| What or Who: |  SEARCH |
Tax payments for a new start-up businessBusiness Community Home > Business Law Forum > Company Formation Forum |
 |  POST A REPLY | Viewed 3,360 times |
| Original Message Added : 22 Feb 2011 My Husband is considering setting up a very small business from home, He currently works full time in a call centre and paying tax national insurance etc. However I am not sure what steps He needs to take in order to set up his business? It will be just himself working part time (6pm-9pm) as a website designer. He is not aiming to take over the world but he has a few people interested in having a website designed by himself. He is probably looking at making £1000 a year if that, We have 2 children under the age of 5 so we are getting child tax benefits, will this be effected also? How much tax and national insurance will he need to pay etc, he is very new to this as he has never started his own business he has always been employed. I really hope this makes sense to you all, all in all He is just wanting to start a very small web design company to earn a little extra cash if any what tax and things would he need to pay. Many thanks in advance.  |
|
| Reply : 22 Feb 2011 |
|
| Reply : 22 Feb 2011 Here is a very useful website for start up businesses, please do forward to your husband to read through. http://www.startups.co.uk/ Good luck! Marcin
|
|
| Reply : 23 Feb 2011 http://www.hmrc.gov.uk/forms/cf10.pdf
|
|
| Reply : 23 Feb 2011 If your husband's net profit from his part time business is £1000 for a tax year then tax would be at basic rate and there would be no Class 4 NIC to pay. Net profit means earnings from design work less tax allowable expenses. Basic rate is currently 20% and should continue at 20% for the new tax year beginning on 6th April. So based on your question tax would be £200, no class 4 nic and if he applies for exception from class 2 nic because of low earnings before the beginning of the new tax year then £200 would be the total cost. If your husband kicks off the business before 5th April then for 2010/11 the profits assessed will be the actual figures from start to 5th April or a proportion of his first accounts profit (not necessarily 12 months). If he expects the business profitability to grow over the next year or two and intends to continue the business and develop it then he may wish to think about fixing his annual accounting date to end early in the tax year and defer the incidence of higher tax bills as the business grows helping cash flow. If the business makes a tax loss in the period to 5th April next which I suspect could be the case (after accounting for set up costs including machines and equipment that he may already have (paid for out of taxed income) then there are choices about using losses i.e. carrying them back, set against same year earnings or carry forward against future profits. Decisions on how to use losses are usually based on the rate of tax in force for the year of set off, how the business is expected to fare in the opening years and desirability of obtained a tax rebate immediately. Sorry if this sounds long winded. For professionals it isn't and if all the information is available does not take long to work out. I hope that this helps and best wishes for your husband's new venture.
|
|
| Reply : 24 Feb 2011 Many thanks for that, it clears things up a little. So as its a web design company he requires some computer software, office equipment, and a few advertising products to start off with (costing around £800.00) would he need to pay this up front or can he claim it on his taxes? So for example he starts before April 2011 and buys the equipment for £800.00, he then gets 3 websites in a year £300.00 each total £900.00 would he then minus the £800.00 costs to start the business from the £900.00 money made? Equals £100.00 profit for the year, tax would be then £20.00 for the year?? Is this correct? would he then need to pay more tax next year to cover the £800.00?? I am unsure of what can be claimed. Many thanks in advance it is much appreciated. |
|
| Reply : 24 Feb 2011 Broadly you are thinking along the right lines although software can be a little bit tricky depending on its' likely useful life. Equipment purchased would normally fall within the Annual Investment Allowance with 100% write off against profits and equipment that your husband may already have and brings in to the business could qualify for writing down allowances at a lower rate. There will undoubtedly be other expenses that can be claimed against the business and the rule of thumb is to keep a note of any costs that in some way relate to the business and then work out a reasonable claim for the business aspect. For the level of business activity that you are concerned with here I would say that the time you will spend learning about these things could probably be far better used doing something else! Don't forget that if you paid someone to sort it out for you for the tax year, say £100, then given your example there would be no tax due and you could sleep at night!
|
|
| Reply : 25 Feb 2011 |
|
| Reply : 2 Mar 2011 Likewise child tax benefit also depends on how much he earned. |
|
0)
