Self employed?

[Shaun]

I started work for an agency last week - the only problem is I need to pay my own tax and NI.

Now I've never worked like this before so I have no idea what to do. I spoke with the tax office and they are sending me some paperwork out.

I'm looking for either a good site with simple details of what I need to pay and what I can claim.

For example I've been told that I can claim all my stationary and travel costs from tax - do I get it all back or just a proportion? Can I claim for a Laptop as I'm going to need one for my work? Can I claim for photocopying and printing?

If I can claim for these things how on earth do I claim for half an ink cart - how do I know what's personal use and what isn't - I'm not wanting to buy a separate printer just for work stuff!

Do I need to open a separate bank account? If so how does this work with paying for expenses and paying myself a wage?

It seems to messy and there doesn't seem to be much info on the HMRC site for people like me who are just one person who needs to pay Income Tax and NI.

How do you all get on with this (there must be some other self employed people here )?

[Hugh]

Umbrella company?
Umbrella

[Ramrod]

Keep all of your receipts.....you never know what you could put against tax.....

[Shaun]

Originally Posted by foreverwar

Umbrella company?
Umbrella

Seems a little excessive - I can see the benefit of that for a Plumber or the like but I shouldn't have that many expenses so thought I could do it myself. It's not the best paid job in the world either so I'd not really want to pay someone. Good suggestion though!

[yesman]

This site might have some useful tips...

http://www.bizhelp24.com/

[danielf]

Originally Posted by Shaun

If I can claim for these things how on earth do I claim for half an ink cart - how do I know what's personal use and what isn't - I'm not wanting to buy a separate printer just for work stuff!

Presumably, you estimate what percentage of use is personal, and what percentage is for work. You then claim the percentage of your stationary/consumables bill that was used for work. Much like people with a company car pay tax on their car based on the percentage they are deemed to use it privately for.

[greencreeper]

Your choices are:

• Umbrella company - some offer a range of services, starting at the el cheapo basic service, upto the full "we'll scew the tax man for every penny possible" service, which is just as well given the price of such a service
• Sort it out yourself - and risk fines and prison for getting it wrong, or at the very least, ending up out of pocket
• Setup a company - has tax and legal advantages, but still the paperwork, and all the risks
• Pay someone to sort it all out - hope he/she doesn't disappear somewhere warm

I used to use http://www.brollyit.com/bit/brollyit.nsf

[SMHarman]

Your local tax office should be able to help.

You need to pay your Class 2 NICs of #2.10 a week (this can be done by DD).

You need to pay Tax on accout quarterly or half yearly based on your estimated earnings.

At the end of the year you produce a set of accounts as indicates
Earnings
less
Expenses (commuting, home office cost, directly attributable costs etc)
equals
Earnings that should be taxed
You then put that and your other earnings through the tax machine
first 5035 free, next 2090 at 10% etc and come up with what tax you should have paid, compare it to what you did pay and pay the balance or ask for a refund.
You also at some point need to consider class 4 NICs whichare you NICs on profits.
You should be able to find a tax accountatnt htat if you keep good records during the year can do the year end stuff for a couple of hundred pounds.

If this is going to be a more permanent way of working then you could set yourself up as a company and the company does all this then pays you and as you are a company that company (which is still you kinda) does the payroll tax.

Or an umbrella company as mentioned, but there is a strong chance of a big crackdown on these by Mr Brown soon.

[Shaun]

I'm waiting for the paperwork from the Tax Office - but I'm guessing it'll not tell me exactly what is allowed as an expense and what isn't.

I think I'll try and do it myself - it's only £8 an hour so for me to pay someone else is going to really sting.

The Tax Office guy said that they could help if I needed assistance - he also said it would be much easier to do it on-line as it'd tell me what I need to pay them.

It's a fairly easy set-up I think, I invoice the agency monthly for the hours I do - they pay me by cheque and then I need to pay tax and NI.

The Tax Office said they'd send me the DD forms for the NI (class 1). I think what I'll do is work out the figures of what I expect to earn and then put by the amount of tax I think I'll have to pay. Any expenses I'll pay out of my own pocket and keep the receipts and that way if the Tax Man says any of them aren't allowed then I'll still have the money to pay them. If he agrees to them I'll have a nice sum at the end of the year!

Does this sound a reasonable way to do it?

Edit- My expenses will only be stationary, and a laptop (will I get away with this?).
I'll be doing some unpaid admin at home (probably filling in tax forms, invoices/time sheets and general paperwork) I'm guessing it's not worth the hassle trying to claim for this?

[SMHarman]

The Laptop will be allowed. As a business asset the rule is something like wholly and necessicerily, no exclusivly (which appears as an employee thing).

What happens is it becomes a busineness asset and you take what is known as a capital allowance, which is the tax equivilant of depreciation and set that against your income.

You should be able to check again with your tax office, but recently technology has had a 100% capital allowance so you can write off the entire cost in your first year. Usually it is say 25% or 1/3 or 50%.

If you paid someone to do the admin then that woudl be deductable to you (and income to them for their tax - so that is nothing).

But stamps, binders for the filing etc are all deductable. You can also probably claim some element of subsistance, say £5 for lunch each day or if you worked a longer day say over 10 hours £15 for lunch and dinner.

You can also claim your travel as a cost. So keep those receipts too. If you are driving then it will be a 40p [check the rate has not gone up]/mile flat charge so keep a book of mileage details.