Question for UK Warriors

contact your local branch of Business Link. They will give you all the info you need.

Thanks for all your help people - I'll crack on with the project and check out all of the web sites that have been mentioned.

I Would recommend getting advice but NOT registering at this point.
If you do, you will be put onto annual tax returns, which if you are only a paid employee at this point, you do not need to worry about.

Be prepared, and know what is required once you are ready. But first, make that product, set up the site, do your research, get the traffic, get the list building, then the sales etc.

You then still have plenty of time to set up a Ltd company or go Sole Trader.
As for choice, I would opt for Ltd Co if you can, just because of the benefits you can gain, plus you can claim VAT back on everything you purchase for your business, and you can also take Dividends rather than straight pay, which means less tax and N.I etc.

Have all the sites in a swipe file and be ready to set things up, but get your business going first. That would be my suggestion (and what I did back in 2006. Worked Full time in Job, part time on business. Once it began making the income, I set up a Ltd company).

Ultimate decision on Sole Trader Vs Ltd is up to you, but get your business up first.

All the best whatever route you opt for.

Martin

Ah crap, lol just realized this may apply to me now, grrrr

ermmm cheers for bringing this up Kev

What do you have to be bringing in per month on average? and does it apply to affiliates?

Lol Alex

Income is Income.... The UK Govt wants their cut
Affiliate income is still included

If you are a sole trader, then you pay the usual tax and N.I as you would in a second job (if already employed elsewhere). If a Ltd Co, then you can take dividends on profits etc whilst still employed elsewhere.

Get advice from tax office is best, but any income should be declared.

Thanks for all the advice in this thread from me also.

I also had the same question of Kev in mind, now i know. Cheers.

Thanks dudes, I'll get in touch

I may be wrong, but isn't there something like an £8000 CGT (capital gains tax) threshold? If your online income is below this and you work full time then you may be able to pass it off as a capital gain? Not sure, someone else may know better?

I agree that it seems maybe most accountants are arguably not quite

up to speed on IM. However not all accountants are qualified

chartered or similarly qualified accountants.Not all chartered

accountants are tax advisers ( indeed I advise on tax for a

number of chartered accountants themselves).

Not all chartered accountant tax advisers are warriors !!

The position on start up businesses is broadly as follows:

Assuming you're trading and don't just have a hobby ( if you make a

profit you're probably got a trade not a hobby).

The start of the trade is usually the day you make your first

sale. If that sale is made in your name you have got a sole

trader business.

You can take into account expenses you've outlaid in order to

make sales. You're taxed on your profit as adjusted for various tax rules.

Profit = sales less expenses incurred wholly and exclusively for

the purposes of the trade. Some payments you make are not expenses

but are for capital items eg a computer. You don't deduct capital

items from sales to arrive at profit. However, you may be able to

claim a % as capital allowances.

You should advice HMRC within 3 months that you have started to trade. The real

purpose of this is to get you to pay class 2 national insurance

contributions (NI) by direct debit. You also have to pay Class 4

contributions payable with your income tax payments (made January

and July).

Make sure you don't pay too much NI. If you have a job as well as

a sole trade you can apply for a deferrment of NI if you are already paying the maximum.

You have to register for VAT once your turnover (sales) is over

currently £67,000. Until you hit this level you don't have to

register.

Watch out for adwords, there are major peculiarities in the VAT

treatment.( If this applies to you find out about reverse

charges and the affect they have on the requirement to register)

If you are paying VAT on adwords you can get it back but there is

a detailed,precise procedure you have to go through.

One of the most important things to do is keep records, and use a

separate business bank account.Note everything in and out of the

bank account, paypal account etc. Perhaps use excel.

Say you start trading November 5 2008. You will have to prepare

accounts to include in your tax return for year end 5/4/09.

Under self assessment it is up to you to tell HMRC if they should

issue you with a tax return. If you have a tax liability where

HMRC have not issued you a return you are required tell them
you have a liability by 5 Ocober following the end of the tax year
in which the liabilty arose.

Beware HMRC sometimes tell you you don't have to do a return when

you do. Unfortunately if this happens you're in the wrong not

them.Their wording is along the lines of we have reviewed your case

and you don't have to do a return this year (unless you have to).


If you start up in 2008/2009 as above the good news is you don't

have to pay tax until 31 January 2010. The bad news is you have to

pay your tax for 2008/09 then but you also have to pay 50% of

this at the same time plus a further 50% in July 2010.

Lots of people go broke because they didn't realise this double

whammy was coming. Try to save a good % of your income to pay for

tax. Put it in a business savings account. If you've got money

over after tax payments buy something nice with it.


A limited company is a separate legal entity from yourself ie it

is like a different person. Unless you are worried about going

bust it's not normally a good idea to start the trade as a

company.You can always transfer the sole trade into a limited

company when the business is making good profits. If you've got a

job and you're a higher rate taxpayer already and you don't need

to spend a lot or any of your IM profits immediately it may make

sense to go limited sooner rather than later. However, each

individual circumstance should be looked at.

Hope this helps.

None of the above constitutes advice so I cannot

be held liable for you acting or failing to act on it.

It's very much a simplified version of the real world. I would need to

write an ebook to cover it fully.

You should seek advice from a suitably qualified professional.

What you know you don't know you can live with. What you don't

know you don't know can be dangerous and costly.

Kind regards and all the best

Now focus on making the money,

Paul

I wouldn't worry about it for the time being
But instead look forward to the day that you're making so much money that you do have to pay taxes on IM! It's almost a cause for celebration.