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

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

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.

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.