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Vat/tax Help!

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Can anyone help with a VAT/tax querey?

I am 26 and work full time at a marketing agency. This throws up opportunity for me to do work on the side for friends and family, be it print work, design, branding and online gubbins. I have just undertaken work where I would be purchasing print design etc from companies that are VAT registered and supplying the work into companies that are VAT registered.

I have been told that I can self register as self employed and be VAT registered even though I am under the circa 60k threshold. My only worry would that I am stung for extra tax and NI due to me already having a primary income.

I will make circa £1,300 profit on this initial job and will probably make that amount again throughout the rest of this year on bits and bats.

Should I bite the bullet and register self employed or should I set up a limited company? Should I just stay non VAT and take the hit?

Or is there any ‘creativity’ I can add to the process if you know what I mean?

Would be really appreciative of any guidance on this from more knowledgeable HPC’ers!

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Guest X-QUORK

Most small accountancy firms would be willing to discuss this with you, or even better ask around your family and see if anyone uses an accountant they can recommend. In my experience they'd be the most appropriate professional body to take advice from in tax matters, and the initial consultations are usually free.

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Not worth trading as a Limited Company.

Simply register as Self Employed (You have Six Months from the date you technically start) with HMRC.

VAT: is it really worth the hassle?

You will suffer Output Tax at 15% on the cost of supplies: however your price to clients will be ex 15% VAT. OK, they offset this as an Input Tax against their own Sales - on which they charge Output Tax. However if you are unregistered, then they pay less and have nothing to offset.

Personally, I would see how it goes.

NIC:

http://www.cromptonward.co.uk/content/forums_paye/dpni.html

On your projected profit, apply for a Waiver from Class 2 NIC under the Exception Rule.

Also remember, the total Gross Profit indicated (Circa £ 2,600) will be reduced will be reduced by overhead: Telephone; Insurance: Travel; Motoring Costs: Printing Postage and Stationery: and finally, Depreciation on any Capital Equipment (e.g. PCs, Printers) you use in your self-employed business.

Finally, also remember, if you have a dedicated room you use for this business - office i.e. - then you can also charge a percentage of the total house costs, such as Heat and Light; Insurance: Council Tax; Water Rates.

If you own don't charge anything to do with this such as mortgage interest! You can, but further down the line then find your principle home exception to Capital Gains Tax is partially eroded: if you rent, then diifferent ballgame and you can charge the relevant percentage of the rent, too.

The percentage to charge to Gross Profit for "Estabishment Costs" is simply arrived at: if the house has seven rooms then it's One Seventh of the total costs.

Income Tax: this is charged on the Net Profit after all qualified (i.e. acceptable to HMRC) are offset.

You will not pay too much tax since you will be compelled to complete a Self Assessment Return on which will go all your income from PAYE employment, and the PAYE Tax Deducated: and your Self Employed profit.

Definitions:

Revenue: Your gross Income from self employed work:

Gross Profit: Revenue less Purchases (Materials you buy to re-sell as part of your trade activity), Sub-Contractors (e.g. printers):

Net Profit: gross profit less all other qualified expenditure.

Taxable profit: Net Profit less Depreciation.

Good luck!

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Not worth trading as a Limited Company.

Simply register as Self Employed (You have Six Months from the date you technically start) with HMRC.

VAT: is it really worth the hassle?

You will suffer Output Tax at 15% on the cost of supplies: however your price to clients will be ex 15% VAT. OK, they offset this as an Input Tax against their own Sales - on which they charge Output Tax. However if you are unregistered, then they pay less and have nothing to offset.

Personally, I would see how it goes.

NIC:

http://www.cromptonward.co.uk/content/forums_paye/dpni.html

On your projected profit, apply for a Waiver from Class 2 NIC under the Exception Rule.

Also remember, the total Gross Profit indicated (Circa £ 2,600) will be reduced will be reduced by overhead: Telephone; Insurance: Travel; Motoring Costs: Printing Postage and Stationery: and finally, Depreciation on any Capital Equipment (e.g. PCs, Printers) you use in your self-employed business.

Finally, also remember, if you have a dedicated room you use for this business - office i.e. - then you can also charge a percentage of the total house costs, such as Heat and Light; Insurance: Council Tax; Water Rates.

If you own don't charge anything to do with this such as mortgage interest! You can, but further down the line then find your principle home exception to Capital Gains Tax is partially eroded: if you rent, then diifferent ballgame and you can charge the relevant percentage of the rent, too.

The percentage to charge to Gross Profit for "Estabishment Costs" is simply arrived at: if the house has seven rooms then it's One Seventh of the total costs.

Income Tax: this is charged on the Net Profit after all qualified (i.e. acceptable to HMRC) are offset.

You will not pay too much tax since you will be compelled to complete a Self Assessment Return on which will go all your income from PAYE employment, and the PAYE Tax Deducated: and your Self Employed profit.

Definitions:

Revenue: Your gross Income from self employed work:

Gross Profit: Revenue less Purchases (Materials you buy to re-sell as part of your trade activity), Sub-Contractors (e.g. printers):

Net Profit: gross profit less all other qualified expenditure.

Taxable profit: Net Profit less Depreciation.

Good luck!

Hay many thanks for the feedback. I will set myself up as self employed – seems strange being already full time employed but the best way round the issue nonetheless.

They really should teach stuff like this at school – I have no idea what to do which is utterly crazy!

I don’t envisage earning loads out of it but upto 4k a year which is great and will not impact hopefully on my tax paid against my full time wage.

Really appreciate the responses.

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Pleasure.

One further useful point: if you can create a loss (By loading costs, expenses and depreciation on to the self employed activity: bearing any equipment you already have can be treated as "Given" to the business at current value: e.g. PCs, printers, desks, desk chairs, filing cabinets, car, ) then you can offset this loss against the same year's PAYE income reducing your tax bill!

The Revenue will not allow you to do this for ever however! They will question the viability of your business activity.

Try and find the time to attend Adult Ed classes on running a biz, tax etc.

useful.

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One further useful point: if you can create a loss (By loading costs, expenses and depreciation on to the self employed activity: bearing any equipment you already have can be treated as "Given" to the business at current value: e.g. PCs, printers, desks, desk chairs, filing cabinets, car, ) then you can offset this loss against the same year's PAYE income reducing your tax bill!

I am pretty sure you can carry a loss back against prior years PAYE aswell if necessary

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Guest X-QUORK
I am pretty sure you can carry a loss back against prior years PAYE aswell if necessary

I think you're right, we did this if I'm not mistaken.

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If not "Relieved" in the current year, then yes you can indeed.

Or carry back the part which is not "Relieved" from current year's taxable income.

You can also bank the whole or part of the loss, and carry this forward for relief in subsequent years.

All provided it is like: i.e. employment and self-employment.

There is an order of set-off which must be adhered to. Primary set off is always to current year.

You cannot relieve property income losses against mainstream income tax: these must be carried forward for relief, against future property income years.

Unless, the property business activity has ceased and then exceptionally, you can apply for this to be relieved against main income.

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