How do I turn a bit of cash on the side into a legitimate business?
I'm currently run a local football team's website for which I charge a small fee each year. I also earn a small income from Affiliate Marketing Groups and Google Ads (of which I partly return to the football club as sponsorship). Up until now its all been on a cash in hand basis as the amounts have been pretty small. As word has spread, I have been approached by a number of people to offer a similar service and the Affiliate revenue is starting to pick up. I suppose my question is what do I need to do to turn this into a legitimate way of subsidising my Income. I am a complete novice when it comes to this and the thought of Tax & Accounts etc make my ears bleed!!! Any advice would be much appreciated. Thanks
Asked by Craig Higginson,
May 2008 - Contact this person
5 Answers
-
Hi Craig,
To legitimise it, you will need to register with HM Revenue and Customs - www.hmrc.gov.uk
I'd also recommend contacting either your local enterprise agency and/or Business Link (or equivalent) and seeing what help they can offer you, eg free courses, etc. -
I guess you just have to fill-in a tax return. It can be done online now. There are two forms to fill-in online. There's a form to repeat the information that's already given to the tax office by PAYE, which tells them what's on the end-of-year pay slip or P60, and there's a form for self-employed earnings. They're both daunting but get simpler when you've got the hang of them - particularly if you're spending anything on the business and have to put it in catagories of expenditure. Take a form down to business link and ask how to fill-it in if you can't find a book in the library or something. There's also an inland revenue helpline.
If you have a dormant bank account, use it just for business. If you need a trade name that's different from your own, Abbey sometimes open free bank accounts in business names. If the account allows you to download bank statement info to a programme that can label expenditure in different catagories, it's good to start googling for free or open source software now while the figures are still simple.
You can choose when your trade year begins and ends but it may as well be the same as your day job's tax year for P60 information. After that you have until January to come clean with the revenue. for each year.
Hope this helps -
HMRC have a good guide to all things tax related and your options if your setting up a business: http://www.hmrc.gov.uk/startingup/working-for-yourself.pdf
As Lee has suggested, it worth talking to Business Links. They also have a lot of useful advice here: http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073858805&r.s=tl -
I agree with the comments above. I was in the same situation last year and I've found a lot of information on the Inland Revenue and Business Link websites.
Just some hints:
you have to register with HMRC within 3 months after your first invoice. Otherwise the fine is £100.
If you have a full time job (and you're paying NI) you may want to apply for Small Earnings Exception (http://www.hmrc.gov.uk/rates/nic.htm) otherwise you have to pay Class 2 tax regardless your income.
If you are doing your own self assessment, do it online. The system guides you through which fields you have to fill in.
Please note: I wrote these hints according to my best knowledge, please double check with professionals (or let's hope more comments are following this post) -
If all you're worrying about is how to record the cash in and out, I have found the Inland Revenue [as was] extremely helpful - you can call in for advice [I'm assuming Revenue and Customs will offer the same services] and then, at your year end, you make an appointment, take in a simple profit and loss, which is only a listing of total income and the expenses you offset, and an Inspector will take you through what you can set off as depreciation, capital allowances and so on, if any.
A great many people profess to be scared of the 'Revenue', but there is absolutely no need - they have a legal duty to take all the tax that is due, but they have an equal duty not to take a penny more and they are very willing to help.
Share this question:
