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Starting a business?...

Discussion in 'General Business Forum:' started by bigdave, Jan 7, 2011.

  1. bigdave

    bigdave Moderator Staff Member

    I've been thinking of building up my freelance work with the intention of eventually going full time working for myself but as I've no experience in seting up or running a business, I wondered if there was anything I (legally) have to do before I start earning money and anything thats perhaps best practice for both setting up and then day to day running?

    A few questions have just popped into my head:

    When taking on a client its expected that I (the design company) present a contract to be signed by myself & the client to avoid either of us getting ripped off. Is this just a standard contract that can be purchased online and printed off as and when or do I need a legal beagle to draw up a contract on an job by job basis?

    How will my new income (all beit very small initially) affect my current full time income with regards to tax, NI etc...

    I know that being VAT registered means you can claim VAT back for business related expenses but does the business have to be taking over a certain amount annually to become VAT registered?

    How hard is bookkeeping?
     
  2. djb

    djb Member

    I have some T&Cs on my website which I borrowed from various other people and combined. I'm pretty sure that legally they are fine (don’t hold me to this) - you’re welcome to take a copy and modify it for your needs.

    You can be employed and self-employed at the same time, you just need to let your tax office know. Then it’s just a case of filling in a self-assessment tax return once a year which will have your PAYE income as well as your self-employed income on it. I think they changed the way the system worked as so many people had separate incomes from their day jobs.

    As for VAT, the HMRC website is your friend for tax questions, have a look at this for more info on VAT. Probably not worth worrying about to start with unless you’re doing a load of print jobs for your clients who may not be too happy if you’re absorbing the VAT from the printer and they are then unable to claim it back. I used to get one of my clients to pay the printer directly when there was VAT involved.

    Bookkeeping is easy, just a question of setting up a simple spreadsheet and remembering to do it! One column for income, one for expenditure and so on. Then a folder with a section to match everything in the spreadsheet to keep all your invoices and receipts in. The HMRC website again has examples of what you need to keep details of - safest way is to keep everything!
     
    Last edited: Jan 7, 2011
  3. Minuteman Press

    Minuteman Press Moderator

    I would add that as soon as your turnover can justify - take on an accountant (who will pay for him/herself and the some) - in my experience a management accountant.
     
  4. bigdave

    bigdave Moderator Staff Member

    Thank you for the advice and big thanks for the Ts&Cs!!
     
  5. djb

    djb Member

    No worries, I forgot to mention that quite a good tax strategy (dodge) is to set yourself up as a limited company so rather than paying 28% tax (which includes class 2+4 national insurance) you pay something like 21% tax by paying yourself a minimum wage to avoid the class 4 national insurance and then take your additional wages out of the company as dividends. Like Minuteman Press said, this is where accountants come in and will pay for themselves - I’ve yet to get one myself as it’s still early days for me but have been advised by an accountant this is the way to go.
     
    Last edited: Jan 7, 2011
  6. Katedesign

    Katedesign Well-Known Member

    Talk to an accountant quickly - with VAT there is also a way (Flat Rate) whereby you don't pay as much but can charge out at the normal rate....definitely talk to an accountant! Limited company status will cost a bit more in fees etc but could be worth it depending on your turnover.
     
  7. djb

    djb Member

  8. DCC

    DCC New Member

    Yeah, looks like you charge 20%, pay 11% to the HMRC and keep 9%... You don't claim VAT off purchases, so I guess the payback figure of 11% is a HMRC estimated average to balance out the VATable purchases for people in Advertising. (that's the nearest category I could find)... Sound about right?
     

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