There is an old saying; "Take care of the pennies and the pounds will take care of themselves"
In reality, the pounds take just as much care as the pennies to work effectively. But by ensuring that you have basic procedures in order to keep the pennies in the right places, you will find that the pound slot in quite nicely too.
In part 2 of my free e-book we will be delving into the historically complicated and sometimes confusing area of money management, specifically with regard to how it affects your craft business.
Become registered as self employed
If you are working for yourself then you are classed as a "sole trader" this means that you are the exclusive owner of the business and will keep 100% of the after tax profits (but you are also liable for company losses).
You can be both "employed" and "self employed" at the same time. For example if you work in a regular job 9-5 and run your own business in the evening.
Registering to be self employed is easy. Lust click the link below to get started.
Once you have been successfully registered as self employed then HMRC will send you a Unique Taxpayer Reference (UTF). You will need your UTF to be able to fill out your tax return online.
You will also require a Government Gateway account. You may have one of these already if you have ever needed to change the details on your drivers licence, or use any other government service online. If you are unsure as to whether you have a GG account, follow the link HERE.
Filling out your tax return online
Until April 2017 you do not need to fill out a tax return if your turnover is less than £2500 a year and you are employed. If this is the case you can just call HMRC and tell them your figures. They will then remove the amount of tax payable through PAYE.
If you are unsure as to whether this applies to you then HMRC have a handy (and short) questionnaire that you can find HERE.
If you don't need to fill out a tax return then great! Sit back, chill out and be happy in the knowledge the HMRC has it covered. If you do (sorry about that) then read on.....
You can log in to your account Here (you will need to GG username and password)
The process of filling out your Self assessment tax return is quite straightforward. You can also save part way through your tax return and come back to it later.
For some great videos on how to fill out your tax return online just follow this link to the HMRC YouTube site.
National Insurance (NI) is what pays for the majority of our state benefits such as the pension, statutory maternity pay and bereavement benefits.
It is paid by everyone who is;
- 16 or over
- Employed and earning over £155 a week
- Self employed and making a profit of £5,965 a year or more.
If you are self employed then the amount you pay depends on your profit for the year.
Profits of over £5,965 a year = Class 2 = you pay £2.80 a week NI
Profits of over £8.060 a year = Class 4 = You pay 9% on profits between £8.060-£43,000
You pay 2% on profits over £43,000
This is paid through your self assessment online.
The very word can strike fear into any crafter and small business owner. People spend their while lives trying to avoid it, accountancy firms make millions by managing it and people have been ruined buy not understanding it. But not you!
I spoke to HMRC to get some clarification regarding our tax requirements as crafters. You can find a concise article on this by clicking this link;
Managing Cash Flow
Once upon a time the management of you business funds probably consisted of a small metal box, (usually black or red for some reason) that you would keep under the table at a craft fair or on a shelf at home. Nowadays with the majority of our business being done online, your money could be in many places at once, and keeping track of it is a tad more complicated than turning the key and opening the kitty.
By far the best and easiest way of managing your cash flow is to have a husband like mine who insists on taking care of everything because he's OCD about finances. Just kidding.
The best piece of advice I could give is to invest in some basic spreadsheet software.
Excel is great, and for basic finances suitable for your small craft business it's all you really need.
the most important figures are those that record the money coming in and where it has gone out as these you will need for your tax return. Everything else such as profit projections, margin calculators and invoice payment rates can be useful, but are by no means essential.
You can also usually find courses on how to use Excel at your local school, college or community centre.
If you don't have any courses running near you, then you can take this free online course from Home&Learn. Link Here
I hope you have found this article helpful. If you think it will be of use to others then please share it on Facebook and Twitter. You can also sign up to our mailing list (up the top on the right) to be the first to hear about new articles as they are released!
If you missed part 1 of our e-book then you can find it here;