Self-employment - financial issues
Quick links to:
Tax
Tax Relief
National Insurance
VAT
Funding, grants and loans
Tax
www.inlandrevenue.gov.uk
When
starting up in business, you must register with the Inland Revenue
within three months. They will change your tax status and make arrangements
for you to pay correct NI contributions.
Tax
rates for 2003/04:
- personal allowance £4,615;
- starting rate 0-£1,960: 10%
- basic rate: £1,961-£30,500: 22%
- higher rate: over £30,500: 40%
Think
ahead about your tax return. The Inland Revenue sends out tax return
forms in April. If you return the form by 30 September, they will
work out what tax you owe. If you want to work it out yourself,
you can return it by 31 January.
After
your first year in business, tax will be due in two equal instalments
on 31 January (during the current year) and 31 July (in the following
tax year). These amounts are based on the previous year’s tax bill.
A balance payment is due on the following 31January to adjust for
difference between the amounts paid and the tax due as a result
of the actual profits and gains.
Tax Relief
Allowable
expenses include the cost of any goods or materials bought as stock
and then resold, rent and running costs for premises, marketing
costs, costs of travel to see customers, financing costs and general
running expenses such as postage and telephone.
You
can claim tax relief on domestic bills if you use parts of your
house for business. Bear in mind that if you are, then you may
be liable to pay business rates for the part of property used for
work; usually you will pay domestic council tax for the rest of
property. Check with Valuation Office Agency, 020 7506 1700; www.voa.gov.uk.
You will also need to check with your insurance provider if you
have correct cover.
You
can’t count as an expense the costs of the purchase of premises
and equipment, but you can claim a capital allowance on certain
kinds of premises or equipment. This allows you to deduct a proportion
of these costs from your business’s taxable profits over several
years, thus reducing your tax bill.
National Insurance
You
will be liable for Class 2 contributions through the year (£2 per
week) and also be for Class 4 contributions, which are based on
profits, (8% of annual profit between £4,615 and £30, 940). Class
4 contributions are paid along with your tax.
VAT
Customs
& Excise National Advice Service 0845 010 9000
www.hmce.gov.uk/forms
See
Form VAT1 and Should I Be Registered For VAT? [Notice 700/1]
If
the value of your goods or services exceeds £56,000 in any 12-month
period. You must do this within 30 days of reaching the threshold
or you risk a fine.
Funding, grants, loans
www.dti.gov.uk/raisingfinance/
BusinessLink
runs a Business Support Directory, which you can search online for
available financial assistance in your locality and in your type
of enterprise.
www.dti.gov.uk/bss
The
DTI runs a Business Support Solutions service, offering financial
support, particularly for innovation, best practice, R&D, use
of science and technology.
Selective
Finance for Investment in England is a fund which has taken over
from Enterprise Grants. More information: www.dti.gov.uk/regionalinvestment.
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