Starting up while employed

[luke12345]

Hi there,

I have a question which I'm struggling to get an answer. I have spoken with 2 accountants but both of them want me to sign up with them for £40 a month before they will tell me what is the best approach.

I am currently employed and take home 44k PAYE. I have been doing some labour only cash work on the side but now the builder wants me to set up a business bank account and become vat registered so it's all a little more legit. I am wondering what is the best way to go about this without my current employer finding out. Im on the understanding that if I make over 50k through a combination of my full time job and part time job my tax code will change?

Can I set up a separate business which is vat registered and deals with the weekend jobs and then pay myself?

Also, just out of interest, what accountant fees are people paying for a sole trader/limited company that is vat registered. Is the £40 mentioned above the going rate?

By the way I am Part P registered so all of the works are signed off correctly it's just the money side of it that's a little dodgy at the minute

Any advice would be great

 

[suffolkspark]

When I started up I remained employed and ran self employed too, nut not VAT registered, I wouldn't have thought you need to be yet either, or makes you less competitive on small jobs vs people that are not vat, you dont need an accountant to start with either just do your own book keeping?

 

[snowhead]

First thing you need to do is check your Terms and Conditions of employment.
Your current employer may not allow you to run your own business and be in employment with them and if they do allow it they may not allow you to be in a business which may potentially be in competition with them.

When you earn over £50k from all earnings, you'll pay the higher rate of 40% tax on earnings over that figure.
You need an acountant to sort out the best way of paying yourself from the extra earnings.

If you're taking home £44k you're already paying higher rate tax, I suspect £44k is Gross Earnings?

 

[luke12345]

The builder is vat registered so he's saying I need to be unfortunately.

I have not checked the t&cs but I assume they would not approve. Iam not approaching any of their clients (it's a friend of the family) so I don't see why it's that bad. If all went well I would go full time on my own, it's just hard getting things off the ground.

The 44k is before all taxes so I am currently under the 50k threshold. I will have to speak to with another accountant and see what they say

 

[plugsandsparks]

The builder is puddled, you are not charging VAT, so there is nothing to recover.
Tell him to stick to stacking bricks..lol

 

[nicebutdim]

The only concern for the builder is that he can not reclaim on any materials you provide, but that would easily remidied by him buying the material and you charging for labour only.

While you might be correctly registered to carry out these works, I'd be more concerned at the prospect of being on the receiving end of action from HMRC than local authorities. Definitely a the right move to pay a good accountant for advice.

 

[davesparks]

The builder is vat registered so he's saying I need to be unfortunately.

I have not checked the t&cs but I assume they would not approve.

Don't take business or tax advice from a builder, they only want you to be VAT registered because they think it will save them some money.
Get your business and tax advice from a qualified accountant and leave builders to get on with stacking bricks on top of each other.
You will find good accountants who don't tie you in to monthly subscription.

You need to speak to your employer about this, if nothing else it's just plain good manners.

Setting up a business bank account and being VAT registered won't 'make it more legit'
You need to set yourself up as self employed and complete tax returns so that you pay the proper amount of tax on your additional income. Being VAT registered isn't necessary until you hit the VAT threshold, an accountant will advise.

Do you already have public liability insurance in place to cover you for the work you are doing?

Trying to hide this from your employer is not a good idea, they will find out one way or another and hiding it from them will make it look suspicious and cause far more trouble
than being honest and up front.

Also hiding things from HMRC is not sensible, especially not posting on a social media platform that you have been working for cash.

 

[luke12345]

Apologies I did not mention that in my original post. It was the VAT on the materials that he wanted sorting out. I also mentioned offering labour only but he wants me to provide one cost which includes labour and materials.

I take on board what everyone has said and I am trying to get everything sorted correctly

 

[davesparks]

Apologies I did not mention that in my original post. It was the VAT on the materials that he wanted sorting out. I also mentioned offering labour only but he wants me to provide one cost which includes labour and materials.

Well then that'd his tough luck, he can pay you what you want for labour + materials or he can pay someone else for the same service.

If you're doing this as cash work then presumably he's paying you less than he would a contractor doing it though the books.

 

[Cbuk2k2]

The builder is vat registered so he's saying I need to be unfortunately.

I have not checked the t&cs but I assume they would not approve. Iam not approaching any of their clients (it's a friend of the family) so I don't see why it's that bad. If all went well I would go full time on my own, it's just hard getting things off the ground.

The 44k is before all taxes so I am currently under the 50k threshold. I will have to speak to with another accountant and see what they say

As others have said you need to check the contract you have with your current employer. Most include non compete clauses which may or may not be enforceable.

Next you need to consider how you plan to structure your business. If you have any personal assets it’s probably worth going down the limited company route. A lot of start ups fail in the first couple of years not always through any fault of your own and you would be personally liable for any debt if sole trader.

There is no requirement to register for VAT until your turnover exceeds £85k. I assume your builder thinks you’ll work for the same rate and he’ll be able to claim the VAT back saving himself 20%. This would mean taking a 20% pay cut for you. Personally I’d tell him you’re current rates are nett of VAT and 20% will be added if you register.

You don’t have to tell your current employer for tax purposes.You get one tax free allowance of £12’000 which will be used by your current job. A big chunk of your lower earnings threshold will be used by your current employment. Your accountant (or you) can change your tax code for yournew role.

Before making the jump have you considered the costs and risks of doing so. I’m sure it seems like your current boss is making a killing charging you out at £50/h and paying you £20 but there are a lot of costs involved.

 

[Midwest]

If you builder is CIS registered, he could pay you as a subcontractor, if you get yourself registered.

When I started, I saw an accountant for a free half hour. Shop around for one who’ll do the same.