Welcome!

[teddyboy]

I'm UK based and have previously done small web projects for clients that resulted in cash payments.

I've had a request to work on a more involved project that means I'll need to invoice for the work I do.

What do I need to do from a taxation point of view?

There may be more work I'll do in the future but nothing is guaranteed. Will I have to set up a limited company, get a secretary and all the other legal tax stuff that goes with it or is there another way?

[TT_Mark]

Personally, I would register as self-employed with teh HMRC, which you should be if you are doing work for cash payments, otherwise you are breaking the law for not paying tax on your earnings.

FreelanceSwitch is a good place to start. It provides templates and guides to help you create contracts and invoices http://freelanceswitch.com/resources-directory/

[teddyboy]

Is there normally a large cost/admin implication doing this? I've considered the limited company option but I don't know if it's worth doing for one or two projects.

[TT_Mark]

Nope, registering as Self Employed costs nothing. You just have to fill in a Self Assessment each year (can be done online) basically stating how much you earned and any business expenses. They then tell you how much tax to pay.

If you are able to use word and excel then you can keep track of your finances and write invoices and contracts. There is advice available for free all over the internet

[teddyboy]

That all useful advice. I'll look into this further. Thanks.

[Eureka!]

If you're asked to work on an pay-per hour basis, Billings is a fantastic app for the job (if you have a Mac, that is).

You put in your client's details, how much you're getting paid per hour, and specify slips for each section of the project. Then, with these slips, you can 'start a timer' which sits neatly in your menubar which then tracks how much you're working in hours and minutes. This can be played/paused, and the app will tell you how much you've earnt so far etc.

But that's not the best part. Once you have to send in the invoice, just click 'send invoice' and it generates the invoice for you, listing each of the slips and how much time was spent/how much money earnt for each different slip. It's a very accurate account of the time you end up working, since it will count your time in hours and minutes.

There are far more features to it but I won't list them here. This is just a good solution for me when it comes to hourly payment.

[nineseven]

Have a look at http://www.freshbooks.com/ for invoicing and time tracking purposes.

Ive used it for a while now and cant really fault it. Its free as well if you have less than 3 clients

[dotcomicon]

I have a business account setup through paypal for accepting credit card payments.

As far as invoicing goes, I've used http://www.getballpark.com for the last 6 months or so.

Unfortunately they lack a proper time clock app/widget, and as my business has expanded I've found it necessary to use QuickBooks for my accounting.

I started using http://www.harvest.com for billing + time recording that can be imported into QuickBooks, seems to be awesome so far, but I've only been using it about 3 weeks.

[jock]

Registering as self employed is a LOT easier than setting up a limited company, just phone up inland revenue. You have to pay National Insurance every quarter (I pay £31.20 or something) and every January you will need to do your tax return (self assessment). Make sure you keep accurate books for this.

Only thing to point out is that you should make sure that you are 100% self employed, e.g you don't have any other income sources and you need to work for more than 1 company otherwise you are technically an employee. Although you could just invoice someone 1p for a 1x1 pixel gif to get round this.

[divisionbyzero]

I agree that becoming self employed is much easier, but a company has it's benefits too.

For a start the company is a legal entity which means none of your personal assets are at risk, only the company's. Plus you could register for VAT and claim VAT back on your business purchases, which is always nice. You would have to get an accountant though, although I know some who handle almost everything (VAT, PAYE, returns etc.) for about £85/month, so you'd have to be earning enough through the company to be able to pay them too.

HMRC and companies house aren't as evil as they're made out to be sometimes, you just have to make sure everything is done properly.

The easiest way to register a company is through a special company formation group, I used Companies Made Simple (google them) who create the company for you from just £35 (last time I checked). They can also handle VAT registration for you too, but as this was £50 I decided to do it myself.

The government are slowly moving a lot of company stuff online, forms, filings, registrations etc. My VAT registration took about 30 mins on a Sunday afternoon sat at my desk. No forms, phones calls etc. at all.

Either way good luck.

[RulerOfTheWorldRob]

I just came on to ask about setting up as a Sole Trader/Limited Company so it's perfect timing to find this topic

Although my exact questions are slightly different to the topic starter. I work full time but in the evenings I run a number of websites that bring in money through ads and subscription schemes. Up until now I haven't declared anything as my profit each month is minimal after paying off my server. But recently i've had some success and in the past month brought in £2200 ontop of what I earn in my full time job.

So I finally think i'm going to realise my dream of quitting my job and earning money through web development. I've read that you have 3 months after your start earning to declare it to the tax man, so i'd like to try and get myself setup as a Sole Trader or Limited Company by the new year.

However it's a little different to getting hired for a contract and billing the client for how many hours i've worked.

Does it work in the same way? Can I deal with it all in the same way? I'm based in the UK which from the sounds of it some of the posters in this thread are.

Would something like this be the easiest solution?

[jock]

I'm pretty sure you can deal with that in the same way as a sole trader. If you phone them up to register they will be able to give you advice.

I don't know anything about setting up a dormant LTD company, when I first started I set up a LTD company but there was so much paperwork, PAYE, and stuff I had no clue about so I wound the company down and restarted as a sole trader. Its much easier for me this way, I'm not overly concerned about any liabilities that I have to accept. I don't have any business debts, capital, loans, staff, etc. I agree with the above regarding VAT though, although I don't really have much business expenditure to claim back.

There are a couple of 'sole trader vs limited company' articles online that are probably worth having a look at.

[seanhimself]

The only thing I can add is that here in Florida, if you're self-employed, you owe 15.3% back at the end of the year. That's a pretty good chunk. That percentage might have changed since I was last self-employed. I would look into a sole proprietorship possibly. That is the best bet if it's a one-man show.

[jock]

If you are self employed in the UK, there are no extra fees or government drawings. You have to pay income tax though... you get £6,475 tax free income then they charge you 22%, anything over £34,600 is 40%. And you need to pay 8% of anything over £5,715 for national insurance.

Pretty expensive