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Hi all,

As per title, I'm looking to do a little commission painting to make a bit of extra cash on the side, i'm already employed full time and from what I understand I have to register with hmrc to declare If I aim to paint for profit.

I've spent the best part of 20 hours trying to understand the official/tax registration necessary for doing this legit.

Questions as follows;

1.) Will I have to pay any tax/upkeep if I DON'T make a profit? I won't get into it if It's going to cost me any money (other than to buy the physical tools etc)
2.) Am I right, from my research that it works like this and ONLY this with tax: I get an annual tax form to fill out to declare profits, and I'm pay 20% on the profit's after expenses?
3.) I only pay tax if I profit, right?

Many thanks

If you are doing this as a job then you will have to pay tax, you will have to register with the HMRC and will have to file a tax return every year.

You will have to declare any money you make from painting, then declare any expenses - paint, tools etc. You will then be charged tax and national insurance on everything that's left (20% is right I think, though may be more if you earn lots).

So, yes you only pay tax if you make a profit.

It's been a while since I was self employed so if anyone can confirm this.

Thanks for the advice,

This isn't my main job it's a part time extra money earner.

My friend is looking to join me by helping out & getting paid a cut of the profits (if any) - I have the following options on the HMRC website, which do I sign up for?

-Corporation Tax (CT)

-Self Assessment (SA) for self-employed/sole traders (including Class 2 National Insurance contributions)

-Self Assessment for partnerships (including Class 2 National Insurance contributions)[i] I'm thinking it's this one??
Description: Select this to register a new partnership for Self Assessment and the nominated partner for Self Assessment and Class 2 National Insurance contributions. The nominated partner is the partner who has been nominated by the partnership to receive and submit the partnership returns. Do not use this to register partners who are not the nominated partner, they need to complete form SA401 instead.

-PAYE for Employers

-VAT

Thanks again

I think your best bet is to make direct contact with some other painting services within the UK. See how they deal with it.

Winterdyne
Golem?

I may be wrong, but the tax threshold in the UK is £8000?

Don't know If that applies to the self-employed bracket, but I wouldn't worry to much about it. Keep it on the QT

Do_I_Not_Like_That wrote:I may be wrong, but the tax threshold in the UK is £8000?

Don't know If that applies to the self-employed bracket, but I wouldn't worry to much about it. Keep it on the QT

Yes & I already exceed the tax allowance threshold with my full time job.

I want to be legit if I'm doing this, as I want to possibly expand in the future.

Tax is never simple, however here is some basic advice and stuff. As with lawers, this is not financial advice. See an accountant or qualifide financial advisor. I am not one.

If you are useing your tax free amount at your full time job you will be paying 20% tax and NI on anything. You will have to complete a self assesment form.

Corporation tax Is to do with the limited companys. It is a rate of 26% and is supposed to help with lowering the tax rate of entrepreneurs to get them to invest, but it only lowers your tax if you pay higher rate tax. I asume that you won't want to go to the fuss of setting up a limited co so we won't worry about that to much, just forget about it.

Two things to remember, first if you loose money you do not pay any tax, infact you could, in theroy, claim back tax paid elsewere, as far as I know.

Second from what I remember if you don't make more than about £5k you will only have to pay tax and not NI if you are paying NI at work. You do need to call hmrc about this though.

Check all of this with HMRC and if you get enough money with a tax advisor. If it is just a few hundred pounds it may be best to just do what hmrc say, but the do get things wrong. Their help line is very good, if a little slow.

I salute you for your honesty !
No one i know that does commissions pays tax on the money they earn from it.

Does this pertain to the United States as well having to register to someone and pay a tax?

Kal-El wrote:Does this pertain to the United States as well having to register to someone and pay a tax?

You don't have to register anything (unless you've decided to incorporate) as a sole proprietor in the US. However, you DO have to declare the income on your tax returns, and it may be subject to a higher rate than your day job. Failure to do so can result in some extremely high penalties.

there is eBay and rthere is commission , which are you after.

If you buy miniatures as retail or online retail paint them and then sell on eBay thats noone elses business even if you make some money. You can go a short way until it becomes self employment, long enough at least to test out whether this is a good idea for you.

You will know if you are painting fast enough to make a lasting profit out of this before you paint and seel enough for it to be classed as a business.

If you take formal commission then yes you must declare as thats it providing a service, not selling your private possessions.

If you do switch to a professional painting service it will have advantages as well as disadvantages, you should be able to buy your stock as trade not retail and claim some tax back on your material purchases as you are not the end user.

You will need to declare yourself as self employed and keep a record of all of your incoming and outgoing money on it as though you are performing any other sort of buisness.

Your earnings from commissions will then be taxable as your already exceed your yearly personal allowance from other earnings. As for your friend working as a partnership that is where it gets more tricky, if the buisness is just you then you are a sole trader which carries significantly less paperwork, anything from a partnership then involves someone else and thus the paperwork for them, for you and any monies shared.

When my wife set up her home buisness (baking, not painting) we found the best option to be to phone the tax office and settle in for about 30 minutes discussing what exactly you intend to do with an operator, they will then direct you to the appropriate online forms (or can post them to you) for registering as self employed.

Thanks All,

I'm just going to carry on painting as my hobby, and if I decide to sell something later on down the line I can & not have to pay tax on it.

Seems too much trouble setting up a commission painting business, I'll give it a miss.

Thanks again

I am registered as self-employed (sole trader), and for self-assessment for tax. There is no need for Corporation Tax (CT) unless you're setting up as a Limited Company. This can cover your ass for some things, but for a commission business I don't really think it's worthwhile until you're having to employ people on a permanent basis.

There is a caveat known as the 'master-slave' relationship- this basically says that if you only do self-employed work for one person / organisation, that you should be an employee of that person. The employer is responsible for calculating Tax, NI etc etc. So ensure you have at least a couple of different clients every tax year.

If there are more than one of you working the same projects, both of you should be self-employed and run with the same principles.

You need to keep a spreadsheet of money in (client payments AFTER paypal fees etc), money out (paint, brushes, postage, packing materials, etc*). From this you can work out your annual profit, turnover and all the other figures you need.

Keep all receipts, bank statements, invoices / etc, along with this itemised, date-ordered balance sheet.

For every accounting year (I run april to april to coincide with the tax year for convenience) you submit a return. Aim to get this below your tax threshold (so count as expenses what you can - you won't make enough toe willingly give anything away!). Keep your taxable income low, and you avoid NI too.

A good accountant will charge for their time, but for the first year or at least a consulting session they're a really good idea - they can tell you what of your household bills etc and all the other stuff that's a valid expense (and therefore deductable from your taxable profit).

It is possible to be auditted; so don't be tempted to 'cheat' - in my opinion there's no real need either; so much stuff is deductable that you can tailor the income dramatically, all perfectly legally and honestly. Keep records of EVERYTHING you do financially as a business. I believe they can audit back 7 years if they want.

It all sounds a lot more horrible than it really is; a lot of your time is taken in keeping up a web profile to get bookings (hi guys!) and in communicating with your clients. I reckon about 25% of my working time goes to this sort of thing (including this post). Working at home, you won't get a full working day in either.

winterdyne wrote:I am registered as self-employed (sole trader), and for self-assessment for tax. There is no need for Corporation Tax (CT) unless you're setting up as a Limited Company. This can cover your ass for some things, but for a commission business I don't really think it's worthwhile until you're having to employ people on a permanent basis.

There is a caveat known as the 'master-slave' relationship- this basically says that if you only do self-employed work for one person / organisation, that you should be an employee of that person. The employer is responsible for calculating Tax, NI etc etc. So ensure you have at least a couple of different clients every tax year.

If there are more than one of you working the same projects, both of you should be self-employed and run with the same principles.

You need to keep a spreadsheet of money in (client payments AFTER paypal fees etc), money out (paint, brushes, postage, packing materials, etc*). From this you can work out your annual profit, turnover and all the other figures you need.

Keep all receipts, bank statements, invoices / etc, along with this itemised, date-ordered balance sheet.

For every accounting year (I run april to april to coincide with the tax year for convenience) you submit a return. Aim to get this below your tax threshold (so count as expenses what you can - you won't make enough toe willingly give anything away!). Keep your taxable income low, and you avoid NI too.

A good accountant will charge for their time, but for the first year or at least a consulting session they're a really good idea - they can tell you what of your household bills etc and all the other stuff that's a valid expense (and therefore deductable from your taxable profit).

It is possible to be auditted; so don't be tempted to 'cheat' - in my opinion there's no real need either; so much stuff is deductable that you can tailor the income dramatically, all perfectly legally and honestly. Keep records of EVERYTHING you do financially as a business. I believe they can audit back 7 years if they want.

It all sounds a lot more horrible than it really is; a lot of your time is taken in keeping up a web profile to get bookings (hi guys!) and in communicating with your clients. I reckon about 25% of my working time goes to this sort of thing (including this post). Working at home, you won't get a full working day in either.

Thank you for your advice, I appreciate it.

It's only something I'm looking into for the future and it's always good to have an understanding of how it all works. I have plenty of my own stuff clogging up my cupboards to sell first anyway

Another quick question if you don't mind.. I house share with a friend who has a mortgage and he enquired with his mortgage company for me as to whether I could be a sole trader at home and he was told that he would need to change mortgage providers to get a 'buisness mortgage'.

Is that right? Would the same apply to someone renting from a landlord for example? I just want to understand how people do it on the landlord/mortgage side of things as well.

Thanks

No, that's not right as far as I know. Both my wife and I are self employed and we didn't have to change our mortgage.

This said, getting a new mortgage (or remortgaging) is substantially more difficult when self employed, especially in the first few years as your income from the business is difficult to prove.

Similarly, renting, when self employed, your letting agent will often want to know that you can afford the rent; so a few months' worth of traceable and verifiable invoicing (charging) is usually needed. This means bank statements and invoices for the corresponding amounts.

If you're looking at commissions as your sole source of income, you'd best be VERY efficient time wise, be willing to have little to no life away from painting, and be good enough to get substantial bookings in advance. To stand a chance at a mortgage you're basically needing an income of around £20k these days, which equates to a turnover of damn near £30k. At my rates (which are middling for the work I do / arrange) that would work out at about 45 high tabletop standard marines a week*, week in, week out. It's very hard to push the cost to the client up without running into competition from studios with lower running costs. It's a global market, with localised costs.
In terms of pure income for time, you're better off stacking shelves. Trying to push it too far will burn you out, and you'll end up having to refund clients. Don't spend the money till the jobs are done!

*: If you're thinking, 'hey, 45 hour working week, 1 hour per marine...' then you're mistaken. Working at home NEVER gives you a full working week. Demands of the house / wife / pets / children / laundry all add up surprisingly quickly, and then you have the admin / communication time which I mentioned before. At top speed I could (I reckon) churn out AT MOST 20 marines in a week, and they'd be pretty unsatisfactory (to me). Seriously, don't expect to get more than about 20 - 25 hours solid painting time out of a 35 hour working week.

winterdyne wrote:No, that's not right as far as I know. Both my wife and I are self employed and we didn't have to change our mortgage.

This said, getting a new mortgage (or remortgaging) is substantially more difficult when self employed, especially in the first few years as your income from the business is difficult to prove.

Similarly, renting, when self employed, your letting agent will often want to know that you can afford the rent; so a few months' worth of traceable and verifiable invoicing (charging) is usually needed. This means bank statements and invoices for the corresponding amounts.

If you're looking at commissions as your sole source of income, you'd best be VERY efficient time wise, be willing to have little to no life away from painting, and be good enough to get substantial bookings in advance. To stand a chance at a mortgage you're basically needing an income of around £20k these days, which equates to a turnover of damn near £30k. At my rates (which are middling for the work I do / arrange) that would work out at about 45 high tabletop standard marines a week*, week in, week out. It's very hard to push the cost to the client up without running into competition from studios with lower running costs. It's a global market, with localised costs.
In terms of pure income for time, you're better off stacking shelves. Trying to push it too far will burn you out, and you'll end up having to refund clients. Don't spend the money till the jobs are done!

*: If you're thinking, 'hey, 45 hour working week, 1 hour per marine...' then you're mistaken. Working at home NEVER gives you a full working week. Demands of the house / wife / pets / children / laundry all add up surprisingly quickly, and then you have the admin / communication time which I mentioned before. At top speed I could (I reckon) churn out AT MOST 20 marines in a week, and they'd be pretty unsatisfactory (to me). Seriously, don't expect to get more than about 20 - 25 hours solid painting time out of a 35 hour working week.

Thanks once again.

I already have a main full time job and was hoping to plan in the future to do this as a second job, for 10-15 hours a week to make some extra bucks (we could all use a few extra bucks, right?)

The best way that would suit me would be to 1.) Buy miniatures new/2nd hand 2.) Paint them well and 3.) Open an ebay shop & sell for a profit in 'buy it now' listings

To do this, is it ok as a lodger/mortgage holder/tenant?

Thanks

Yeah, it's fine, you probably don't even need to bother with the self-employment as it's technically a hobby you're pursuing.

Be aware though, the bottom fell out of the ebay market some time ago. It's not easy to get £150 for a painted tactical squad on there. If you're good you can make a profit on the purchase cost of models (usually, for the new / popular ones), but it's pin money, not bread-and-butter money.