Tax Information. Becoming Self Employed

0:00 It is, to the best of my knowledge, factual

Alright ladies and gentlemen, for quite a few years people have asked me to give some form of or some sort of advice on becoming self-employed, registering your business, what taxes are all about, what you have to do, what you can and you can't do. So I'm going to give you a bit of advice based on the knowledge I know. It is, to the best of my knowledge, factual. Now, first and foremost, let's say you want to become self-employed. Now, it's not difficult to do. What I did is I went to my local tax office, I explained the nature of my business, I explained the date I started that business, and I gave that business an address. That's just about it. They then got in touch with me, they sent me all the information.

And that was it. So the major point there is the date at which I started, because that is the time at which my business started. Now when we talk about a year, we talk 365 and a quarter days, January 1st is the start of the year, December 31st is the end of the year. A financial year does not start January 1st or end January 1st. December 31st. A financial year for me starts on April 6th and ends April 5th. Now, that's my financial year. Could be the same for you. Please let me know. Now, OK, so you have decided to become self-employed and that's near enough all you've got to do. I'm not sure about age, how old you have to be. There is more than likely there is a limit. Above that limit, you can start to become self-employed. Underneath that limit, then maybe you're not allowed to. I am not sure there. Again, I'm only telling you what I know. So, first of all, I want to explain three very important terms that are very important. There is net, there is gross and there is expenses.

2:51 No, I'll tell you what, no

If anything, when you earn, not thousands and thousands, but when you're on a relatively low income, you know, you're self-employed, maybe you have another part-time job, but your self-employment job is, you know, it's a bit on the side or you're earning enough to keep things going, then those really are the three most important words. Net, first of all. No, I'll tell you what, no. We'll look at gross. Gross first of all is the total amount you will earn in that financial year. So for example, if you've earned £10,000 then that is the gross amount, £10,000. Expenses is what you have paid out. For example, your fuel to get to the function, your downloads, your kit, your clothes. Anything that is relevant to your job. So, for example, if you're clever, you could maybe take an acquaintance out, a client, for a meal. You could have a damn good slap at meal, you keep the receipt and you can class that as an expense because that was part and parcel of getting the client to book you for a function. Again, you need to maybe...

You know, delve into this a little bit more. Or for example, let's say you go clothes shopping, you buy a shirt, a tie, you buy a nice waistcoat and you can class that as an expense because if you use that at one of your gigs, well you're using it a part and parcel of your job, therefore it is an expense. So that is tax deductible, so that is an expense. We have £10,000. I'm just going to give a roundabout number. £10,000 that you've earned in one financial year and your expenses over that year were £2,000. Now that means, this is the third number, the net. Your net income will be £8,000. Dollars, Euros, whatever. The tax office are very interested in all three numbers because they all have to tally. But that is the most important one for you and for them. Now, again, I'm not going to give exact amounts, but let's say, for example, person A, the tax office say that person A is allowed to earn £7,000 a year before they are taxed.

5:45 You can keep the £7,000

The expenses is £2,000 which brings it to £8,000. Now the tax office have said you can earn £7,000 and we won't touch it but after £7,000 we will tax you. Now that means there's £1,000 left so they will tax you on that £1,000. Now let's say the taxable rate is 20%. Now that means that they will take £200 off you. So you can keep the £7,000. The £1,000 they will tax, they will take £200 away, leaving you £800. So you will end up with £7,800. Now I hope that makes sense. And it's not, they don't help you to hide money or, you know, sort of get these tricks and, you know, you're very clever and, oh, you just put a bit over there or there. No, what they're good at is making sure that you get the right expenses, you get everything correct. For example, they could say to you, well, you know, you've recently bought a car. And you may say, yeah, well, it's for the family. And they may say, well, have you ever used it for a gig? Yes. Well then, you know, maybe you should...

Take some of the revenue you spent on that car and put that towards expenses. And you can do it. Again, you need to quote me there, but I'm quite sure you can. So I hope this has been a help. The other thing that's quite important is your national insurance. Now, I pay national insurance voluntarily and you will need to look at that as well. So I hope this has been a help, but it is relatively simple. If I was to take this video and just squash it down into like one minute, it would be you need to go to the tax office or maybe now you can do it online. I'm sure you can. You give them information, the nature of your business when you started and the registered address for that business. Then you keep all of the amounts you earn. So for example, if you go out on a Saturday night, great, you've got the client's name, their number. Thank you for watching. See you next time.

This transcript was produced automatically from the audio of the video and may contain mistakes.