Starting a small business
by Andy Turner,
Partner, Mark J Rees
When you start to become self-employed it is very important that you comply with the requirements to register this with HM Revenue and Customs. You can be self-employed in addition to a having full time job where you are an employee.
It can be confusing when what you are doing develops from a hobby into more. The factors that need to be considered if you feel this might be the case are the “badges of trade”. Some of the key factors are intention to make profit and frequency of transactions, basically if there is an intention to make profit and the transactions are repeated you are probably trading.
Once you start a trade in this way you have three months to register with HM Revenue and Customs to avoid a potential penalty. This is done by calling HM Revenue and Customs or using form CWF1. Once you are registered as self-employed you will be required to complete a self-assessment tax return each year showing your profit from the trade as well as other sources of income.
In order to calculate your taxable profit it is important to keep records of every transaction related to the business as well as keeping the various invoices and receipts. You should also record things like business mileage in your own vehicle and business usage of your telephone.
There are three types of tax potentially payable on these profits which are:
1. Income tax
2. Class 4 National Insurance
3. Class 2 National Insurance.
The current basic rate of tax is 20% and starts once your personal allowance is utilised. National Insurance Class 4 is currently 9% and starts when profits exceed £7,225. National Insurance Class 2 is currently £2.50 per week but is exempted if profits are below £5,315.
Your self-assessment tax return needs to be completed by 31 January each year if you are filing electronically or 31 October if filling on paper. The penalties for being late can be very harsh. Any tax liabilities are due in January and July. As these tax forms can be confusing many individuals prefer to ask an accountant to help them out.
More information can be found at
Mark J Rees
T 0116 2549018
We’d like to thanks Andy for clearing up these issues that can seem like a minefield when starting up a business.jewellery business, jewellery business week, selling handmade jewellery, selling jewellery tips, trading