anyone out there have a proper day job but also run a second business from home?

Reason I ask is im thinking of starting one up, just wondering where i stand from a tax point on any profit i make form the new business. Is it as a higher rate?

Oh yes ....PAYE at whatever rate you may be on, exceed the threshold for higher rate tax (34K ish) and you pay the higher rate...on interest on your savings (spent mine!!!), income from any source in fact....assuming you declare it...?

Higher rate tax band is £31,400 this year

 

Yeah scoops you will have to declare it on a yearly income tax form. Simplistically - the rate you would pay on it would be the same as you'd pay if you got in increase in pay in your day-to-day job for the same amount as your sideline income. Obviously there are all sorts of allowable expenses which you can push through your "business" ;) and other allowances.

Done this my self, and alsa yes the tax is a pain in the ass :mad: , basicly even thought you own the company, the tax man see the company as a person and you work for that person, your tax code would be BR*** same as your regular tax code, however, here comes the good bit. you can pay your self peanuts, as it's your business and then every quarter/6 months/yearly give your self a dividend bonus of what ever you like and guess what :confused: ............................it's tax free!!!! :dance:

 

so on that note pay your self enought so that the tax man see's you earning from this second job, but pay yourself just enough to keep you under the higher tax fresh hold!! see where i'm coming from, then every quarter give your self a bonus!! :hyper:

 

Also if you pm your address to me i've got loads of stuff here i can send you, but i will need it back. :cool:

 

hope this helps :D

 

Neil.

LOL Neil I hope the IR arent reading :p Dividends or bonuses arent tax free. Dividends are paid to the recipient net of 10/20/32.5% tax... and that is after the company has paid 0/10/19/30% tax on its profits out of which you are paying those dividends.

 

Dividends are an appropriation of profits back to the shareholder(s) of the company, you will have paid tax on these profits and then get charged again to remove the money. There arent many ways to move money around nowadays where you can avoid tax.

 

Bonuses are no different from wages and are subject to PAYE and Employers NI

 

I assume you are talking about a limited company which yes is treated as a separate legal entity to the director(s) - ie you. The distinction between co and person is an advantage and is usually the reason people incorporate their businesses.

 

Apologies if I've readyour post wrong of course ;)

 

Pete

most of the info about dividend bonus was frot the bank manager, who happens to be a close pal of mine, will have to check on that, so only going from what i was told, which i had no reason to doubt,

most of the info about dividend bonus was frot the bank manager, who happens to be a close pal of mine, will have to check on that, so only going from what i was told, which i had no reason to doubt,

 

my brother in law does the same.

 

pays himself min wage then pays himself tax free dividends

 

has offered to take me on as a director & do the same for me. very temping!!

you could pay up to 6000 in dividends to a director until about 6 months ago tax free, now this is taxed as income to close the hole.

 

Profit is also a dodgy word and at the end of the day does not always mean the final amount of money in your pocket, its always worth seeing an accountant, they inevitably know more about this than most people and you don't run the risk of conflicting advice that may be wrong.

has offered to take me on as a director & do the same for me. very temping!!

 

You've got to be careful with that one, otherwise you can end up getting caught under Section 660 (if dividends are paid to family members that are not in line with what they 'bring in' to the company you can end up liable for more tax, yay the gov't!).

 

One bit of advice to anyone doing it - make sure you have a decent accountant :)

 

Might cost you £4-800 a year, but it can be money well spent if they save you getting clobbered by unexpected tax bills IMHO..

my brother in law does the same.

 

pays himself min wage then pays himself tax free dividends

 

has offered to take me on as a director & do the same for me. very temping!!

 

Dividends are not actually tax free, they are paid from a limited company net of 10% notional tax - hence you receive them after tax. However if you are into high rate tax then you will have to pay 32.5% of the grossed up dividend to HMIT (ie an extra 22.5% as you are deemed to have paid 10% before you receive it).

 

Basic rate tax payers (below £31400) wil not pay any extra tax until gross earnings exceed this limit.

 

Exactly as Shrimpy says. I was a tax manager for an accountancy practice (and Shrimpy's an accountant too :tongue: ) until June so we know our stuff....

 

If you start a sideline business, Scoops I guess you won't go limited (not worth it) so you would have to declare your profits (after allowable expenses) on your tax return each year. You would pay tax at the same rate as your salary, unless the extra income takes you into high rate if not already there. No national insurance though unless business profits exceed about £4600 p/a.

 

Tax is due by 31st January following the end of the tax year in which money earned.

 

Richard :)

If you start a sideline business, Scoops I guess you won't go limited (not worth it)

 

i would have thought this was my best route.. whats the difference?

 

also , so i have to register my company name? i noticed a few of the traders on here arent registered with consumer house? why is this so? do i have to? if not what makes consumer house so special?

when you go ltd you have to register yourself with companies house, along with secretaries dirctors share split ect ect. it is a UK registration and provision directory

 

Becoming a limited company isn't down to money alone

 

 

Becoming a limited company means exactly that, you are limited in the damages you pay out incase you are sued, this is limited to company savings, property and possibly intellectual property. I think also as a director you are liable for up to £1000

 

As a sole trader if you cock up and are sued your house and your life savings are at risk.

 

there are advantages to being a sole trader however, you will pay less tax as a sole trader,

 

you need to really read up on IR35 tax as well here, thats a big influence on how you trade

 

 

http://www.resultsforbusiness.co.uk/tax/ir35tax.shtml

 

If you have a office in your house you can also charge the company ground and amenity rent, its a good tax bypass.

 

 

First place to start online before starting a business is

 

 

http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&topicId=1073858805&furlparam=mkt1_startup

 

lots of good information.

Would your sideline develop into main?

Stay as Sole Trader and see how it goes.

Maybe worth reigistering for VAT if you have to pay a lot -

are your customers mainly paying for your expertise, ie time,

or for goods?

If you do go Ltd iirc you will have to submit annual accounts prepared by

a Chartered Accountant.

Would you be making serious money or 'Pin Money'?

I think that a Ltd Co. can lend money ;-).

There are quite a few government agencies to give help and loans/grants.

Keep accurate records of expenses and income.

Maybe you could employ you wife? Give her the actual money as IR

don't accept 'Notional Employment' - I got caught out by that once.

cheers for the info guys, much appreciated :)

LOL Richard :tongue:

 

Mike - there is no lower or indeed upper limit to which a director can be held liable for a company's liabilities, dunno where the £1000 fig came from?. There are many instances eg trading insolvently where the director(s) can be made fully liable for the company's debts.

 

But yes in normal circumstances the company and you are separate.

 

Scoops - I'd hold back against setting up a ltd co for now until you are up and running, there are a few costs associated with ltd company formation/running you would have to incur whi9ch you could probably do without in your early years. Accountancy fees being one of them. Although if you need any company forms or company names checking for availability gimme a shout :)

 

Pete

Ok now tell us; what business?

that would be telling.. but its nothing car related

Hah!

You're not going to do much business if you keep it secret.

Hah!

You're not going to do much business if you keep it secret.

 

:rofl: He's got a good point there! :D