Designing for the future - Help needed!!

Hello all,

I'm in need of some help and would like some feedback..

I'm currently working full time and want to start web design full time. Before I do this I want to get as many clients on board etc so I have enough contacts, resource etc to succeed.

While im doing this a at the moment on the side of my normal job do i have to do any of the following?

1) Sign up with the tax man of anything coming in?
2) set up a vat number?
3) set up a business account?

Obviously i will want to advertise etc so wanted to know of any people who have previously done this before freelancing full time etc.

Matt

 

Hi Matty,

You will need to register as self-employed and declare all your earnings to HM Revenue & Customs. VAT is only an issue if you set up a limited company to operate under, and even then it's only a legal requirement if you earn more than a certain amount in a year.
I recommend having a read of Business support, information and advice | Business Link there's loads of stuff about starting a business, and what your legal obligations are.
As for a business bank account, this is up to you, however I think it's a good idea to certainly have an account that is completely separate from your personal account. It's your responsibility to maintain audit trails. Keeping business transactions separate from personal assists with this, it also makes year end account preparation easier for your accountant.

Ben

 

Thanks Ben,

So if im still working for two years in a company i have to register as self employed? Bit confuddled lol.

Thanks for the link ill have a read over. Just want to do both jobs for the time being until i know i can finish my proper job.

 

The current limit is £64,000 but it goes up every year. You do have to register though if you hit this threshold even if you're not a limited company. I'm a sole trader and I had to!

 

To declare your freelance earnings, yes. It doesn't mean you can't have a full-time job at the same time.

 

I didn't know that – you must be doing well as a sole trader!

 

in regards to registering for VAT you have to think who your client base will be.

If they are larger companies then they will almost certainly be VAT registered. This means that you being VAT registered does not affect them as they can claim back whatever VAT you charge on your services

Smaller companies and the general public who are not vat registered will loose out if you charge VAT as they will have to pay your fee + the VAT which they cannot claim back. So if you charge £100 +£17.50 vat for a job you may loose it to competitor who is not VAT registered and only charges £100 with no VAT.

The benefits to you if you are VAT registered are that you can claim back VAT on expenses and purchases such as your printer ink, phone bill, capital items etc
It also aids your cashflow as the VAT charged will sit in your bank account (or investments) until you have to pay it (usually every quarter)

Being VAT registered also comes with an image of being a larger business so if you are dealing with mostly VAT registered clients and have a trunover under the £64k threshold then it is still beneficial but not compulsory to register for VAT.

The downsides are that you have to complete a VAT return every quarter (pr pay an accountant to do it for you)

 

As someone who was pretty apprehensive about having to do a VAT return and bookkeeping I can say it's not as difficult as I thought it would be. My accountant explained it all and told me how to keep all my financial records and bit by bit I've got my head around the whole thing! It's just a case of being disciplined enough to keep the accounts up-to-date.

 

One other thing to consider is registering for VAT, but opting for the flat rate scheme. This is especially suitable if you sell your time, but do not buy in services and sell them on. As such you have a far smaller requirement for claiming back VAT on purchases and a flat rate scheme could be better.

When you apply they 'grade' you by business type and agree a VAT percentage that you have to pay. Mine happens to be 9.5% so I actually make a profit on my VAT (as I charge at 17.5%) and this makes up for the fact that I cannot claim VAT back on business purchases such as IT equipment and the like. Overall it's still a much better option.