How to set-up a Small business from home?

Choco · #1 (**permalink**) 26-07-2008, 07:29

Hi all,

I'm a newbie here. I am interested in setting-up a small office from home but am not sure what I need to do in order to comply with all the relevant legislations such as tax compliance.

I am thinking of setting up a sole trader business from home. I have the following questions: -

1. DO I have to register with HMRC for self-employment before I set-up the business?

2. What is the implications on own home as it will be used for business and domestic use. What is the effect on council tax, business rates, and capital gains tax?

3. I don't envisage there will be much income in the 1st year. Probably less than a few thousands pound if that in turnover. How complicated is it to prepare self-assessment tax returns?

Many Thanks,

fee · #2 (**permalink**) 26-07-2008, 08:51

hello choco........im sure some of the experts will be along to answer your questions........in the meantime a warm welcome to here........

Eagle · #3 (**permalink**) 26-07-2008, 08:54

Quote:

Originally Posted by Choco

Hi all,1. DO I have to register with HMRC for self-employment before I set-up the business?

Hi

No - but within three months of the start of trading I believe.

Quote:

2. What is the implications on own home as it will be used for business and domestic use. What is the effect on council tax, business rates, and capital gains tax?

I can't answer that one fully but you can offset a portion of your domestic bills against your tax bill.

Quote:

3. I don't envisage there will be much income in the 1st year. Probably less than a few thousands pound if that in turnover. How complicated is it to prepare self-assessment tax returns?

Personally speaking, too complex for me but some say it's not too bad. It will depend on how complex your tax affairs are. A lot of people just hire an accountant for peace of mind.

Hope this helps a little.

Mark

IP2 · #4 (**permalink**) 26-07-2008, 09:51

Hi Choco and Welcome to A1

You will need to contact your local tax office to advise them of the change to your status, I believe they will be able to send you some quite helpful leaflets.

Providing you are only using one room as an office, there should be no tax issues (including business rates) with working from home.

Self Assessment tax forms are a doddle. Depending on your circumstances there could be very little to fill in at all. Need to keep a record of any bank interest, share dividends etc for the period. Your first Self Assessment would not be due now until Oct 09 at the earliest and if you were to feel you couldn't complete it yourself, you could employ an accountant to do it for you.

Hope that is some help, look forward to hearing more about your new venture.

All my best
IP2

Paul Norman · #5 (**permalink**) 26-07-2008, 10:07

A big tip on the tax stuff...keep precise and meticulous records of your income and expenditure, and write up a simple profit and loss for yourself.

You will be glad you did it, and it will make the tax stuff easy as well.

As far as council tax goes, regretably the rules are not the same in every area, so you would need to check with your local council. Having an office at home does not automatically make you liable for business rates, and the line between having an office and running a business is a rather blurred one. However, by the sounds of it, you are the correct side of it!

Choco · #6 (**permalink**) 26-07-2008, 16:29

Dear all,

Thanks for the reply to date.

Is it possible to set-up a 0800 free telephone number....and then any call received on this 0800 number get diverted to my mobile number....as I will be away from the home/office room very often.

If the above diversion is possible....who will bear the cost of the diverted call....as I do not want my customers to pay for the costs of the call.

Any tips regarding setting up a new small office business....e.g., business card, business letters, legal compliance with tax affairs, accounting records etc...

If it doesn't work out...how can I exit as self-employment?

Thanks

Indizine · #7 (**permalink**) 26-07-2008, 19:47

0800 - yes. I use BT RingCentral. You can divert it to any and several numbers to follow you around if you are mobile all pr aprt of the time. You take the cost of the calls, incl mobiles.

Choco · #8 (**permalink**) 26-07-2008, 20:12

Quote:

Originally Posted by Indizine

0800 - yes. I use BT RingCentral. You can divert it to any and several numbers to follow you around if you are mobile all pr aprt of the time. You take the cost of the calls, incl mobiles.

If the costs come to me as the receipient....how much does it costs?

..... a) cost of mobile rate?
b) cost of 0800 as receipient?

James Smith · #9 (**permalink**) 29-07-2008, 08:02

Choco,

Couple of points for you:

1. Re CGT/business rates and the home. If you have EXCLUSIVE use of one room or area of your home then you could well be liable to business rates. Simply solution – make sure its not! Recent rules changes make CGT less likely than before. Rules in this area are complex but shouldn’t hurt most people but it is very much an "it depends" on your circumstances issue. Exclusivity is again a key factor.

2. Self assessment - filling the form is a relatively simple. Paying the right amount of tax is a lot harder (ie knowing what numbers to put on!). Whether it is worth paying someone like myself to help you will depend on how big the numbers are. Often there isn’t a huge amount I can do for a micro business other than peace of mind.

Re exiting, one of the reasons HMRC ask you to register only after 3 months or trading is that they don't want to clog up the system with failed businesses that are still in the “ideas and first steps” phase.. If things don't go too well after you have registered then all you do on the self assessment form is put a ceased date and that’s about it! With a limited company it’s a lot more complex which is why I normally suggest testing the water as sole trader where practical.

hope that helps

Regards,

Indizine · #10 (**permalink**) 29-07-2008, 08:48

It costs £15.00 a month and you get £10 of call costs included. Checkout the website ww.ringcentral.com for all the info.

It is BT but based in the USA, so you get really cool US staff when you need to speak to them and they are ever so nice and helpful, they even give you credit for free! Twice I rang because at first I didnt understand the pricing structure so they just gave me more credit instead of asking me to pay extra credit when it had run out about 2 days before the monthly renewal.

UK calls are about 4p/min but mobiles cost more, might be about 25p, but still, IMO it is worth it.