Need help/advice making everything official (A thread about tax)

[theshortstack]

First up, hello to everyone. I'm a member of a few other forums, but only just got round to signing up to AGD. I know ... shame on me

Anyway, my question revolves making your affiliate business official and setting up your own company for tax reasons.

I'm based in the UK, so I guess I'm ideally looking for advice from UK based affiliates, but to be honest I'll happily take advice from where ever it comes from!

Obviously the official line is that you should register yourself as a new company before you even start promotions ... and I (like the majority of new affiliates) haven't done that.

Now that I'm getting a few sign ups every month (nothing to write home about yet!), I'm thinking I should make everything official to avoid any penalties or legal problems.

Having done a bit of research into everything, I know that I can offset any losses I make from affiliate marketing against the tax I pay in my full time job, but even taking that into account I can't help feeling that I'm almost better off waiting until the business has grown a bit more before submitting details to company house ... which I know isn't really right.

That's because there'll still be a host of other charges to pay:

• One off fee to set the company up (several hundred pounds I believe)
• Monthly NIC fees
• Fees for a recommended separate bank account (which I believe are monthly too)
• Accountancy fees at the end of the year
• Tax on all income

There are probably a few other charges that I haven't found out about yet either ...but it seems that by making everything official I'll turn an admittedly small monthly earning into a large monthly loss.

Or am I missing something here??

Many thanks in advance for your help ...

 

[bonusjackpot]

Hi theshortstack

This seems a bit complicated to start of with.

Just register yourself self employeed and then make up a trading name. This is free and tells the taxman that you will be earning money and are liable for tax on any profit made.

* One off fee to set the company up (several hundred pounds I believe)
* Monthly NIC fees

See above, and NIC fees are about £60 a qtr as part of self employement.

* Fees for a recommended separate bank account (which I believe are monthly too)

I have a Business Bank account setup in my trading name and this was free and no monthly or any other charges involve.

* Accountancy fees at the end of the year

You can do this yourself as part of the self assesmment yearly (as self employeed you will get all documents through about this) just keep a record of all incoming and outgoing costs and keep all invoices and transactions in an accounts book. An accountant costs about £1000 a year roughyl depending on accounts.

* Tax on all income

Yes, just keep about 30-35% of all earning (profit) each month in a seperate account, ready for paying the tax man at the end of the year.

This is the simplistic way of doing it, if you earn much much more then I would think about setting up an LLC or LTD.

Most importantly, if you keep money aside for taxman, them you have no worries.

 

[RayUK]

Just to say that I am in a similar boat - just starting up and I would say that bonusjackpot is spot on. I have a trading name, and have registered as self employed. As I don't expect to make more than £5,000 before April I have applied for and received an exemption certificate for type 2 national insurance (you don't have to pay that if you earn less than £5k in your self employment) - type 2 is £2.40 a week I think. You will still have to pay type 4 NIC but that is assessed along with your income tax at the end of the year (30-35% should cover income tax + NI as long as you don't earn over £35k or whatever it is to get into higher rate tax).

You don't even need a separate bank account for the business if you don't want, but do keep track of what are business expenses and income vs. personal ones.

My situation is a bit different in that I am starting up very slowly and have a part time 'day job' - so I don't really want to get too involved in business banking, accountants, Ltd companies and so on until things are big enough to warrant that.

The businesslink websites and the HMRC websites are quite informative, but you do have to trawl through rather a lot of info!

--

Ray

 

[doolally]

When I started up, for just over a year, I was registered as self-employed. I paid Class 2, which I would recommend anyway even if you don't have to as it makes sure you get the right contributions when it comes to claiming your state pension. £2.40 a week isn't much.

I used a seperate personal current account for tracking income and expenditure and got a new credit card for online purchases. It makes things easier to explain if you even get a tax audit rather than mixing it with your personal stuff.

Keep a list of all income and expenditure (I used a simple spreadsheet - update often) and keep any receipts, invoices, etc, as backup should you ever need it.

If your income is less than £40k then set aside 30% to cover tax and Class 4 National insurance at the end of the year.

Now here's the tricky bit to watch, especially in your first year -

After the first year, you'll pay tax on any profit over the allowable non-taxable amount as you would expect. Now, different than your first year, half-way through your second year, you'll be billed for half that previous tax amount again. This goes towards your second years tax requirements. You'll then pay the remainder at the end of your second year.

Worth setting aside as much as you think you'll need to cover the second bill as it catches out a lot of beginners who think they'll save towards the end of the financial year.

Once you earn over £40k per year from all your incomes put together you need to setup a Ltd company. It'll cut your tax down. You might want to register before this but over this amount is a must. Pay your wife/partner, etc, £5k per year tax free and get them to give it back to you.

You'll have to pay an accountant unless you know someone who can help out for Ltd company but this is covered by the £5k tax free so there really is little cost to being a Ltd Company and you have the advantage of keeping your personal assets if something goes terribly wrong.

Hope this helps a little.

 

[tryme1]

OK, it's 10:15 as I type this and I'm tired and don't have time to read this through in detail.

However, some of what I'm reading here is wrong.

If you are self-employed (or even a small ltd), an accountant shouldn't cost you £1000. Half that is a fair price, depending on turnover and complexity.

Secondly, setting up a limited company won't cost you 'hundreds of pounds'. £30-£50 is more like it.

Thirdly, you need to figure out whether being self-employed or a limited company is going to be more tax beneficial. A decent accountant will be able to help you with that - usually a limited company is the way to go regardless of turnover.

Fourthly, if you are doing this full time and you don't use an accountant to certify your accounts, then you will have problems getting a loan or a mortgage. All UK financial institutions are insisting on independently certified income at the moment.

Fifthly, aside from being a gambling affiliate, I work in B2B lead generation and we work with well over 200 UK accountants - our flagship site is www.justaccountants.co.uk

If you want a chat about this and maybe a referral to a decent accountant, feel free to call the office on 01634 817271 after about 9:30am (I'm Mark and that's my direct line)

 

[sipka]

Awesome answers here. Thanks to all who added their bit of info.
My question would be if are there any requirements for foreigners to set up an Ltd in the UK? I am getting really fed up that I pay around 60% taxes after my Ltd in my country, worst taxation rules here in the EU (and because of the awful administration things I cannot even count with costs that are not paid out of the company's bank account - so ewallet payments are ignored and does not count toward our costs
I was thinking about to move the company to another country or just set up a new one in the UK I'm in the position now that I rather pay taxes for another country than let all the money sink in mine.

 

[stevebn]

Thanks to all. It was very interesting reading through these threads. Appreciate Mark's clarifications as well.

Quick question - where would an Isle Of Man setup be beneficial taxwise? Is there a threshhold where one should consider taking it offshore?

Thanks,

Steve
Winner Affiliates

 

[tryme1]

Sipka - I don't know the tax laws of your country, but in the UK, you are taxed where you are living.

So, even if my company was based in Latvia, for example, I would still be taxed in the UK if I was living here.

I suspect this is true of most of the EU, but you would have to check.

Stevebn - No benefit to having an offshore account at all if you are a UK resident. You'll still get taxed according to UK tax laws and the lovely HMRC people will take a very close look at you if you start putting stuff offshore. Best avoided.

 

[stevebn]

Mark - got it.
Thx for the clarification!

 

[theshortstack]

Right, first up huge thanks to everyone who has replied to this post and my apologies for not getting back to it sooner - I've been doing a bit of research on here and a few other forums and it seems that a few things I initially thought are incorrect.

Firstly, it seems I don't need to set up own company (yet). I just need to declare myself Self Employed (even if I've got a day job) and keep a track of all income/expenditure. It does look as though there will be a recurring NIC fee of £60/quarter which isn't a huge amount and will just be another cost that I'll need to use as a motivational factor.

Secondly, I'm not taxed on all income. I'm only taxed on profit at the end of the year, and I can submit that tax form myself to initially save on costs. Quick question though, what sort of format do these accounts need to be submitted in? I'm planning on keeping track of all transactions in iBank (for the Mac) and would like to make sure I can export data correctly.

Thanks very much to Doolally for suggesting the separate credit card and also the warning about tax payments in the second year of business. One quick question about finance stuff though. A couple of people suggested setting up a separate bank account to house 30% of all profits (for the taxman). Does that mean you recommend having three accounts: my personal day-to-day account, my main business acount, and a 'tax' account?

Do these business accounts cost to set up? Or can I just use another 'personal' account - are there any disadvantages to doing this?

Thanks hugely to everyone who contributed to this thread - I asked this question on a few forums, and these are by far the most comprehensive answers I've had.

Is anyone able to provide me with a good link that I can use to keep reading up on this? Also, is anyone here on Skype? I won't bug you, but it would definitely be useful to talk to someone who's gone/going through this at the same time as me ...

Thanks again

 

[tryme1]

Quick question though, what sort of format do these accounts need to be submitted in? I'm planning on keeping track of all transactions in iBank (for the Mac) and would like to make sure I can export data correctly.

OK, if you are going the self-assessment route, you will need to complete a self-assessment tax return (http://www.hmrc.gov.uk/forms/sa100li-2009.pdf ).

You do not actually submit accounts, just the tax return. The HMRC doesn't ask to see the accounts, so you can use iBank or whatever you are comfortable with.

 

[bonusjackpot]

Thanks very much to Doolally for suggesting the separate credit card and also the warning about tax payments in the second year of business. One quick question about finance stuff though. A couple of people suggested setting up a separate bank account to house 30% of all profits (for the taxman). Does that mean you recommend having three accounts: my personal day-to-day account, my main business acount, and a 'tax' account?

Do these business accounts cost to set up? Or can I just use another 'personal' account - are there any disadvantages to doing this?

Hi

I have a business bank account with HSBC it is completely free to setup and use, as its mainly all online transactions etc, and cheques and actually money (paying in etc) are free up to 50 per month, which will never happen, so yes HSBC is completely free. It comes with a bank account (debit card), a saving account (which I use for tax money 30%) you can also have a credit card (£32 per year) free for the first year (£1000) I also have my own personal account elsewhere.

As for accounts, I keep a book, in/out thats it, though I will be doing it on excel next time. The tax man does not need this, the accountant does, you only have to give final figures to taxman (online) when you do the self assessment.

Hope that helps.

 

[theshortstack]

Hi

I have a business bank account with HSBC it is completely free to setup and use, as its mainly all online transactions etc, and cheques and actually money (paying in etc) are free up to 50 per month, which will never happen, so yes HSBC is completely free. It comes with a bank account (debit card), a saving account (which I use for tax money 30%) you can also have a credit card (£32 per year) free for the first year (£1000) I also have my own personal account elsewhere.

As for accounts, I keep a book, in/out thats it, though I will be doing it on excel next time. The tax man does not need this, the accountant does, you only have to give final figures to taxman (online) when you do the self assessment.

Hope that helps.

Thanks for the feedback - much appreciated.

Just out of interest, are you registered as a sole trader or have you have set up a limited company?

Would you recommend HSBC? I'm at the stage where I'm going to talk to various banks ...

Cheers again

 

[RayUK]

Sorry to bump an old-ish thread but TheShortStack PMed me and I can't reply because I don't have enough posts yet!

TheShortStack: email me at ray (dot) poynter (at) gmail (dot) com by all means

Regards,

Ray

 

[theshortstack]

Thanks for the help Ray - hugely appreciated!