UK Online Marketers How Did You Make The Leap?

Doug,

Go and make some money.

Make sure you keep a record of income AND ALL EXPENSES.

If you are still working PAYE then just complete a tax return at the year end.

If you are going fulltime self employed then find a local accountant/book-keeper
and give them details. They will do everything for you and tell you what is needed. For what you are doing then it'll cost you maybe £200-£400 a year and you'll save more than that in tax.

PM me if you need more info

.

Doug

As you've been well-advised "go and make some money" and spend a little of that in talking to an accountant, even though it will set you back at least £100/hr. However, most accountancy firms will give you at least half an hour of their time without charge.

You could tell them what your business plan is (affiliate marketing and/or product developing, etc) and say that you were wondering whether it would be better to go down the sole trader route or as an incorporated company.

I'm neither an accountant nor a solicitor but I have run both types of operation - a sole trader operation and a few companies, including two at present.

I'd suggest you put your business on a professional footing from the get go but I wouldn't incorporate the business (ie limited company), just yet. It will involve company formation costs (£50-£120) and unnecessary formality, admin and hassle, particularly as you are holding down a job as well.

But decide on a trading name for your company and open a business bank account. This will be in your name trading as "your business name" (Joe Bloggs trading as Affiliate King).
This will keep your personal cash separate from your business earnings and so it will be easy to account to our friendly taxman at year end.

Keep a detailed income and expenditure account (excel spreadsheet will do). Keep all your invoices (both those for purchases and for any that you issue for sales of your own products). Print off and file in chronological (date) order all payment receipts and cash paid into and out of the bank.

There are no upfront payments to the taxman. You will, however, need to inform HMRC that you are running a sole trader operation - read up the facts on HMRC's site. It's very clearly explained.

At the end of your trading year, you'll be required to submit a return and accounts. If you make a loss, you won't have to pay any taxes on your business earnings. If, however, you make a profit, there may be tax liabilities. For more precise info on bookkeeping, end of year accounts and tax liabilities, consult an accountant.

You could, of course, do none of the above, particularly if you are doing nothing more than earning commission as an affiliate. You could simply make money then declare your earnings to the taxman in September (self-assessment) and have your tax code adjusted accordingly for the following year. In any event, I'd seek professional advice to ensure that you don't get a nasty tax bill from HMRC when you least expect it.

They have "vays and means" of finding out whether or not you are withholding info on extra earnings. So it's best to stay on the straight and narrow.

James

Thanks to everyone for the help and advice. I'll go look at the HMRC site and see where I go next.

Don't worry about scare stories of HMRC, they're used to dealing with newcomers to self employment, and their tax questions. These days, I find if I give them a call with a genuine 'need to know' enquiry, they're pretty helpful, and even friendly.

Registration.
Limited Companies.
You may elect to form a Limited Company, of which you would be a director. However this is a much more involved process, and needs more paperwork. It also costs money, and HAS TO submit audited accounts. You have to take your income as an 'employee' of the company (director). You will need an accountant, which incurs even more outlay too.
When you're first starting out, or before you start making serious profits, I can't really see any advantage to forming a Limited Company in the IM industry. It does afford you a little protection in the case of liquidation or bankruptcy (of the Company), but if you keep strict controls on your spending etc., this shouldn't be a problem. I have been a Director of my own Limited Company in the past.
Sole Trader or Partnerships
Here you have a choice. If you trade only in your own name, you don't need to register with HMRC (call them to confirm), bt you will need documents at year end to declare your Net Income as well as your tax paid through your employer.
If, however, you want to use a snappy trading name, such as Douggies Enterprise, the HMRC will ask you to register. The trading style would be "D. Surname trading as Douggies Enterprises.
A phone call to HMRC will quickly clarify what you need, without incurring accountants' costs. I would recommend having an accountant complete your end of year figures, but they don't need to be contracted month by month. In fact, a good one will tell you exactly what records you need to keep, and what to give him at the end of the year.
Detailed Accurate Records.
You MUST maintain good financial records. However, they don't need to be over complicated.
In the most basic terms, you need to record:

1. Any Receipts (money you RECEIVE), and
2. Any Outgoings (money connected with the business you PAY OUT).

Golden Rule: Keep ALL receipts and invoices for money paid out. You can offset a lot of revenue with your costs and expenses, trducing you tax liability.

That's it.

You can get a Small Business Accounts pack at WH Smith or similar for about £20.00, which has pre-printed forms. This may make everything easier for the newcomer to self employment, but it's not esssential. If you're any good with a spreadsheet, you could set up your own weekly/monthly accounts record.

Don't forget that if you're in employment full timr, you are probably over the tax threshold already, so you'll need to ensure you put aside a percentage of your PTOFIT as you trade. Otherwise a sudden heafty tax demand can be pretty scary. You will need to contact an accountant or HMRC about VAT, although you won't need to concernyourself until you're making quite a healthy profit.

Hope this helps.

Cheers
Alan

Thanks Alan, that's really nice advice. I'm going to spend the next week or so organising myself and then jump in.
This might even be a good idea for someone to do a product around, as I've not seen this addressed in any of the information I've read before.

I'd be very interested to see what you come up with Alan, so let us know when you have decided how you're going to release the information.

Call up HMRC - they are usually very helpful and nice. Do everything properly and get an accountant. I used to do company formation myself - you can with a few pieces of legal stationary - but you can pay £99 and get it all done in a few days online now - very very easy.

Good luck and all the best

Hi Doug

There's been some really good ideas here already but here's a few more:

Check out the UK Government business support website at Business support, information and advice | Business Link and HMRC at HM Revenue & Customs: Home Page

Contact your bank and ask for their free business startup guide. Do the same with a couple of local accountants, most of them have one. You may even be offered a free consultation.

Ask your local Council if they have a business support unit, most of them do and some employ business mentors.

Check with your local Chamber of Commerce or local Federation of Small Business (FSB) branch, many of them have business startup support or work with local agencies who do.

If you are in or near the East Midlands check out ebusiness club east midlands - Advice on ebusiness, ecommerce, online marketing, websites ICT and internet technology, they do free briefings and workshops on internet marketing.

There's loads of help around, most of it for free.

You might also find some of my blog articles useful, click on the Starting Out category first. Address in my sig file.

Good luck getting started, you won't regret it.

John

Thanks for the links freedomguy, looking at them and filling the questionnaires hasn't really helped set my mind at rest though. As I'll be part time IM'ing and have a full time job those questionnaires in the articles on the sites seem to be tailored only for people not already paying anything in (NI, PAYE).

Additionally I have no money available to get the services of an accountant up front so need to find out more about self assessment. More reading to do then...

Looking on the HMRC site it appears I could fill out the form at http://www.hmrc.gov.uk/sa/forms/sa1.pdf to register extra income above PAYE, can anyone confirm this?

dougyt,

It's pretty simple to start as a sole trader. All you have to do is register with HMRC when you start earning money. Keep records of all money coming in, and all business expenses. Then do a self assesssment tax return before the return date. Or, if you've made enough, pay for an accountant to do it. Google "hmrc sole trader" for more details.

If you want you can set up a limited company at a later date. Or, some people trade through a company from the start.

hope this helps and good luck!

P.S. I'm not an accountant, so this isn't official advice

Thanks Chickenlittle I was starting to feel that this would be the way to go, start keeping detailed transaction records and then declare to HMRC through self assessment on form SA1 I linked to in a post above yours.

Thanks Azarna, I'll have to look into that too.

Doug,
If I can be straight here I think you're using this as an excuse! There's some great accountant's and business tax advisors in the UK that can work out a plan for you to mimimize your taxes legally. And let's be honest it's always best to earn so much you have to worry about taxes rather than too little surely?
So I'd call a few local accountants and tax advisors (sometimes that may be the same place) and book an appointment. Many offer the intial consultation free but even if you have to pay £50 for that first hours of advice surely that's a great long term investment?

Rich

Hi Richard, you're dead right about it being an excuse and that's why I came and asked the question when I recognised the excuse holding me back because I know I can make money online.

Contact your local branch of Business Link. They run free courses for start up businesses which tell you everything you need to know about running your own business. What records you need to keep, what insurances you need, all about notifying the Inland Revenue and paying the correct National Insurance.

I did that before I became self-employed and my sister did the same course just a year ago. I'm not sure if it's just one day now - but they have all the information you need to make sure you are legal from the start.

Hi Rosetrees, funny you should mention BusinessLink, as I was just about to post about their website and the list of documents for UK web owners to use (Privacy Policy, Disclaimer, ETC.)
Business Link Website Legal Doc Templates (Free) Hopefully they may help someone else looking for them too.

@ Alan Ashwood, thanks for all your posts too (and obviously everyone else too) I'd be really interested in the UK Bloggers thing you mentioned as most of my sites are based on blogs (Wordpress)
As for the tax advice product, I can see why that could be scary and I certainly wouldn't want to be responsible for your head being placed on a spike in London.
The advice on losses isn't lost on me either as I said at the start I've been online a looong time but not making anything and just playing at it, spent a fortune along the way.

There is some great info on here for IM'ers wanting to start an 'official' online business in the UK. Great thread. Mine is a limited business but to start out with, sole trader is ideal with a business account. As mentioned just keep records of all expenditure both incoming and outgoing. Then just focus on earning and don't worry about the next step until those $'s start rolling in.

Good luck!

Thanks everybody, I have a bit of work to do now before I get into anything else. As for office space, it's a corner of my bedroom. The rest of the house is occupied by the 4 kids, dog, cats and associated family stuff.

The tax paying still seems a nightmare even with all the help here. The PDF that freedomguy linked to seems to imply I will have to pay NI on a direct debit even though I haven't got anything yet and pay through the nose as it is from my first job lol.
Still reading and trying to make sense of something written by bureaucrats for bureaucrats.

Yes it would be easy to turn it over to an accountant but before I make any money I still have all my bills which my day job just about pays, so to be honest I can't afford an accountant at all right now. And before any naysayers jump on me and tell me I shouldn't be starting that way I ask when better than when I actually need to make a better income?

I have a couple of days off the end of this week when I will go to the bank to get a little advice and maybe a business account too. I'll contact the HMRC and talk to someone there direct to get the advice I need. I am setting myself the date 1/11/2011 to put it all together and start building a proper business online.

Thanks to everyone in this thread for all the support and help, it's really appreciated.

Very helpful thread. I've been worrying about this myself.

One question i have is how do you deal with the multiple currencies when it comes to bookkeeping? Keep a record of everything i pay out and everything I bring in gets confusing when you are dealing in dollars and pounds (for me anyway!).

Mancunian here.

I started IM a good 17 years ago, made a niche adult site and sold it to a big name in the industry. This was back in the days of Windows 3.1 and dial-up of course so it was purely pictures only.

Since then, with the expansion of internet marketing I have spread my wings really far. Luckily for me, I got in it at the start andcashed in fairly big which gave me time to learn and get creative. Luckily for you, you can dismiss 99% of what I know because it's no longer relevant.

I read somewhere a year or so ago that people starting a degree in internet studies etc, will get to year four and realise year one was a complete waste because what they learned is no longer relevant.

This isgood for anyone looking at getting in on IM, the bad thing is that it's more difficult to earn your first buck now because of the multitude of ways to do so.

Concentrate on your business and making some sales first,if you haven't made any sales yet what are you going to pay taxes based on what!

I'd been considering this, and decided that for tax purposes only what you personally end up with can be classed as income.

Hey Doug,

I live in London. Im not an account so this is just advice.

Register as Self Employed, keep all receipts and send them to
your accountant at the end of the year.

You don't need to worry about becoming a limited company
until your earning about £70,000 per year. Until then
I wouldn't worry to much about it.

Well the HMRC people were really helpful, I phoned and explained the situation and was told to basically find the information on their website. Explaining that I wanted to ensure I paid the right tax I was informed to fill out the registration for self assessment and that NI had to be paid too, yep look it up on the website again to find out more.

Super advice here for us Brits! Cheers!

Andy

I am from the UK originally but live in the Netherlands now. Go for it and start your own company I can't say how much I love it!
Its a bit different here in the Netherlands but now I handle all my own business and do all my taxes and calculate all my incomes and expenses.
My next plan for next year is to take my online business offline too! Exciting times.
I was forced to quit my job when I fell pregnant and now work full time from home and LOVE it!

Best of luck for you

Doug, thanks a lot for asking something I've been wondering myself! Let us know how you get on.

Form a company. Go to Company Formation, Online Company Formation, Company Registration Set up a business account. I use Barclays and Santander for another business I have. Keep your own books but get an accountant to do your annual accounts. Register for VAT at HM Revenue & Customs: Home Page Some company formation companies will also do this for you but it took me months to get set up properly and then they made me jump through hoops to make sure my company was a genuine one.