Escape plan

[tinker]

Sue I think that's very naive of that seller! They can claim back what they've spent out on VAT so to hike the prices up so far is silly - you have to take a view on these things and make the price reasonable.

I'm slightly concerned that I've been ill-advised in registering for VAT now, the refunds have been very helpful up to now in terms of cash-flow but I'm also wondering how much I'm going to end up paying out once I'm selling more (positive thinking!!). I probably can't back out now though so no point worrying about it.

Zeldadog - It's my understanding that you'd also have to pay NI - I think it's class2 - as well as the employed NI, but if you are earning under a certain amount in your business you can apply for a certificate of exemption, which they should explain to you when you register as self employed but you do have to prompt some of them. It's all very silly, they don't always mention it, but you can get fined if you don't do it - one arm doesn't talk to the other...

[Kalorlo]

Regards NI contributions, I *think* if you are employed and earning over a certain amount so that work are paying a portion of your NI as well as you are yourself out your wages, you don't need to be paying the self-employed class contributions as well?

No, you have to pay Class 2 contributions even if you're employed full time with your employer paying NI. It's something like £2.50-£2.70 a week, I forget exactly! I've got a monthly direct debit for it.

(ETA: Crosspost!)

[Zeldazog]

Kat & Heather, its probably me getting it all mixed up - I can remember someone on a course saying something about it, but thinking about it further, I think I am getting it confused with when he was talking about the potential benefits of being a company - probably the company paying the NI contributions for you as an employee or something - I'll shut up now!

[Sandera]

I read somewhere that if you expect to earn less than circa £5000 that you don't have to pay the NI (although you can do it voluntarily? I've just got a big pack of information through the post from Business Link so will have a look at that and see what they say.

[Moreton]

We were registered for VAT when we sold dog equipement at shows & though our shop. It was worth it as we bought in a lot of stuff that we didn't make ourselves . Feeds, Beds,Chews, Shampoos ETC. However if your turnover is only going to be £1000pa or so there is no point at all in registering as the claw back from your kiln etc will never outway the additional costs of adding VAT to your mark up. Also do you really want to complete quarterly returns that carry a fine if not sent in even if the return is nil.

As others have said, Self Employed Yes. VAT No No No. 

[Lotti]

I read somewhere that if you expect to earn less than circa £5000 that you don't have to pay the NI (although you can do it voluntarily? I've just got a big pack of information through the post from Business Link so will have a look at that and see what they say.

Here is a excerpt from a recent email from my accountant.

Re the self employment, you need to register within 3 months of starting, always a difficult one to pin down a precise date but you could say 1st May, 1st June etc whatever's appropriate [Dates for me of course as I made my first sale in June].  You can opt out of paying the class 2 NIC if your profits are likely to be less than £5000 a year or so.  CWF1 form is needed to register and CF10 to opt out of class 2 if appropriate.  The forms are very simple and you can download them from the HMRC website but do let me know if you need any assistance with them

Re the NIC you want to think carefully about this.  As a woman (at the moment) you need to have paid 30 years contribution to qualify for state pension, so if you have less than this and want to opt out it's a bit tricky.  I decided to go for the class 2 (and I do have 30 years   - how did that happen), it isn't that much.  The forms were easy to find and deal with but it did take ages (as I think I have mentioned) to get anything back from HMRC

[Ant]

This needs some careful consideration. Although I've sold some items in the local via the local art gallery I haven't gone in to collect my money yet. I will need to speak to the gallery owner to see whether he has charged VAT in which case I assume that the evidence can be used to satisfy VAT return?

I think you'll find that you have to pay VAT on your sales to the gallery, if you're VAT registered - regardless of whether he charges VAT on his sales or not... not sure about that one though.

Regards NI contributions, I *think* if you are employed and earning over a certain amount so that work are paying a portion of your NI as well as you are yourself out your wages, you don't need to be paying the self-employed class contributions as well?

You won't need to charge VAT to the gallery if you're not VAT registered - it just means that the gallery won't be able to claim VAT back on the goods that they purchase from you as none was paid in the first place.  They will, however, have to add VAT onto the prices at which they sell any of your beads/jewellery. Personally, I wouldn't go VAT registered since it will either add extra cost to your own personal sales or erode your income. Good luck with your escape plan though.  Think my escape plan is going to take about 10 years

[Blue Box Studio]

I've got a class 2 exemption because of low earnings, but I also pay class 1 though my main job so my pension is protected.  If I went back to being just self employed again I'd pay the class 2 to protect my pension.  Having said that, depending on your age, ask for a pensions statement, you might have already paid enough to qualify for the state pension.