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Working from home/invoicing/payme
nts etc. advice please
I am starting to do more freelance work from home but I have no idea what I should be doing about invoicing and VAT.
Do I need to charge VAT on invoices? What's the best way to accept payments from abroad? Do I need an invoice numbering system or can I just make up a number. What do I do about tax?
Until now, it has been fairly irregular, so haven't really had to worry about it, but now I will hopefully be doing more work, so need to take it a bit more seriously.
I hope some of you with experience of these things can give me some advice. Thanks.
From what I know:
- You don't need to collect VAT unless you a registered for VAT. You must register for VAT if your incomings are over (from what I remember) around £40K. Being registered for VAT is a bit of a hassle, but it does mean you can claim back VAT on purchases.
- For tax: if you are doing this just as yourself, I guess you need to declare your earnings as earnings on your tax return. Once you do this, IR will start wanting money from you in advance on tax, for future years, but for now, you just need to make sure you've got the cash to pay the first tax year's worth of stuff.
This is entirely off the top of my head, I'm not an accountant, but I was self-employed (own limited company, VAT-registered) for years.
Thanks NQC, that helps. So I don't need to do anything about tax for a year?
Other than set aside a proportion of your income to pay the tax! 25% if you are lower rate and more if higher I should think
I don't think so. Well, if you didn't have tax for the 03/04 tax year, then you need to worry about the 04/05 tax year which ends in April 05, and you can send in tax forms in September 05, getting them to calculate your tax owed.
It might be worth talking to IR to be sure, though. They tend to have help lines for this sort of thing.
I'd do a websearch, but am being mauled by baby and must go to dentist (that will be fun).
Not sure whether I'd rather sort out tax or go to the dentist - close call!
I'll have a look on google.
Hi CQ - good luck with your work (what is it you do?). The Inland Revenue website has a self-employment section link
which might help you (and if that link works it'll be the first time for me, so don't hold your breath).
I've been self-employed for years. I think I wrote to the Inland Revenue to tell them, then at the end of that tax year they sent me my first form. I keep things really simple. Of course it depends what size of business you're talking about - I don't earn anything near the threshold for VAT. I don't have a separate bank account, and I just number the invoices as I go along (eg 2005-01) and keep a list of them. Keeping clear records is really important.
Thanks mfh, the link did work! I'll check it out tonight.
I won't be earning huge amounts, as I'm a SAHM at the moment, so it's what I can fit in around dd.
You do need to register with the inland revenue for national insurance as a self employed person. If you are not earning much you may not have to pay anything yet though
You need to register as soon as you go self employed or the IR will fine you, as my partner found out just last month! You won't have to pay them anything yet, but you do have to declare yourself self employed as soon as you are.
You can't charge VAT on invoices if you are not VAT registered, and it sounds like you don't need to be...but if you buy a lot in your business that you have to pay VAT on then it might be worth registering.
Can't help with payments from abroad I'm afraid apart from when I invoice another country I keep it in stirling and that's how they pay me, usually direct into my bank account.
Hope this helps and good luck.
you need to notify Inland Revenue that you are self employed within three months from when you start working for yourself. you can do this via their website , via the phone or they can post the forms out to you if you call them up. You'll need your NI number, the name of bussiness, your address etc. Of course the name of bussiness could be your own name.
You will be sent a self assesment form at the end of each financial year (april) which you complete and return to them.They also have a support for start up bussiness link on their site. where i live there is a bissiness link (I assume there is one in every area of the country) and they are very helpful & useful and are free of charge to use.
If your estimated annual earnings are bellow the threshold (I think that is currently around £4700??) then you can request an exemption certificate for class 2 national insurance but it's best to read about it first to see if it's applicable or suitable in your situation.
As for invoicing, I don't know what the rule is by I write my own invoices on the comp[uter (just made up a standard letter with my address, business name etc and details of fees). You must keep copies of all of these so you can work out how much you earn and deduct your costs from there (i.e. if invoicing abroad you might incur postage payments of some sort which is not profit but expense)
The IR website gives you some idea of what you can include as bussiness expenses when self employed. You qualify for VAT refunds if your anual turnover is about £40 000 (I think) but it's something you need to look into more detailed.
I hope this helps a bit. Good luck with your bussiness.
PS You'll also have to declare other earnings such as state benefits if you get any or interests you earn if you have savings or even on your current bank account etc. Therefore, make sure you keep your current and savings account interest summaries which your bank posts to you in april each year. if you do not receive these, ask your bank for a copy.
Thanks for all your advice. I'll definitely have to get myself organised.
I don't think I'll be charging VAT just yet as I've only earned about £200 so far!
CQ, I freelance from home too - good luck! Branster's points about NI are good. My main tip would be, if you are planning to earn enough to pay tax (£4600 or something like that) get an accountant. I use one specialising in small businesses and he only charges me apx £300/year and he's invaluable. He's always there when I phone beacuse I've got a letter from the tax office I don't understand, he claims for everything he possibly can against tax (except childcare - but that's a whole other thread earlier today!), he does my tax return and files it in time so I needn't worry.
I don't know what you are planning to do workwise but remember to keep all your receipts whenever you buy anything that could be work-related. I would number your invoices if I were you - it makes things easier when you're chasing them as companies will use the invoice no as a reference. And make sure you make your terms of credit clear on the bottom of the invoice. You are entitled to claim interest and compensation if people don't pay up in the stated time. I put the following on my invoices:
TERMS: STRICTLY 30 DAYS UNLESS OTHERWISE AGREED AND STATED ABOVE
Any queries relating to this invoice should be raised in writing within 7 days of date of invoice
Note: WE UNDERSTAND AND WILL EXERCISE OUR RIGHT TO CLAIM INTEREST AND COMPENSATION FOR DEBT RECOVERY COSTS UNDER THE LATE PAYMENT LEGISLATION IF WE ARE NOT PAID ACCORDING TO AGREED CREDIT TERMS
You can actually claim 8% above base rate on a daily basis if people pay late. here's the website giving details of late payment legislation
Finally, you need to keep copies of your accounts for 6 years before chucking them out.
PS you won't need to declare child benefit or maternity pay.
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