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Business Advice 101

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GhostOfDixie

GhostOfDixie

Player Valuation: £70m
As you all may know I am now working for someone fulltime now, but I am really just riding out the recession and taking another crack at it in say 6 months or so.

I'm just looking at asking some questions to help me establish my business model.

First query I have, and hopefully Bruce will be able to help me here.

If I have an invoice of £100, how much of that value should I portion off for my Tax returns?

I only ask because I'm thinking if I save tax money eachtime I receive a paid invoice it would help me manage my return when it is due. Plus if it sits in an account it can acrue interest.

Am I on the right lines at all?
 
MikelsGoat said:
Surely there is very little money in web designing? Im sure my 11 year old daughter can design a website.

Just saying like lid.
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Woah, ugly can of worms there. Me an Ghost famously went through this before.

Ghost I would advise a few 'New Business' refresher courses to fine tune niggling questions. The last thing you want is the tax man calling you a year down the line with a hefty outstanding bill.
 
Why dont you just keep the job your in now, regular paypacket and do your hobby at night. Surely it only takes 10minutes to throw a website together?
 

GhostOfDixie said:
As you all may know I am now working for someone fulltime now, but I am really just riding out the recession and taking another crack at it in say 6 months or so.

I'm just looking at asking some questions to help me establish my business model.

First query I have, and hopefully Bruce will be able to help me here.

If I have an invoice of £100, how much of that value should I portion off for my Tax returns?

I only ask because I'm thinking if I save tax money eachtime I receive a paid invoice it would help me manage my return when it is due. Plus if it sits in an account it can acrue interest.

Am I on the right lines at all?
Click to expand...

i think im right in saying it depends on the amount earned over the tax year in 09-10.

09-10...
starting rate = £0- 2440 , 10%
basic rate = £0- 37400 , 20%
higher rate = £37400 + , 40%

so on average £20 of that £100 invoice will be for tax.

(im guessing - i leave our taxes to those more knowledgable than me )
 
GrandOldTeam said:
Woah, ugly can of worms there. Me an Ghost famously went through this before.

Ghost I would advise a few 'New Business' refresher courses to fine tune niggling questions. The last thing you want is the tax man calling you a year down the line with a hefty outstanding bill.
Click to expand...

Oh I know. I'm fairly on good terms with my taxman.
 
If you are set up as legally self-employed then the amount you pay in tax depends on your earnings and your claimable expenses (very much similar to being employed, except your tax returns or self-declarations can be more complicated and you are obligated to make them more frequently - the frequency dependent on how much you are actually earning). So if you are earning low (for example, possibly in your early months) and have high initial claimable expenses then that is going to be completely different from the level that you have to put aside if your business booms. Especially if you are a single-person business, where all the left-over income is treated as "personal".

There are plenty of complications in both the income tax (and whatever you call VAT these days) system so I would strongly agree with Danny that you need to take advantage of the multitude of new business advice seminars and free consultations that are on offer these days. In fact, there is probably a local course that the state will finance you through (at least to a certain extent) which will teach you basics of business accounting, contract law and other gubbins that might be of use.

Of course, if you are setting up your own company (private or public) then you need to take qualified financial advice.
 
uknightbreed said:
i think im right in saying it depends on the amount earned over the tax year in 09-10.

09-10...
starting rate = £0- 2440 , 10%
basic rate = £0- 37400 , 20%
higher rate = £37400 + , 40%

so on average £20 of that £100 invoice will be for tax.

(im guessing - i leave our taxes to those more knowledgable than me )
Click to expand...

So some guesswork is probably adviseable. I know that it won't be accurate, so perhaps something like 17% - 20% of each invoice should be saved in a tax only account.
 
atrottel said:
If you are set up as legally self-employed then the amount you pay in tax depends on your earnings and your claimable expenses (very much similar to being employed, except your tax returns or self-declarations can be more complicated and you are obligated to make them more frequently - the frequency dependent on how much you are actually earning). So if you are earning low (for example, possibly in your early months) and have high initial claimable expenses then that is going to be completely different from the level that you have to put aside if your business booms. Especially if you are a single-person business, where all the left-over income is treated as "personal".

There are plenty of complications in both the income tax (and whatever you call VAT these days) system so I would strongly agree with Danny that you need to take advantage of the multitude of new business advice seminars and free consultations that are on offer these days. In fact, there is probably a local course that the state will finance you through (at least to a certain extent) which will teach you basics of business accounting, contract law and other gubbins that might be of use.

Of course, if you are setting up your own company (private or public) then you need to take qualified financial advice.
Click to expand...

Did it last year, and it bored the arse of me if I'm being honest. Trouble is I can't really ask my current boss if I can take a day off to go on a business course.

I have to say though that I am fairly well versed, just looking at a few tips and tricks, and these can help others too.
 

You need to price your services according to:

a) The going rate - what the market will bear etc.
b.) The level of experience and skills you offer


With regard to tax - surely this is an individual matter. When you have established what your overall earnings are - whether by PAYE means or otherwise - the amount you declare to the taxman will form the basis of the tax you owe him.

With regard to any business venture there are allowable expenses - set-up costs and so on. If this particular line of work accounts for no expenses (that is to say it's only your time that is being used) then you can imagine that the total amount (declared) is taxable.

As indicated above the tax levels are correct but, you would have to take into account your existing earnings to determine where your total gross income is and budget accordingly.

Note that, as an accountant, I cannot recommend per se that you don't declare all your income but I am sure there are......... :)
 

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