Folksy Ltd

Query about tax

Hi, I’m hoping someone has the answer to my question about tax. I know I need to register but I’m not quite sure what I need to do. Although I have got my “embryo” craft business I also have a “proper” job and so when I went to register on line I wasn’t sure if the self-employed form was the correct one to fill in, or do I just request self-assessment? Help please

Gilli

I work a full time job and run a business. I am registered self employed with HMRC as well as PAYE with my employer…

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My only advice is to seek the advice of an accountant. They are the only ones who will be able to look at your circumstances and give you the advice you need. If you are worried about costs etc, then a craft business can in some circumstances be offset against other earned income, and if you pay tax, you could end up with a tax refund.

In my experience most accountants are happy to chat things through free of charge so you can assess what is the best way forward, so just pick up the phone and get a couple of quotes/ options from local accountants to get you started.

Your immediate question will probably get answered on your initial phone call, and you can then decide if you want them to handle your matters moving forwards.

I just wrote to HMRC and told them my circumstances stating how much I earned at my part time job and my circumstances with my Folksy shop. I had a letter back within a couple of weeks stating what I had to do.
There is some new thing coming in where you are allowed to earn up to £1000 per year from online selling, on top of your salary without having to declare it, but I cannot remember exactly when it comes in to force…sometime in 2017 I think.
Here is a link

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Thank you so much for that link. I will follow it up and good luck.

I wrote a long and detailed response, but then I found this article that does it much better than I did :wink:

Just a couple of things I’ve found out after 14 or so years of doing it:
If you owe any tax you can have it put into your tax code for the following year and pay it via your normal monthly deductions from your job or if you want to keep it separate (which I do) you can pay it as a lump sum by the end of the tax year (so if for example if completed a return this year it would need to be paid by 31st January 2017). There’s a box you have to tick for that at the end of the return - don’t do what I did and miss it, it took some sorting out to put that mistake right and I never did it again :grinning:

The final thing is - you’ll be taxed on the amount of profit you make as HMRC assume you’ll put this profit straight into your pocket. I found it was years before I could actually take the money I’d paid tax on, because I needed to keep the money in the business to pay for new stock. Serious word of caution - make sure you keep proper accounts for income and outgoings and learn what counts as legitimate expenditure - then you can make sure you’re genuinely only paying tax on profit, not income (which is higher). I just use a simple spreadsheet - 1 tab for income (so sales), 1 tab for outgoings - materials, postage, Folksy fees, PayPal fees, advertising, craft fair costs and then a summary sheet. That should do you.

When I first registered as a sole trader I made the mistake of volunteering to pay extra NI - even though I didn’t make the threshold, the good news is now you’ll be assessed for additional National Insurance when they assess your self assessment tax return. Do just bear NI in mind as an extra cost (you need to be earning about £5000 extra a year I think for this to become due).

https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

I contacted an accountant and they were honest enough to tell me that I did not need their services. In the politest way possible the told me that it would really not be worth their time :slight_smile:

That was at least 6 or 7 years ago. However, recently there seems to be have been a change in what HMRC are telling people. There have been a few threads on here that say some sellers were told that they only needed to register when they were making a profit.

When I phoned HMRC all those years ago I was categorically told that “all extra earnings no matter how small needed to be declared” - so I went went that.

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There is a very useful app, 1 Tap Receipts, you enter your receipts for things you buy either by taking a photo on your phone or by forwarding the email and then it automatically saves them , works out any tax you can claim back and then enters it onto a tax form for you.

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I had to register as self employed despite being on a very low pension and despite my earnings from my art being extremely low…I am thousands below the tax bracket and yet I still have to declare it. I am hoping that one day HMRC will take a close look at my accounts and see that there is NO WAY I will ever be taxable…but in the mean time I have to still fill in all the forms.
Fortunately for me, I have a friend who is an accountant and does it all for me…

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Thanks for sharing this @Gilliyflower - just had a quick look - looks really handy and gets very good reviews.

Well I phoned up HMRC and believe it or not got through first time! Very helpful advisor, I am now registered for Self-assessment rather than as self-employed. He then asked if I knew what I could claim for in terms of expenses, and when I said I wasn’t sure put me through to another colleague, who took me through the basics.
I think my best plan now is to keep on top of logging my expenses and invoices as I go along.

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They’ve always been very good whenever I phoned them. Glad you got it sorted. Let’s hope you’ll have loads of sales to declare :slight_smile: Good luck.

Yes they are always very helpful, because they would like you to have it right too. There is lots of advice on the gov.uk website as well.
Ali