jbrown_gtfc started this topic @ 23:22 on 09/01/2005
Hi all, newbie here.
I would really appreciate some advice..
I started a hobby affiliate web site 2 months ago (i.e. I earn when visitors click on adverts on my site). I'm currently earning around £120 profit per month and am also in full time employment.
I've heard that I should register as a sole trader within 3 months of starting 'trading' so I need to decide now whether to become a sole trader or a Private Ltd company. I'd like to expand my web site(s) and increase my profit.
Can anyone tell me what are the legal requirements for a sole trader?
Once registered do I simply fill in a single tax return for me as a person every year? Or are 2 tax returns required?
Do I have to do annual accounts etc or is a tax return all I have to worry about?
As a sole trader, do I need to obtain/issue invoices etc? or will bank statements do?
Can I bee a sole trader AND be in full time employment at the same time?
Although the limited liability would be good, I'm thinking becoming a Ltd company would wipe out all my profits in accountacy fees etc.
Thanks in advance for help you can give me.
James
RE: Affiliate - Sole Trader or Ltd?
James Smith | 10/01/2005 12:48 AM
James,
it sounds like you have a relatively small amount of income here, for which being a sole trader is ideally suited, especially if you are in full time work and this is a small second income.
There are no particularly large burdens placed on you as a sole trader. The main accounting/tax ones are to:
1. Keeping accounting records (basically a list of your purchases and income)
2. Filling an annual tax return
3. Pay your income taxes and any NI that is due.
There are some more detailed notes in the main section of this site, plus you will receive a pack when you register with the IR with further details about what you can/cant do.
You can always incorporate at a later date, so this choice of structure now is not final. Given you have traded for the past 3 months you are actually a sole trader by default even if you have not realised it or registered yet.
You can sort out your own return although it shouldn’t cost a lot to have one professionally prepared to ensure you are not making a mess of it, and ensure you are claiming everything back you can. My small trader returns go as low as £149 for example.
In answer to your specific questions:
------Once registered do I simply fill in a single tax return for me as a person every year? Or are 2 tax returns required?
There is one combined return per annum for a sole trader/personal return
------Do I have to do annual accounts etc or is a tax return all I have to worry about?
No accounts needed, but you do need to draw up the figures in order to prepare the tax return.
-----As a sole trader, do I need to obtain/issue invoices etc? or will bank statements do?
You need to keep “proper accounting records” this basically means you need to keep receipts for all expenditure and any invoices you issue. Given affiliate income doesn’t normally require you to issue invoices you should just retain any statements you receive from your affiliates. Presumably you will be retaining these anyway for your own business purposes.
----Can I bee a sole trader AND be in full time employment at the same time?
Yes
If you need some help then please let me know, although I will be busy with last minute tax returns until the end of the month so I dont have as much time for freebies as I do normally.
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: RE: Affiliate - Sole Trader or Ltd?
jbrown_gtfc | 10/01/2005 09:45 AM
James
Many thanks for this information, it has helped immensely.
Just to clarify few points, if you don't mind:
1. What is the best/easiest/quickest way to register as a sole trader? What information is needed from myself? Is there a cost?
2. I advertise my site using Google AdWords who charge me through my credit card. Would retaining my credit card statements be sufficient when keeping "proper accounting records"?
3. I take it, these advertising costs are entered on the tax return and I only pay tax on my profit and not my total revenue?
4. Is it best to register as a sole trader in my name or a new name? Do I have to display this name on the web site(s) at all?
5. When it comes to "3. Pay your income taxes and any NI that is due." Is this calculated for me using my tax return? And will it come out of my pay packet in my full time employment or do I pay by some other means?.
Thanks again. I'm sure you're replies will be immensely useful for others starting up as affiliates.
James
RE: RE: Affiliate - Sole Trader or Ltd?
James Smith | 11/01/2005 08:13 AM
A few comments for you:
1. What is the best/easiest/quickest way to register as a sole trader? What information is needed from myself? Is there a cost?
Its free. Ring the IR on 08459 15 45 15
2. I advertise my site using Google AdWords who charge me through my credit card. Would retaining my credit card statements be sufficient when keeping "proper accounting records"?
You should really print off the invoices Google produce, but credit cards would be "second best" evidence.
3. I take it, these advertising costs are entered on the tax return and I only pay tax on my profit and not my total revenue?
Yes
4. Is it best to register as a sole trader in my name or a new name? Do I have to display this name on the web site(s) at all?
You register a business name, this should be the one you use. If the business name doesn’t include your name you need to show both on your website invoices etc. The main section of this site deals with this sort of thing.
5. When it comes to "3. Pay your income taxes and any NI that is due." Is this calculated for me using my tax return? And will it come out of my pay packet in my full time employment or do I pay by some other means?.
Computed from your tax return. You can elect to have it out of your paypacket if the total is less than £2000 and you submit your return by the 31st December each year. Otherwise you pay the IR direct.
Hope this is of help to you,
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: RE: Affiliate - Sole Trader or Ltd?
jbrown_gtfc | 12/01/2005 11:37 AM
Many thanks James. I'll get registered now.
