Very small business

[Craphouserat]

Hi all

I have a full time job in the Forensic Science sector but decided last year, August, to start a very small side business for weekends and days off detailing cars. Customers have just been friends and neighbours.

They always get invoices and receipts - I decided to do this formally because people were always asking me to their vehicles as I kept mine in such good nick. Never charged any of near what a pro does but always give them an invoice and receipt.

My question is this, Do I need to fill out a self assessment form if my income from this has only been around the £750 mark? I have all records of products bought and have copies all of all invoices etc.

I'm sure I was once told if you earn less than £1,000 from a business you don't pay tax on it as it's seen as a hobby?

Thanks in advance for any advice.

[BoRED S2upid]

I’ve heard that before as well in relation to car boot sales and such businesses.

I’m sure Eric will be along shortly.

You don’t need to worry about the tax return until this time next year whatever the answer is.

[chml]

https://www.gov.uk/self-assessment-tax-returns/who...

On the face of what you have said then the answer is no however if you only started in August and are up to £750 then you probably will exceed the £1000 threshold.

[hyphen]

Craphouserat said:

My question is this, Do I need to fill out a self assessment form if my income from this has only been around the £750 mark? I have all records of products bought and have copies all of all invoices etc.

Just to check you are aware - is that net income after expenses/costs like Liability Insurance etc? As if new to self employment, you may be stating turnover..

[Craphouserat]

hyphen said:

Just to check you are aware - is that net income after expenses/costs like Liability Insurance etc? As if new to self employment, you may be stating turnover..

The £750 is what I've actually brought in since August - i probably only do a car a month. Regarding costs i only buy the best products - Angelwax,Bilt Hamber, Koch Chemie etc. I've invested in a Dual Action Polisher and a new Pressure washer with a decent Foam Lance. Without exaggerating i've probably spent the £750 on products and equipment. But thats them bought now, products i buy as i need them - i don't hold a particularly big stock in the garage.

Like i say more a hobby but i don't want to fall foul of HMRC - why don't i have to worry about a tax return this month may i ask?

Sorry - completly new to this but i am taking part in a tax webinar later this month run by my local business gateway,

Cheers

[Simpo Two]

My suggestion is: Add up your gross income (ie total of all invoices), subtract all your relevant costs (stuff bought in to do the work), and the difference is your net profit. My understanding is that you can have £1,000 of that tax free but anything more would be added to your main work for income tax which may be 20 or 40% depending on how far up the tree you are.

Craphouserat said:

The £750 is what I've actually brought in since August... i've probably spent the £750 on products and equipment.

Looks like £0 profit then.

An accountant will be along soon to add complexity and talk about NI

Edited by Simpo Two on Friday 8th January 19:19

[FWIW]

If only everyone was as honest as you.

[mike9009]

My wife had a really small business/ hobby on a similar scale. It probably generated about £1k profit per annum.

She approached and signed up to HMRC and they told her not to bother. ( Her main PAYE job is very low paying too, mainly due to part-time hours)

Do make sure you have the appropriate insurances, especially with people's pride and joy!!

On that scale/ profit, I would just enjoy it.

[hyphen]

Simpo Two said:

My suggestion is: Add up your gross income (ie total of all invoices), subtract all your relevant costs (stuff bought in to do the work), and the difference is your net profit. My understanding is that you can have £1,000 of that tax free but anything more would be added to your main work for income tax which may be 20 or 40% depending on how far up the tree you are.

Craphouserat said:

The £750 is what I've actually brought in since August... i've probably spent the £750 on products and equipment.

Looks like £0 profit then.

An accountant will be along soon to add complexity and talk about NI

Edited by Simpo Two on Friday 8th January 19:19

https://www.gov.uk/expenses-if-youre-self-employed

As said above by Simpo, OP you can deduct your costs so

Edited by hyphen on Friday 8th January 23:52

[hyphen]

FWIW said:

If only everyone was as honest as you.

I think the phrase you may be looking for is "risk averse".

[trickywoo]

Craphouserat said:

The £750 is what I've actually brought in since August - i probably only do a car a month. Regarding costs i only buy the best products - Angelwax,Bilt Hamber, Koch Chemie etc. I've invested in a Dual Action Polisher and a new Pressure washer with a decent Foam Lance. Without exaggerating i've probably spent the £750 on products and equipment. But thats them bought now, products i buy as i need them - i don't hold a particularly big stock in the garage.

Like i say more a hobby but i don't want to fall foul of HMRC - why don't i have to worry about a tax return this month may i ask?

Sorry - completly new to this but i am taking part in a tax webinar later this month run by my local business gateway,

Cheers

Do you use any of your purchases yourself or are they all business?

The more honest you are the more complicated it gets unfortunately.

[hyphen]

trickywoo said:

Do you use any of your purchases yourself or are they all business?

The more honest you are the more complicated it gets unfortunately.

Keeping his car spotless is essential to the business, as customers otherwise won't use him. So justified use.

Probably needs a company car in view of the travel involved.

Will be a decade before he makes a profit.

[Simpo Two]

hyphen said:

Keeping his car spotless is essential to the business, as customers otherwise won't use him. So justified use.

Probably needs a company car in view of the travel involved.

Will be a decade before he makes a profit.

Opening a branch in St Tropez won't be cheap either!

[BoRED S2upid]

You don’t have to worry about a tax strum this month if you started this business in Aug 2020 it’s next years tax return so keep up the good work maintain your records, see how much you make (profit) by the end of this March and consider completing a tax return after that. Insurance is a must and is obviously deductible from the tax return.

[Eric Mc]

Per HMRC -

Sole Traders need to register with HMRC for Self Assessment no later than 5 October after end of tax year when you first get Self Employed income.


Exception – if your turnover (not your profit) is less than £1,000 – you then do not need to register, but check for registration next tax year.

[Craphouserat]

Hi all

Apologies for the late reply to you all.

First off thanks to everyone for their input - i really appreciate it.

Regarding the products I buy in - the vast majority of them are used on my clients cars. When I do detail my own I will use them....what does this mean exactly?

Do I need to anything at all by the deadline this year or should i just keep my records going as i am? I don't personally think this will ever be anything bigger than it is but I do expect to do more business this year due to people's recommendations - given all the big pieces of equipment have mostly been purchased I am hoping to actually make some money this year....even if it's just spending money for a holiday !

Appreciate everyone's input.

[Simpo Two]

Craphouserat said:

Regarding the products I buy in - the vast majority of them are used on my clients cars. When I do detail my own I will use them....what does this mean exactly?

Well technically you'd assign a percentage for private use and so not claim for that part, but 999 people out of 1,000 wouldn't bother.

Craphouserat said:

Do I need to anything at all by the deadline this year or should i just keep my records going as i am? I don't personally think this will ever be anything bigger than it is but I do expect to do more business this year due to people's recommendations - given all the big pieces of equipment have mostly been purchased I am hoping to actually make some money this year....even if it's just spending money for a holiday

Is the cost of all the 'big pieces' included in your sums?

You'll reach a point, probably about now, where all you need to buy has been bought and so all money that comes in is profit (except for consumables like polish and pads). And as trade increases, up she goes!

[Eric Mc]

Craphouserat said:

Hi all

Apologies for the late reply to you all.

First off thanks to everyone for their input - i really appreciate it.

Regarding the products I buy in - the vast majority of them are used on my clients cars. When I do detail my own I will use them....what does this mean exactly?

Do I need to anything at all by the deadline this year or should i just keep my records going as i am? I don't personally think this will ever be anything bigger than it is but I do expect to do more business this year due to people's recommendations - given all the big pieces of equipment have mostly been purchased I am hoping to actually make some money this year....even if it's just spending money for a holiday !

Appreciate everyone's input.

I'm afraid your questions come across as a bit muddled so it isn't altogether clear what questions you are asking.

" When I do detail my own I will use them....what does this mean exactly? "

Not sure what this question is. What I THINK you are asking is, "How do I account for materials I buy for my business but which I end up using for my own personal, non-business related, projects".

Is that the correct interpretation by me?

What "deadline this year" are you talking about?
On what date (be specific) did you start your sole trader business?

[bristolracer]

You're a Forensic scientist and you clean/detail cars?

I can see there would be a lucrative market for your services if you know the "right" people

[Mandat]

bristolracer said:

You're a Forensic scientist and you clean/detail cars?

I can see there would be a lucrative market for your services if you know the "right" people