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[chipper]

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Hi, I have a couple of questions. A bit of background first, I first started affiliate marketing in December (I did try a few other times before this, but only lost money). I've just received my first pay cheque in early Feb. In the past week or so I've finally made it into profit (only a tenner, but have fine tuned and over past two month or so it's been quite a good return on investment to make up for earlier losses/mistakes!).

1). I understand I need to register myself as a sole trader. Would my business start date be Feb or Dec?
2). I advertise via:

• Yahoo!
• Microsoft adCenter
• Google adWords

I'm charged 17.5% VAT on Yahoo!, nothing on Microsoft, and potentially 21% on Google. If I click the "I use Google AdWords for business purposes" button, do I need a VAT registration number (not intending to get one anytime soon)? If I do click yes, what happens, should I do so, and what would I need to do if I do click it?
3). My business earnings are likely to be very low to begin with, based on last two months it's likely to be in the hundreds a month some time soon, but have a full time job as well. Do I still have to pay NI as a sole trader?
4). I presume on my tax return I will only be charged tax on profits and can declare all the advertising from the three sources as expenditure?

Thanks in advance!

[Travel Pixel]

You are required to register for VAT in the uk when your turnover (total sales) exceeds a certain threshold. That threshold is around £68000 I think but you will need to check. Adcenter is exempt from VAT, Yahoo is UK based so is standard rated (15% atm NOT 17.5 - VAT rate has changed buddy!) and Google is reported using the reverse charge method because they are based in the Eurozone (Ireland). Not sure how you came to 21% on Google? Consult an accountant on this. Worth registering for VAT to reclaim it on Yahoo if you spend a lot. You can backclaim VAT (pre reg VAT) for up to 6 months on services I think. As far as clicking the button 'I use adwords for business' then of course you would click yes because you do use it for business.

I would register your business from December with the IR.

I have a feeling you only need to pay one class of NI (which is about 14 quid a month) if you pay class 2 contributions already. Call the IR on this, it will be a monthly direct debit.

You only pay income tax on profits yes but make sure you have clear purchase invoices for all your expenditure, especially if you are VAT registered. Bear in mind at the self assessment stage you may have to make payments on account (advance tax payments) - that can come as a nasty suprise! One of the disadvantages of being a sole trader is that you cannot have retained profits (that is every year all profits are liable to income tax) because the business is you. In a ltd company you can retain profits after corporation tax. So this means (if you are a sole trader) every year you must pay income tax on all profits before you can recycle any money (your personal money) back into the business for the following tax year.

Being self employed is pretty straightforward to account for, although a touch more complicated with VAT but not much. The best thing to do is to setup a business bank account and take 'personal drawings' as your wage while recording these. Put 22% of each wage away in a savings account ready for your self assessment in the following year.

Dave - disclaimer - im not an accountant, consult one.

[hrbs]

Hi

I have written many free guides on this topic at http://tips.hrbs.biz , including how to reclaim your VAT from google, starting self employment, tax deductible expenses etc.

Regards

Keith
http://HRBS.biz