From Her Majesty’s Customs Service

Monday, August 3, 2009 7:20 | Filed in The Pickards

Okay, so maybe it’s not quite like James Bond, but the other week I went on a short little training course/seminar thingummy run by HMRC about the taxes and regulations relating to people becoming self-employed, to basically look at what I need to do in order to start trading under the TPis banner.

As yet, I have not yet discussed what I need to do with the job centre, but I’m hopeful that by the time I’ve done that, I will know exactly what I need to do in order to start trading — and from speaking to HMRC I know that if I do start trading before getting this all sorted, that’s not necessarily a problem — I have a three month window in which to inform them about it before I would start getting penalised.

The course was around three hours long — scheduled for three and a half but obviously we managed to get through the workbook without too much difficulty — at was at the Greenesfield Business Centre in Gateshead. They give you a big workbook to make notes on which also contains copies of the relevant powerpoint presentations, and I thought I’d try and summarise what I’ve learned. You also got some cups of coffee, which were nice, although a bacon sandwich wouldn’t have gone amiss…

The first, and most important thing is that these courses are free. Book up to go on them — they run self-assessment ones as well, so if you’re self-employed, find out what and where the courses are in your area and sign up. The second, almost equally important thing is that the people presenting this course (mostly M. although D. contributed also) knew the subject matter. They didn’t know the answer to every query, but they could handle most of them, and advise where to get any additional information from. And if you have a lecturer/ trainer who is obviously confident in their subject, that makes the whole thing a lot easier, and gives you confidence in them…

The first thing I learned was that if you are self-employed, you pay two different sorts of National Insurance contributions. First is Class 2, which must come out of your money, not the business money, and amount to £2.40 a week at the moment, and can be paid monthly by direct debit or by a quarterly bill. Now you do not need to pay these if your business earnings for the year are less than £5,000 and you have applied for a Small Earnings Exemption, but you might want to, because if you don’t, you’re not paying towards your state pension and other benefits for which you need to accrue 30 years.

Then you’ve also got to pay Class 4 NICs from the taxable profits of your business — this is the bit which is net after business expenses, and beyond a particular earnings allowance. Obviously the exact figure may vary from year to year…

Similarly, you need to record all the incomings and outgoings of the business — either something as simple as a cashbook or some people will use excel spreadsheets and similar (although emphasis was given to ‘you must take a backup’ as ‘my laptop is broken’ will not excuse you). It’s also recommended that for simplicity you run your trading periods alongside the tax year — i.e. from 6th April one year to 5th April the next.

No-one was able to give me a satisfactory reason why it should be 6th April rather than 1st April to 31st March which would seem eminently more sensible, because as far as I am concerned ‘for some historical reason’ is not good enough. Sadly, this is the one area HMRC were unable to answer for me, but fortunately the internet could help — it’s to do with the change to the Gregorian calendar.

There’s a big list provided of the sort of expenses which are and are not allowable — working from home, you can claim a proportion of the utility bills based on the ratio of the office space to other allowable rooms in the house and the proportion of the time that room is used as an office; you cannot claim for entertaining clients and hospitality. You can claim car mileage either on a flat rate (40p per mile for first 10,000 miles) or as a calculated cost based on the costs of the vehicle and proportion of business use but you can’t swap during the life of one vehicle, and if you introduce a vehicle once you’ve passed the turnover required for the VAT registration threshold, you must go down the more complicated calculation of real cost route.

One of the things that initially struck me as a bit of a swindle was the tax liability. If we were to assume I do start trading, at some point on or after 6th April 2010, I’m going to need to fill in my self-assessment form. If I’m doing this online, I need to fill it in and provide the payment by the following January (with a paper form, the payment deadline is the same, but there is an earlier filing date).

If I made a taxable profit of £22,000 (effectively, my wages) then I would have to pay £4,408 (approx) in Tax and Class 4 NICs for that year. But I would also have to pay half of that again at the same time, on account for next year (with a similar payment on account 6 months later). In other words, I’d have to pay out £6,612 in tax. Initially I was thinking “well, that’s a bit steep, being taxed for stuff in advance…” until I realised that it wasn’t actually in advance at all.

If I’m earning in the tax year 09-10, I’m not actually paying any direct taxation on it until January 2011 — some 9 months after it was due. And it’s not unreasonable therefore to expect me to pay an estimated further 6 months tax at this time, as I ought to have worked more than that anyway.

And this is just giving you an outline of the basic thing — if you are going to go down the full self-assessment route, they run specific free courses on that as well. And if they are delivered to the same quality that this one was, I’d imagine they are worth going on. And while the material on the course wasn’t entirely new to me — when I’m looking for information in various locations, it’s only natural that there will be a certain amount of overlap, as I’m sure would also be the case with a self-assessment one — there is still likely to be enough new stuff in there to make it worth attending.

Besides which, they might have introduced bacon sandwiches by then…

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2 Comments to From Her Majesty’s Customs Service

  1. garment news daily says:

    September 9th, 2011 at 5:37 pm

    You should check this out…

    [...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……

  2. Kaylynn says:

    December 12th, 2012 at 7:21 am

    Most help articles on the web are ianccutrae or incoherent. Not this!

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