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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am thinking of registering as a sole trader in addition to

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I am thinking of registering as a sole trader in addition to me already being full time employed. I will be designing and hosting web sites and I expect my income to be minimal. If I understand correctly, my losses can be offset against my tax when I do my self assessment (I am a high rate taxpayer), as I expect to make a loss in the first year until the number of customers I have increases enough to cover the outlay. If I make a profit it becomes extra income also to be declared on my self assessment regardless of whether or not I actually spend the money on myself. I believe I need to also register for NI Class 2 exemption as I will be paying NI on my salary as an employee. I also believe I can claim a portion of my utility bills etc as I will be working on the websites from home. Is the simplified expenses the best for me ?
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
You are correct in your understanding of the tax position, with profits and losses and how they will affect your current situation. And that the net profit is charged tax upon whether you actually draw on it or not.
Yes you will be liable to Class 2 National Insurance and should your net profits (so self employed income less expenses) exceed £7956 a year, then also Class 4 on the excess (charged at 9% and payable at the same time as any tax liability)
And yes, you can claim a proportion of your additional expenses at home to represent those additional costs incurred through working from home, and if this will be more than 25 hours a week, then you can claim £10 a month (simplified expenses)if you plan to spend more than 25 hours a week on self employment, if not, then you will have to claim actual costs.
Let me know if you have any questions on the information provided.
Customer: replied 3 years ago.
Thanks for the speedy reply. Just to clarify on the Class 2 NI I thought I could register to be exempt if my profit is less than £4500 a year, I will never reach this amount. I already pay Class 1 due to my full time employment.
Is this correct ?
Hi Bob
Thanks for your response and you are welcome
If your net profits are to be less than £5885 for Class 2 - then you can ask for a small earnings exception - which renders you exempt for Class 2, and as you already pay Class 1 National Insurance (which contributes towards your state pension and other state benefits) then I agree there is no need to pay Class 2.
As your net profits are to be very much below the threshold, then when you register you will state exemption from Class 2 and 4 - under the small earnings exception certificate.
Let me know if you have any follow up questions on the above, and it would be appreciated if you could take the time to rate the level of services provided, as this ensures I am credited for my time
Sam and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thank you very much indeed for your assistance.

Hi Bob

You are very welcome and good luck with this venture !