VAT
In general, you are not obliged to register for VAT unless you have a turnover of more than £61,000. You can choose to voluntarily register for VAT if you sell goods or services below the £61K threshold. The decision to voluntarily register or not will depend upon your type of business, whether you purchase a lot of goods that you could reclaim VAT on, and what affect the extra VAT charge would have on your sales levels. Again, there are forms to fill in and regular returns to be sent, with penalties for late returns. There are systems now in place to make it easier for small businesses to manage their VAT. A guide to the VAT system and how it applies to businesses of all types can be found at www.hmce.gov.uk.
Money and Tax
Most people who work from home start out as self employed. However, you may want to consider setting up your business as a Limited Company- this brings with it a heavy administration burden, as you need to set up the company, and regularly fill in forms for Companies House, corporation tax returns and file accounts that are in the public domain. Some people find there are tax advantages over self employment,- and this is an area where you should seek professional advice. For basic information about Limited Companies take a look at the guidance booklets at www.companieshouse.gov.uk.
It's important to think about how much money you need to make when you work for yourself. But don't forget that you still have to pay tax and national insurance on your income. The tax you pay will depend upon your personal circumstances, and you may need to get advice from an accountant, or a tax specialist. A good place to start is www.inlandrevenue.gov.uk
It's now possible to fill in your tax return online. If you are unclear about how much tax and national insurance you should be paying, or if you feel that there are allowances you should be able to claim but are unsure how, you have a couple of options:
- You can employ an accountant or tax advisor to give you advice and/ or submit your tax returns.
- Or you could contact your tax office and ask them.
Personal Viewpoint
Personal experiences differ, but we have used tax specialists in the past that have given us poor advice. The best advice we have received has been from our local tax office- we saved money as we didn't have to pay for the advice, and we were clear about what was taxable income, and what was not.
However, you must use your own judgment on where to get your advice from. Make sure that you are clear about the cost of any advice you get. Also make sure that you are clear about the charges for preparing and submitting accounts, tax returns etc. Always get a written quotation, detailing what work will be carried out, how much the work will cost and a specific deadline for completing the work. Also clarify payment terms. You are paying for the service- make sure you are treated as well as you treat your own customers.
Insurance
All businesses will need some form of insurance. The type of insurance that you need will be determined by the nature of your at home business. For example, insurance will be needed for any staff you have; your stock; any equipment you use to run your business; visitors, or customers that visit your business at home. If you provide a service you may need professional indemnity insurance. Always advise your home insurance company that you are working from home. It may be necessary to take out an additional policy, or to amend your existing policy, to ensure that you are fully covered.
There are a huge variety of insurances available according to your type of business. There are insurance advisors and insurance brokers available to give advice and guidance on the types of cover available. It is important not to be under-insured- but don't get swept away and pay for cover that you will never need.
Personal Viewpoint
Insurance quotes vary tremendously between companies, and our advice to you is to shop around. Don't take your first quote- make sure you are getting a good deal.