestic Energy Assessor sometime towards the end of the year, I estimate.
Posted 2 years ago # -
RS$KEV
Is hat true?
I must look into it... yo have any easy to understand info?
What confuses me is that Italian VAT differs on servies and goods (i.e 10% on hotels, 20% on bikes )
Posted 2 years ago #
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