I'm ready to become self-employed but would like some advice.

[tammybear]

Hi there,
So I'm getting myself organised (as best as I can) to become self employed. I'm running my own photography business and have done enough of my own work or assisting other photographers to build up my own portfolio and construct my own website. I have just done a degree and part of it was to build up our own business plan if we were to have our own business, so I constructed it around this business I am now wanting to start up, so that really helped! So now I just want to make sure I have everything covered.

Once I have sent off my application form to register, I can start paying NI C2 monthly as that's probably just easiest for me rather than quarterly. C4 will be calculated during self-assessment. I get my tax return form in April, and then will have to pay the tax by 31 January the following year. I should keep a record of all sales/invoices/receipts as well as purchases/expenses. Is there anything else that you could recommend I need to save that I have forgotten? It'd be best to get an accountant which is something else I need to look into.

I am a little concerned as to how this will affect my tax credits though, as I can't guarantee how often I will be working, as obviously with photography, it's not just the taking of photos but also the editing afterwards. How have others found this? I'm also doing my top-up year for my degree this September so I also need to figure out how that's going to affect everything too.

I feel a little bit scared doing this, as it makes me much more responsible money wise, which I'm not lol. So any advice would be fab TIA

If you have an erratic income your tax credits are going to be a bit of a lottery on an ongoing basis: they are organised on the basis that you work regularly, regular hours, and know how much you are being paid. However, it all comes out in the wash round about now when you send them the final definite figures for last year and they work out whether they have paid you enough or too much. So what I did was take an educated guess, pitched it too high so they paid me less and there was less risk of me having to pay some back. Worked out fine.

Do you plan to register for VAT? definitely something to talk to an account about. VAT runs on TURNOVER not profit, so you need to take that into account

Thanks! That's a good idea about going higher than lower. I'll have to work that out. I don't think I'll register for VAT, but I may just go over it just in case I think it'll be a good idea to. Thanks

I spoke to a friend who is self employed. He said I should register for VAT but also register as a limited company instead of just being self employed/sole trader. I'm not sure how this would differ/benefit me?

I'd strongly advise finding and speaking to a good accountant - they are worth their weight in saved money!

There are a number of reasons to register for VAT. The first is if your turnover is likely to go over the threshold (which is £70k).

Secondly, if you buy lots of things that have VAT added.

Image - it projects the image that you are a bigger business.

Image is often the reason people chose to be a limited company over being a sole trader but there often is no need. I operated as a sole trader for 4 years and ltd co for the last couple and in terms of business gained it has made no difference (but I do mainly sell business to business).

Your accountancy costs will be higher as a ltd company. And you have more legal obligations as a director.

It's easy to become a sole trader and become ltd at a later date, but not as simple to form a ltd company and then realise you don't need it.

Thanks for that! Yes I have been going through different accountants and have asked people I know if anyone knows of one they can recommend, so shall be calling round this week.

That's good advice about sole trader vs. ltd company. My friend has other people working for him so I can see how it works well for him, but yeah I wasn't too sure if there would be any benefit other than the image as you say. But I suppose as I'm starting out, it'd be better to keep costs low and not go overboard too soon if accountancy costs are higher.

That's been a great help

No problem Tammy. If you are in my neck of the woods (Manchester) I can recommend a superb accountant (and I should know - I'm on my 5th!).

Ahh I'm afraid not. I'm down in Watford, otherwise that would have been fab!! Thanks anyway

Hi tammybear,

sounds exciting times for you and getting the best advice can save a headaches, time and money.

I also registered a few months ago for being self employed and am still in fits and starts.

I can recommend an online tax and advice service which I use called Tax Advantage if it helps.

Hope it all goes well

I would not register for VAT unless you absolutely have to as you then have to charge VAT on your services so become more expensive compared ti a local competitor with a lower turnover.

Being a limited company keeps your business finances separate from your personal ones so if you are in an industry whereby someone not paying could sned you under - there is a safeguard. eg in the construction industry you have to buy ythe materials up front, often on 30 days credit so a customer not paying would be difficult.