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So she's branching out on her own after getting sick of working for others at only 22! 😀
Does she need to notify HMRC now or just fill in a self-assessment at the end of the year?
She'll likely be picking up some evening bar-work while she gets established so would be on the payroll of whoever she works for at the time as well.
NI Payments - would she just pay in a lump sum when she complete her self-assessment?
And she'll have to start her own pension too.
She should inform HMRC at start. She should potentially get some advice on whether "self employed" or "limited co" is the best way to do it.
She does need to inform HMRC before hand. I believe there is a window to actually do it but sooner is better than later. It also takes a while to set up the online stuff for self assessment so again do that soon and don't leave it to the last minute.
All easy to do, especially if she goes for sole trader. Sole trader is the easiest option, very little legal requirements or paperwork. I'd start there, you can always go for something else if there are advantages.
National insurance is sorted as part of self assessment, but do keep an eye on contributions if she doesn't earn much. Might be worth topping up with voluntary contributions.
She will need to do her own pension. Probably worthwhile to get the benefits of long term growth. Also worth looking at an ISA as it is a long time before the pension be accessible. Good to have some rainy day money, especially if you are self employed
The ship might have sailed, but buy a pick up truck ?
The ship might have sailed, but buy a pick up truck ?
Well she is working in the equestrian world so would have a valid use for one! 😀
Have a good think about what she actually needs to make to cover her wages and overheads. Things like admin, vehicle running costs, equipment, clothing, insurance. I know a couple of lads who are only barely on minimum wage once they work it all out.
National insurance is sorted as part of self assessment
Careful here. You need to separately inform HRMC (ring them) if you're going self employed for the right mix of Class 4 & Class 2 to be collected (and allocated) based on your self assessment. Don't assume that they'll do it automatically based on you correctly filling and submitting your tax return. I have a number of years where I both over payed NI, and also didn't have that paid NI included in my tax years summary. So I have gaps in my qualifying years, despited paying more than required. A mess.
If you do not register your self-employment with HMRC, then any class 2 NIC payments may be rejected by HMRC, or class 2 NIC payments you are treated as having made may not be recorded. It is not sufficient to state on your tax return that you have started self-employment. Instead, you should follow HMRC’s registration process for the self-employed (or advise them separately you have started self-employment), even if you are already completing self assessment tax returns for other reasons.
I know a couple of lads who are only barely on minimum wage once they work it all out.
It's the equestrian world - the wages are shite especially when working for people! 🤣
At least this way she can build up a client base for regular grooming work and pick up more lucrative clipping/riding/teaching work when it arrises.
She's very good and reliable is picking up work already.
Thanks for the replies so far! 👍
(And has anyone else's formatting gone to pot in this thread?)
Don't forget insurance, public and professional. As mentioned need to earn enough for taxes, NI and pensions, as no employer to help, hopefully will work out is she is a saver. Also check if VAT is a thing in the industry or if she gets that far in turnover. Good Luck, working for yourself is a driver.
A chat with an accountant would be good. She might be entitled to HMRC relief on a work vehicle, expenses, meals, computer use, tools, etc.
12 months with an accountant might pay for itself, plus a bit
Yes first year i got an accountant to do my return, year 2 onwards I just collated numbers as I went along using the accountants format. Come the end of tax year i had all the numbers in the correct format.
Accountant also said what I could and couldn't claim as an expense.
My top tip is stay focused and don't lose sight why you started solo.
I wish your daughter all the best and hope it works out.
If she needs to have any kind of booking system, I can recommend 'youcanbookme' its like having an admin department- sends auto reminders by text and email etc, very easy to use. You can also take payments etc. I also use 'Zettle' (paypal) portable card machine, with Xero for accounts and Starling bank account- they all play nicely together.
Be aware - the first year they won't ask you for any tax. Then the next year, they'll ask for all the first year's tax, and an estimated half of the next lot (ie, half as much again unless you tell them you expect a major change either down or up). I found it best from the start to put 30% of my gross income away against the tax bill, generally that covered it nicely with a bit of spending money left over for a treat.
(Although it may have changed as I've not been self-employed for a decade or so... but the tax man is always going to want their slice sooner or later, so always better to be ahead of the game)
So she's branching out on her own after getting sick of working for others at only 22! 😀
Does she need to notify HMRC now or just fill in a self-assessment at the end of the year?
She'll likely be picking up some evening bar-work while she gets established so would be on the payroll of whoever she works for at the time as well.
NI Payments - would she just pay in a lump sum when she complete her self-assessment?
And she'll have to start her own pension too.
Having a daughter who's done the same, being harsh, but I assume she's already looked into all these points. If not, self employment may not be the way. You can only advise/point in the right direction
If she has , fair play, go for it, My girl did, brilliant way to go 🙂
echo above - a trusted accountant will save more than they cost. also note that submission of tax records deadline is also payment deadline. ask me how i know... and also as above, end of your first year you get to pay tax, and also pay tax on the start of your second year against expected earnings. hope things work out for her. paperwork needs doing all the way through. do not leave it until the end.
It is not sufficient to state on your tax return that you have started self-employment.
Which is utterly bonkers!
Careful here. You need to separately inform HRMC (ring them) if you're going self employed for the right mix of Class 4 & Class 2 to be collected (and allocated) based on your self assessment. Don't assume that they'll do it automatically based on you correctly filling and submitting your tax return.
Both of these.
I've been self-employed for about 30 years and they never tell you this. Consequently I've been paying class 4 NI but didn't know about class 2 (it never showed on my tax calculations* so I presumed class 4 was all I needed) and now have lots of missing years in my NI record.
* my accoutning app started showing class 2 on my tax calculations about 5 years ago which I've been paying but it's still not showing on my NI record!
I spent 1.5hrs on the phone to HMRC the other day questioning why my payments were not showing and why I'd not been asked to pay class 2 on my tax bill for so many years - they didn't have a clue, so I've submitted evidence and requested I pay the missing years at class 2 rates rather than class 3 (which I'll do if I have to). 🙄
So, yeah, get her to register for NI and pay the £180/year!
Thanks all - she's working it all out but it will probably take a few weeks.
Self-employment wasn't planned but her last live-in grooms job ended in such a shit show* a few weeks ago she's taking her time to get things right...
...and booking a solo trip to Gdansk next week to relax visiting the 2nd World War Museum and Stutthof concentration camp - like you do!
(*resulting in a moonlight flit while her bosses were on holiday)
I went self employed last year, and various people offered advice I'll pass on:
* If you want to go the Ltd Co route, it takes about 15 minutes to set up, and is more tax efficient if you are happy with the accounting load and complexity. If you make a good profit, you can chuck loads of it into a pension and reduce your tax load while also saving for retirement at the same time.
* Freeagent is really straightforward and peanuts (or free with certain bank accounts). You can issue invoices and estimates and track your potential tax liability and so on.
* Get an awesome accountant. I went by personal recommendation and haven't regretted it
* Set up a pot to put tax contribs in - 30% is a good hedge, as already mentioned. Once you've got a few years under your belt, you'll get a feel for it, and if you over-saved, there's money in the business to put to good use elsewhere
* Build a rainy day fund if you can, as early as you can. It means you can turn down stuff that might be counterproductive. I didn't have that option in my first year, and did a couple of projects that barely broke even just for cashflow
* Liability insurance is a good thing that you'll hopefully never need
* Make sure to build a network of mentors / people who've gone through it before. I've had excellent advice from friends who have been self employed long term
* At some point you'll fire a customer who is being awful, and it will feel awesome. Just don't get addicted to it.
I think that's about it. I don't have a huge amount of tooling / plant for my job, so VAT reg when it comes will be a pain in the balls, but if your daughter buys a lot of consumables etc, then it can be a good thing.
I was lucky enough to work for companies in the US and Europe as well as the UK, and having that was a good thing when it came to different bits of the world being on holiday at different times.
Oh - final thing: If you're good at it, and build a reputation for being honest and hardworking and generally someone who goes by Charlie's First Rule, the work finds you, and the clients are often better to work with, too. I'm finding that now; people I last worked with 15 years ago are searching me out to pass work my way.