Down_In_It started this topic @ 15:58 on 01/03/2004
Greetings. What a great website – just what I was looking for, as I’m desperately in need of some good advice!

Basically, I’ve found myself recently redundant, a slightly bitter affair that left me with only a small percentage of my contracted severance pay. Anyway, I’ve long decided the office is not for me; I’m a solitary type of person with enough experience and hopefully talent, to go my own way. Essentially I have two basic questions, and perhaps a few more that I might save for another thread:
Firstly, when you let IR know you’re going self-employed, do you have to state the specific nature of your business, or can you go by the generic term - e.g. “sole trader”? The reason I ask is because I plan to be a little diverse – I can get work through my contacts to do some freelance web design and photography work, but my main interest is in the traditional arts, and I plan to paint more than anything else, though that will probably not be my main source of income as freelancing will inevitable pay better. BUT, I am also using my redundancy time in creating software, again based in the arts. So to get back to the question, if I had to describe the nature of my work, what should I write? I realise artist’s have a few exceptional rules under the self-employment regulations, though I am not too concerned about having to average out payments due in times of possible hardship, and having to put my job description down in some other terms. (as long as I can still claim expenses against buying art supplies of course!)
My second query, which is causing most of my anxiety due to my ignorance in the subject, is book-keeping and tax returns, having been a PAYE member in my short working life. I’ve no doubt I can keep and maintain well organised records of my expenses and sales, but taking a peek at IR’s SA103 form, I’m more than a little daunted about attempting to fill it in myself!
Reading many of the other threads, it seems hiring an accountant is a good route to take, and it seems many accountant’s rates are quite reasonable. Please correct me if I’m totally off the mark here, but if I were to say file for self-employment in May or June of this year, would I only need to start worrying about tax returns and working out one of the NI contributions (I could be totally wrong, but I think there’s one you pay twice yearly, and the NIC2 which is a weekly direct debit?) in April 2005? If that is the case, can I just approach an accountant around the time the tax returns are first issued, and simply handover all my receipts, invoices, statements and my book work, and expect to pay a fixed sum and have them deal with the IR and the tax return on my behalf? Or presumably accountants might charge hourly depending on the quality of book-keeping you provide them?
Many thanks in anticipation to anyone who is kind enough to reply.
RE: Accountants & Business Description 4 self-employed
James Smith | 01/03/2004 04:43 PM
In terms of your description - they don’t really care, just make sure you register within 3 months of starting to trade with the main activity.
It may be that you will have more than one trade which will complicate things slightly - its best to keep all your records for different activities separate, although some expenditure will inevitable be joint. This separation may also help with your management of your activities so you can see what is profitable.
In terms of doing a tax return, if you are currently self employed, your first return period will be to April 2004. You would make your first tax payment by 31st January 2005, which is equivalent to 1 and a half times the amount due. (The extra half is for the current year). You would then pay another half by the 31st July 2005, and any balance by 31st Jan 2006 (along with the next years payments and so on)
For NI, you will pay a very small amount - £2 a week from when you start, the rest of it goes in with your main tax payment.
if you do not start being self employed until May 2004, you first year end would be April 2005 and all the dates above move along one year.
In terms of using an accountant to fill in your return, some will charge hourly, some will offer fixed fees. If you hand over a bag of receipts, this will inevitably cost you quite a lot more than if you are able to put together some basic books, (eg a list of income and expenditure in excel is my preferred method for small clients). Each accountant is likely to vary so agree with them how you are going to prepare you records, and what the costs would be. If I can be of any assistance when you get that far, please let me know
Regards,
James Smith
Chartered Accountant
[url]www.jamesesmith.co.uk[/url]
[url]www.uktaxshop.co.uk [/url]
01284 764436
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Accountants & Business Description 4 self-employed
Down_In_It | 01/03/2004 04:58 PM
Hi James,
Many thanks for the swift reply, you've answered a lot of my questions.
I haven't currently applied for self-employment, but will be doing so fairly soon (a month or two most likely).
Separating activities does sound like a wise idea. I'll certainly keep your name and contact in mind, though just out of curiosity how practical is it to deal with an accountant who isn't local? I mean it's easy enough these days to keep all receipts optically and stored on a computer, but it would still be a fair amount to email if the information was exchanged that way.
Cheers,
Gavin.
RE: Accountants & Business Description 4 self-employed
James Smith | 01/03/2004 05:33 PM
Gavin,
Im glad you found that useful.
In terms of remote working, I actually deal with about 90-95% of clients (even some local ones) in this manner. My clients tend to be people who prefer using phone/email to communicate rather than having the bother of visiting their accountant. For some larger clients (including one in Germany with a UK ltd company) I actually dial into their accounting systems remotely to do their year end. I may as well be in the next office, I happen to be 100's of miles away.
I don’t generally need to see original invoices/receipts unless I am doing the bookkeeping, in which case clients tend to put their shoe box of receipts in the post, so there is no real need for complex storage set ups. Most people tend to have scanners which will suffice for the odd thing I do need to see.
I guess it depends if you view a trip to their accountant's office as a good day out or not. I find the people I meet personally tend to end up getting charged more as it takes up more of my time to have a meeting than a phone call. As cost seems to be the biggest issue with small clients, remote working seems to make sense to me.
Its really down to personal choice with what you feel most comfortable with.
James Smith
Chartered Accountant
[url]www.jamesesmith.co.uk[/url]
[url]www.uktaxshop.co.uk [/url]
01284 764436
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Accountants & Business Description 4 self-employed
Down_In_It | 01/03/2004 06:14 PM
Hi James,
When you put it like, I can imagine more fun days out than in the office of an accountant.
Well I have to say I'm impressed by your advice and help, and from what others have said you seem to be an accountant with high recommendations, and I believe you have no problems working with sole-traders who probably aren't making an fortune in a year?
If that's the case, I'd certainly be happy to send the work your way when it becomes necessary to do so.
Would you recommend a separate excel spreadsheets for each side to the business? [
]
Thanks again,
Gavin.
RE: Accountants & Business Description 4 self-employed
James Smith | 01/03/2004 07:07 PM
Gavin,
I would be delighted if you would like to consider using my services. If you want to give me a ring tomorrow/ send me a contact email we can discuss what your needs are. And dont worry, I dont charge for a chat.
Regards,
James Smith
Chartered Accountant
[url]www.jamesesmith.co.uk[/url]
[url]www.uktaxshop.co.uk [/url]
01284 764436
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Accountants & Business Description 4 self-employed
Down_In_It | 01/03/2004 07:37 PM
Hi James,
Sounds great. I'll get in contact with you tomorrow.
Cheers!
Gavin.