Business costs and rates.

[Greedo]

Quick question.

A mate of mine is thinking of starting a small business from his garage making small bowls, chopping boards etc. It's a triple garage so adequate for what he wants to do. Question is though does he need to pay any costs like tax, rates etc... or can he just work effectively for free appart from electricity of course.

 

[Rorschach]

He needs to pay tax on his profits through a self assessment return but that's all.

 

[lurker]

Good luck on making a profit from "small bowls and chopping boards".

Has he seen what the completion charges and how many of then there are out there?

 

[Doug71]

Public liability and product liability insurance? Will have to tell his home insurance? Don't know at what point you need to tell planning?

 

[Chris152]

selling-woodwork-legal-measures-t113364.html

 

[Deadeye]

It's layered.

If this is his main income, he will become a "sole trader" - https://www.gov.uk/set-up-sole-trader. He will need to pay income tax and class 2/4 NI. He can offset some costs against this.

If the turnover is over £85k he will need to register for VAT.

The premises can be free... but as soon as he wants to claim any tax reliefs or costs against them then he need sot be careful. For example, if he wanted to offset heating and maintenance costs against tax then HMRC may view that portion of his home as a business undertaking and want to charge capital gains tax on any increase in value of that portion of the home.

In reality if he:
- adds the income to his personal tax return and
- only claims cost of materials to offset (so no premises costs to offset tax) and
- stays under £85k
Then he'll be fine.

I'd suggest that over £85k turnover, or if he has this as main income and wants to manage the tax efficiently, then paying for some professional advice would be worthwhile.

 

[Wallaceandsons]

If he's selling stuff online etc from his garage I believe he would need to apply for change of use, this would leave him open to paying rates, paying for bin collections etc. I run a business from home, I have an outside catering business and I get around this as I don't sell directly from my house.

Do not register for VAT unless absolutely necessary, he needs an accountant, their job is to reduce your tax bill, they don't cost much, mine is £300 odd a year and is absolutely worth it even below 85k.

 

[thetyreman]

he won't have to pay any tax until he's earning above the tax threshold.

 

[johnnyb]

Am I missing something you guys seem to be saying that £85000 is a possible earning point for someone making a few chopping boards in his garage! I think that you should just get on with it and I suppose it may lead you somewhere where the bits of advice may be useful.

 

[Distinterior]

Am I missing something you guys seem to be saying that £85000 is a possible earning point for someone making a few chopping boards in his garage! I think that you should just get on with it and I suppose it may lead you somewhere where the bits of advice may be useful.

£85k is the threshold for obligatory registration for VAT based on TURNOVER,....not profit or earnings...!

 

[Keith 66]

For anyone starting out in his garage making stuff his first priority will be not upsetting the neighbours with noise dust & smells. If he gets along with them just get on with it.
His second problem will be selling what he makes at a price where he actually makes any money at all.
If he can beat the man from china on price the profit will be very thin.
Worry about planning permission when he is actually earning.
Best of luck!

 

[acewoodturner]

That's the most sensible post yet on this thread!

 

[Wallaceandsons]

An accountant will be some of the best money you spend when setting up. Also it can be surprisingly easy to find yourself skirting with the dreaded VAT threshold.

 

[doctor Bob]

If he has to worry about the VAT threshold making a few chopping blocks in a garage, tell him to jack it in and he can come and do the marketing for my business.......................

 

[johnnyb]

Ditto

 

[johnnyb]

I also feel that if you've got the urge to start a business don't let any red tape stop you. I'm thinking here about the seemingly endless car washes that have sprung up. Imagine asking about them on a forum. People would say you have to pay minimum wage...no. you have to give all your employees pensions...no. manage the waste..no.planning no.
Or say cannabis grow shops. Where the basis of the entire thing is an illegal drug.

 

[johnnyb]

That's skirting around them paying any tax or business rates and using slave labour!