Small business / low earnings questions

[Pavlov]

I have two questions, seperate of sorts.

1. My husband is currently unemployed. He is not claiming any benefits in his own right (other than joint wtc/ctc with me) as I earn too much. He has done a few odd days here and there with friends as 'self employed' with cash in hand money. To the value of a couple of hundred pounds or so. How does he declare this? Does he have to officially register as self employed? does it matter that he has not yet done this? (work was last minute, friend is a gardner and has hurt his wrist so he went in to help him), does he just declare this to wtc/ctc people at the end of the year, and fill in a self-assessment?

1. We are about to sell some items on ebay to make some money, buying/making to sell. Not looking at a huge amount, and certainly with tax limits. We want to do it properly, so are opening a business a/c on ebay, and DH is going to register self-employed. However, I will also be doing stalls at fayres etc, and it will be me doing this work. Is it ok for him to be the 'business owner' and have it registered as his business, I earn over the taxable limit but he does not. Is there anything we might have missed that we need to think about here? Don't want someone knocking on our door in a few months/years saying 'oi you have broken the law, you owe us xxx'.

(this money making is our 'dream holiday fund, have a 5 year plan!)

bump

1. Yes, he has to register as self-employed. It has to be done within 3 months of the first payment iirc. You let tax credits know and do a self-assessment by the deadlines given on the HMRC website.

1. Um, well obviously it can be your husband's business. Don't know how things work wrt you 'working' for him though. Hopefully someone else will be able to answer that for you.

You register as self-employed with HMRC.

Just realised my post makes it sound like you ring tax credits to do it.

Agree with crafty. You can also apply for a nat insurance contribution exemption if you are earning below a certain amount (not sure how much).

You might need to register twice for each business/job. Let me know if you find out :-) I have registered for pet sitting but am now doing freelance work for someone entirely unrelated to pet sitting and I think I have to register that one separately. I presume I will have to pay national insurance on that, whilst not on the pet sitting (which is my holiday/xmas fund).

hehe i got what you meant! ok, thats fine then, it has only been a couple of weeks of earning. But he is hopefully going to get a salaried job soon, so it will potentially impact on his tax so he wants to do it all properly.

Can he be self-employed and have a salaried job at the same time? for two different lots of work (ie a salaried job, and this small business we will be doing?)

re point 2. I guess, if he does not 'pay' me, it wont be a problem.

Yes- I did that for years. He will need to fill in a self assessment form- there's one section for the PAYE job he has and another for the self employed job. I'm not sure whether they are assessed separately or together for tax purposes (I never earned enough in my PAYE job to get over the tax limit at all so it was just zero owed all round).

saint oh yes that is interesting, so if he does x job, and gets paid self employed, and then does y job, something completely and utterly different, he would have be registered self employed seperately for that? Can he just not earn whatever he likes doing whatever he likes as long as he declares it under his self-employed status? i will look into that...!

Thanks for the info on NI exemption. As self employed, what can he claim tax back for? for the cost of fuel to drive to location of fayre? for buying things to display items? entrance costs? Is that expenditure?

I don't think so- I used to but last time I spoke to the tax office (and the bank) they said each self employed business had to be treated and registered separately (so you couldn't use a loss in one to mitigate tax in another I guess).

Their helpline was reasonably helpful - might be worth phoning and asking.

Yes, you can be self employed and also a PAYE employee. A loss on the self employment can be used against other income in the year it occurs, or carried forward to be set off against THE SAME source of income in future. You register as self empoyed and pay class 2 NIC and tax and class 4. Class 2 is a weekly amount to safeguard contributions based benefiots, and a pension, Class 4 is just another tax really.

Re: the other business. If it is a sole trade rather than a company, bear in mind that the debts of that business are not seperate to the sole trader. You can work for him, but may need to register as self employed as well and declare your income. I think he needs only register once and prepare two sets of accounts - depends on the nature of the businesses, and if there are assets used for both. Look at HMRC website.

You don't need to register twice to do different self-employed jobs as you only have one UTR number (the registration number for self-employment). You can report it on separate pages of the tax return, though, if you wish. The income from all self-employment will be added up to establish whether you can apply for Class 2 NIC exemption. So if your husband makes £3k profit from job X and another £3k from job Y then he can't apply for the exemption as his total income from self-employment is £6k (over the exemption limit).

As mentioned before, he can also be employed at the same time, there's a separate page to complete on the SA return for employment income.

If your husband makes losses on one self-employment and profits on another, then losses CAN be set against profits, provided he was actually intending to make a profit from both of them (i.e. was running his business on commercial terms rather than "mates rates" or something).

You can work for your husband's business but if you take any income then you need to declare it and pay tax on it. Of course, you can do all the work for free (as I understand you already have your own income utilising your tax free allowances so there's no advantage in giving you an income through his business). The business can still be declared as your husband's since - let's be fair - how is HMRC ever going to know who actually puts the items on ebay etc...

If the ebay business takes off, though, be careful about VAT limits. If you sell more than £70k worth of items during any 12-month period then you need to register for VAT (unless you're selling some non-VATable items). THis isn't an immediate concern but worth bearing in mind if the business goes well.

ritski blimey, I am not sure we would ever make that kind of money, not doing what we are doing but, the hope is eventually it will run alongside a business DD sets up in a few years, once he is closer to making that happen. In the short term we are thinking more like couple of hundred a month .

I will of course benefit from the income earnt, but i will not be taking a wage, it will go straight into a saver account. Can the money earnt go straight into a joint a/c? or does it have to be his account if his business?

oh this whole offsetting against each other! and losses? not intending on getting into that situation as not going to spend lots on outgoings, other than a little, and time. But, if we buy stock and it does not sell, is that classed as a loss?

really ritski? That's not what the bod on the tax helpline said! Perhaps they're not that useful then (I'm not surprised, I was told a load of rubbish my someone on the DLA 'helpline' but I knew enough about that to know he was wrong).

Pavlov, we always recommend to our clients (I'm an accountant) to have all business-related money going to a separate bank account. You can take it out of there later and put it whereever you want but having a business bank account makes accounting for money coming in/going out easier, and makes the business look more professional as well. Some banks offer free banking for new businesses for a year or two so there's no immediate cost either.

The stock thing is a bit more difficult to explain. Basically your profit is calculated as:
Total income X
Less purchase cost of items (X)
Less phone, internet, mileage (X)
Equals profit

The purchase cost of items is calculated as:
purchase cost of items X
add stock value brought forward from previous year X
less stock value carried forward to next year (X)
(this effectively gives you the cost of items sold in the year, which is what you're allowed to write off against sales income). If you don't keep much stock then you don't have to do this calculation or can just estimate that you held say £100 worth of stock last year and about £150 this year. HMRC isn't really going to worry about a couple of hundred pounds.

saintly, yeah, I think the losses issue might be advanced math for SA helplines There's a helpsheet dealing with trade losses, which might be handy and that tells you fairly clearly what you can or can't do with your trade losses. As you can see, setting them off against other income in the year (this includes employment or other self-employment income) is perfectly fine like grumpypants mentioned above.

I don't have any losses (I only run very low risk businesses ) - my bank did say when I opened my account that with 2 entirely different businesses I couldn't have one business bank account, it would have to be a separate account for each business. Is that right?

Basically I have a pet sitting business with a free business account from Santander - this doesn't make much - and has some limited expenses/phone credits etc- so having the business account makes it easy to track those.

Now I've just started doing freelance editing/writing work - this is much better paid and will probably pay me enough that I will need to pay NIC and some tax. At the moment I just have that going into my current account because I wasn't sure whether it would be a one off - in fact it looks as if it's going to be an ongoing long term thing that will probably pay pretty well, I haven't yet incurred any expenses as I go into the office to do the work - I'm assuming I can't pay that money into my pet sitting account?

I was wondering whether I should set up another free account with Santander for this. And perhaps give myself a name, so I could take on similar work if it came up? Agh confused. I didn't apply for the editing/writing work - I was asked to do it, so I haven't really thought much about the structure.

sorry, I think I've hijacked this! Am still interested in the original OP's question though.

To be honest there's no reason (tax-wise) to open a second account. It would make separating the expenses easier, though.
There aren't many rules about the setup of a sole trade. Only if you set up a limited company do you need a separate bank account etc, that's because a limited company is a separate legal individual and even if you were to own 100% of the company then the company's money would still belong to the company and not to you personally. Sole trade, on the other hand, cannot be separated from you - the individual - and therefore it doesn't matter where the money goes for tax purposes. Tax returns should be prepared based on invoices issued. A separate bank account is often recommended to help you keep your business affairs separate from your personal affairs and it makes it easier to track (especially if you are an accountant looking at the paperwork 18 months down the line) to make sure all the income is declared and all expenses claimed for.

So from that point of view I really can't see why Santander states you absolutely NEED to have two accounts for two separate businesses. If they're free accounts and you can close them at any time with no penalties then there wouldn't be any harm in having two, though.

marking place

Saintly another freelance edior here. Given that everything shows up on the bank statement anyhow, I've never opened a second account specifically for freelance income just bung it all in a spreadsheet, and keep drawersfull accounts of all receipts and invoices for the tax office.

God, if freelance editing is earning you 'much more', how badly was the petsitting paid??
(Mind you, I'd earn more if I got off MN right now...)

Oh it's not quite freelance editing - that's a rather vague title- it's doing some freelance work for a business. Pet sitting is pocket money - pays for a holiday/xmas/extras we need for ds1 etc. If I did it properly (dog walking etc as well) it would pay quite well but my hands are tied a bit by having a disabled child (certain times I have to be home). It's a very lovely gentle way to earn a bit extra though without any hassle.

I had to go into the bank this morning to pay in some pet sitting money and I asked them - they just opened another free business account there and then. I'll ring up the tax office about this freelance work next month and see if I have to register that with them (I'm sure they said yes last time I spoke to them) and I may need to register for nic.

Ah, I see (and I CAN spell editor. Some days.)