Newbie small business question!
Discussion
Any business minded people on here could help me with the following?!
I have an idea
for a small business, to run in my
spare time, alongside my salaried job. It would be more of a hobby than anything else, and wouldn't make that much money per year (a few hundred quid probably!)
Would I need to go to the hassle of forming a company / getting an accountant to look after my accounts / filling in tax declarations etc? Is there some kind of threshold you are allowed to earn before the revenue come after you?
Thanks in advance,
Philip (who knows nothing about business!)
I have an idea
for a small business, to run in my spare time, alongside my salaried job. It would be more of a hobby than anything else, and wouldn't make that much money per year (a few hundred quid probably!)
Would I need to go to the hassle of forming a company / getting an accountant to look after my accounts / filling in tax declarations etc? Is there some kind of threshold you are allowed to earn before the revenue come after you?
Thanks in advance,
Philip (who knows nothing about business!)
My brother and I did basic websites for a while as a hobby, beer token idea.
Fortunately I had a friendly accountant who sorts out our personal tax stuff, and she includes it on our personal annual returns. £50 each (but she did know us)
No need to formally set up a company, but you do need to advise the tax man (if you want to do it properly
) Need to keep a track of what you spent and moneys received, but no need for an accountant for run your books, just keep a spread sheet of outgoings and incomings should be fine.
Went to bank and set up an account for the tip bits of money made, sole trader or informal partnership account did us fine.
Bank was great at advising what I needed to do. It ment I had a much better idea this time round when I did it for real and went out on my own.
>> Edited by vex on Friday 9th July 09:23
Fortunately I had a friendly accountant who sorts out our personal tax stuff, and she includes it on our personal annual returns. £50 each (but she did know us)
No need to formally set up a company, but you do need to advise the tax man (if you want to do it properly
) Need to keep a track of what you spent and moneys received, but no need for an accountant for run your books, just keep a spread sheet of outgoings and incomings should be fine. Went to bank and set up an account for the tip bits of money made, sole trader or informal partnership account did us fine.
Bank was great at advising what I needed to do. It ment I had a much better idea this time round when I did it for real and went out on my own.
>> Edited by vex on Friday 9th July 09:23
If you are making a profit from the operation - and you are already paying tax on your salary, it is virtually certain that you should pay additional tax on the profits you are making. Therefore, notification of the start up of your business to the Inland Revenue is required - within three months of the start up date. Conversely, if you are making losses, you could still notify the Inland Revenue and claim the losses against your "Other Income" in the tax year and maybe get a tax refund.
Paolow - settinng up a Limited company is the last thing you do. Losses incurred by a limited company are the company's, not yours. As a result, all the company can do is offset its losses against its own "other income" or its own future profits. You would not be able to get any refunds of your own personal income tax.
Secondly, even if you were making personal losses on a property you would not be able to offset those types of losses gainst your "other income" either. The offsetting of losses against other income is restricted to "trading losses" i.e losses incurred from running a business. Owning a rental property is not a "trade" for tax purposes, it is an investment. Losses incurred on investment income are not as flexible as losses incurred in a trade.
Finally, if you set up a limited company to own and run a rental property, you might find that it was not that tax efficient - company's do not get the "personal allowance" avaialble to individuals when a cpaital gain is made and companies deriving their profits from investments can not avail of the special low rates of Corporation Tax which are available to small "trading" companies. The last problem is getting your hands on the rental income sitting in the company's bank account. On withdrawl of this money, you personally would be subject to Income Tax (and possibly National Insurance).
Secondly, even if you were making personal losses on a property you would not be able to offset those types of losses gainst your "other income" either. The offsetting of losses against other income is restricted to "trading losses" i.e losses incurred from running a business. Owning a rental property is not a "trade" for tax purposes, it is an investment. Losses incurred on investment income are not as flexible as losses incurred in a trade.
Finally, if you set up a limited company to own and run a rental property, you might find that it was not that tax efficient - company's do not get the "personal allowance" avaialble to individuals when a cpaital gain is made and companies deriving their profits from investments can not avail of the special low rates of Corporation Tax which are available to small "trading" companies. The last problem is getting your hands on the rental income sitting in the company's bank account. On withdrawl of this money, you personally would be subject to Income Tax (and possibly National Insurance).
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