Setting up a new business...

[Stuuk1]

No, not me, the girlfriend!

After a lot of talking we have decided that it would be best to get out there and earn some money as a self employed photographer.

We have a website soon to be made (by a friend) for a fee of £0... He's a good friend and does it as a hobby :)

She has her business cards all made up and now needs to register a company and register as self employed.

My question to you lot is the following.. How the hell do you go about doing all this?!

I've always been employed by a company so have no experience. Can anyone help in perhaps listing the first to last step on how to go about doing this stuff...

Does she need to be VAT registered? Pros and cons of being VAT registered? I did read somewhere that you have to earn over a certain amount before you can begin claiming back any VAT, is this correct?

Any help would be much appreciated!

[Specialone]

To register is a piece of urine, ring tax office and give them details.

If your turnover is over £60k per annum, then you have to be registered for vat.

I'd advise against vat if you can avoid it, you instantly become 20% more expensive than another photographer who isn't vat registered, so you're not competitive, if you claim vat, you charge vat, simple.

Make sure you account all her equipment into the business, you're allowed a lump sum, so you won't pay much, if any, tax.


I'd get an good accountant, they will save you a fortune and advise you exactly what you can claim against tax.

[flymo]

some good advice here http://www.businesslink.gov.uk/bdotg/action/home/

[Stephen McG]

first things first.
you do not register a new company and also as self employed.
one or the other.
being self employed is straightforward.
Inform taxman of you intention to become self employed - is she already in work?
There are no costs to this.
If you register a company, this will cost money and you become employee
(also director)
I set up as self employed in 1991 and never regreted it.
you have to ensure that you put away some of earnings for tax which is payable 2 times per year.

VAT -
if you register, you must apply tax to sales i.e. customer pays more.
but you claim back VAT on equipment etc.
If already have gear then you cannot claim VAT back but can put a cost against tax.
I do not know the current threshold for VAT i.e. above that earnings you must be registered whether you like it or not.
I suspect that you would not get registered immediately until you see how work develops (pardon the pun)

These are my thoughts and experience - others may have a different view.
SMcG in Glasgow

[maviczap]

I wish your girlfriend every success with this venture, its what my mum & dad used to do.

Its dam hard work!

[Stuuk1]

It does seem like hard work but looking at what people will spend for a wedding photographer etc it seems as though it could be a very lucrative business if she gets a good reputation...!

I have offered my help (I do sports photography as a hobby) and she will get me for free!

She currently works part time at a golf club while she sorts things out, could she register as self employed and just continue to work there?

This sounds stupid, but as for 'keeping records' how do you go about doing that? What records etc? Does this mean keep every single receipt for everything you buy throughout the tax year that has anything to do with your day to day business?

With all these receipts, what are you entitled to claim back if you aren't VAT registered?

It's all rather confusing... Thanks for the replies so far however, very helpful.

[embee]

... as said above, basically.

Becoming self employed is very simple if you are a "sole trader", in essence just you working for yourself. There's no company, all you do is get in touch with your tax office and tell them you are going to be s/e as a sole trader. If it's the same as when I did it in 1991 it's a sheet of A4 where you give basic personal details, what your business is (e.g. photographer) and what your trading name is. You can use your own name (what I do) with no issues to bother about, even if your name is W.H.Smith no-one can stop you.

You'll need to decide what your tax accounting year is for your tax return purposes, it's often easiest to use the normal tax year dates 6th April-5th April, saves complication

Any routine cost you incur for anything to do with your business is added up and can be taken off your "turnover" (i.e. total money received), so any materials, cost of insurance etc. Equipment is put into a "capital pool" and one way or another you take some/all of it off your turnover. The rules change year to year, last year if your pool value was less than £1k you could take it all off in that year, otherwise you can take a percentage each year (e.g. 20% of pool value is allowed and the remainder is carried over to the next year). Sounds complicated but isn't really. Keep receipts, all of them. I keep a very simple day book (a diary) and note costs/jobs/money in.

You can take costs of a vehicle off too, that's dealt with separately from capital allowances etc. If you use it for personal use also, it's done on a pro rata business/private mileage basis. It includes everything, insurance, fuel, servicing, tyres etc, can be very useful.

No need for an accountant if you are happy to do tax return yourself, though there are accountants who will do simple returns for very modest sums, ask around. You don't publish accounts as a sole trader, just between you and HMRC.

Basic rule is look after the cash flow, avoid paying out lots of money without getting cash in. One bad debt costs you dear, you then need 2 more jobs just to break even, and if you're not careful you end up paying for the privelege of working.

You can be employed and self-employed at the same time, it complicates the tax return a bit but plenty of people do it. The tax office is usually pretty helpful with these things.

[Stephen McG]

She can work and also be self employed.
i.e she will have to fill out a tax return at end of year that shows earnings from golf work (P60) and additional earnings from other sources.
Records
Sales
keep a copy of all invoices for work done.
These must show her name and address, client name and address, unique invoice number, value and date.
You can easily make one up via Excel.
Purchases
keep invoices of all supplies/expenses etc that are required to run the business.
I used to have a big envelope for each month.
Sales - Costs = taxable income
If the turnover is low, you can do the annual accounts yourself (you will soon pick it up)
If turn over good then you can still do the books but then get accountant to lay it all out in format Taxman expects.
If camera is bought then you will get a depreciation each year - this goes as cost so reduces taxable income.
Believe me it is not rocket science.
You do not need an accountant initially - wait until you have records to actually show.
Do not go mad buying things initially.
A negative income is surely to be avoided.
You can always get free advice from me and others.
SMcG in Glasgow

[tactcom7]

+1 to all yhe above advice and as it's important i'll repeat it, keep all your receipts. If there is ANY way you can link something you buy to the business, down to a pack of pens or a pad of A4 etc then use these as costs at the end of the year.

[Small Clanger]

All the above, good advice.

I'd suggest, if you hav'nt already done so, setting up a business bank account seperate from your private ones. Pay in a suitable "start up" sum which you can take back once the profits accumulate.
As stated, in that line of business, VAT would probably be a bad thing unless you are working on commercial projects for other VAT registered companies.

And definately find a good accountant.

[Stuuk1]

Wow this is just fantastic, I have now written down a whole load of questions which I will give to her to ask the accountant she decides to set up with or to ask the hmrc when she contains them.

I know everyone here says it's not hard but from where I am sitting, looks like a nightmare... one step at a time I suppose!

[tactcom7]

I found the tax return the hardest part, was self-emoyed and employed for a short while. Definitely use an accountant for that bit.

Another thing with regards to receipts is try to keep on top of them. Don't leave it months till you have a big homer simpson style ball of paper before you go through them. Do it weekly, I bought some clear plastic wallets labelled Fuel, Equipment and Other just to make things a bit easier to sort through. As already mentioned get a diary, a day to a page one so there's plenty of space to write things in should also help.

P.S if she took your avatar pic perhaps portrait photography is not for her ;)

[missyburd]

Believe me it is not rocket science.
You do not need an accountant initially - wait until you have records to actually show.

Nope it's not, if I can manage it without an accountant (although do have one in the family who advised me initially) then can't be bad :)

All the above, good advice.

I'd suggest, if you hav'nt already done so, setting up a business bank account seperate from your private ones. Pay in a suitable "start up" sum which you can take back once the profits accumulate.

I was advised against a business account to start with. Depends how much money you're talking here, obviously photography can be a well paid business dealing in large wodges of money (especially weddings!) but for me, as an artist, I cash the odd cheque, get bank transfers and paypal transfers and that's it really so I'd be worse off with all the bank charges a business account involves. Business accounts charge you to put money in, take money out, cash a cheque etc. Just wasn't worth it for me, not saying it won't be for your girlfriend though.


I found the tax return the hardest part, was self-emoyed and employed for a short while. Definitely use an accountant for that bit.
I did my first one last year, wasn't so bad. I don't earn a packet with it though so not overly complicated.

I have a part time job as well as being self employed, I just invoice my boss each month and fill out my tax return accordingly.

Another thing with regards to receipts is try to keep on top of them. Don't leave it months till you have a big homer simpson style ball of paper before you go through them. Do it weekly, I bought some clear plastic wallets labelled Fuel, Equipment and Other just to make things a bit easier to sort through. As already mentioned get a diary, a day to a page one so there's plenty of space to write things in should also help.


Best way is to have a spreadsheet to enter stuff in monthly or weekly to suit. There are a few templates online. I keep all receipts for materials, equipment, fuel, advertising, postage etc. in a folder full of plastic wallets with a wallet labeled for each month.

Don't forget being self-employed you will be expected to pay your own National Insurance so try and keep some money aside for that.

Best of luck! I'd love to go into photography but the cost alone of the equipment, eep.

[tactcom7]

The hardest part of the tax return for me was all the anacronyms and terms i didnt understand. Ended up with a tax bill of zero so im pretty sure i messed it up!

[Small Clanger]

Free business banking @ www.co-operativebank.co.uk (http://www.co-operativebank.co.uk) or also free at most other banks as long as you're in credit, amounts vary.
Mine's www.bankofscotland.co.uk (http://www.bankofscotland.co.uk) and I do 95% of my banking online. Simple. :)
Most local banks have small business advisors too, obviously they're trying to plug their own products but it's worth looking into, especially if you have your private accounts already established and can keep all it in-branch.

My local HMRC do half-day seminars for those wishing to go self-employed or start businesses. They go through all the requirements, explain all the forms and dish out relevant leaflets. Handy stuff to know and it helps to speak to, and get to know, a friendly face in the Inland Revenue's office. Worth calling in at your local office to ask.

[Small Clanger]

The hardest part of the tax return for me was all the anacronyms and terms i didnt understand. Ended up with a tax bill of zero so im pretty sure i messed it up!

A zero tax bill! :notworthy:

You can do my books. :D

[tactcom7]

A zero tax bill! :notworthy:

You can do my books. :D

Haha can do mate! Just don't blame me when the tax man comes a knockin ;)

[DaveyF]

All good advice above.

Remember setting up a bank account for your business doesn't have to be a 'business account'. This can simply be a second current account so you can keep an easy track of how much cash you have.

It's been a while since I did sole trader accounts but the simple rule with expenses is keep an invoice for literally everything that you spend on the business/whilst on a job. If the job requires being away from home for a day or two I'd be claiming food costs, accommodation etc.

Also don't worry about registering for VAT until it becomes necessary. Since you won't be able to reclaim any VAT on supplier invoices you should be able to claim 100% of the invoiced cost on the tax return.

Speak to a local accountant though, some will give you a bit of free advice on setting up with HMRC and the firm I used to work for charged about £250 to do the tax return for sole traders. Even if they do it once and explain the process, then do it yourselves next time.

[embee]

Yep, I've never had a "business account", just a second personal current account. Bank has never queried it.

Don't make it any more complicated than it needs to be, especially to begin with.

[Specialone]

Ion regards to national insurance contributions, I pay about £12 per month, don't know if this is unique to the building trade but the hmrc set this for everybody, you can pay monthly, quarterly or annually.

Biggest mistake I made when I started was not getting an accountant, It cost me a lot of money in the long run.

Btw, if your turnover is less than £15k, the tax return online takes seconds to fill in, all your expenses in one box, your takings in another and it calculates how much you owe, it's that simple.

Must admit, I used to keep detailed records, spreadsheets etc but the accountant said it was overkill, now I just take him a shoebox full of receipts, my statements for my credit card and account and a list of any other expenses.

Finally, you don't have to have a business account, I've not had one in 8 years and ive been ok.