The Body Shop at Home is a great way to earn some extra cash at home while taking advantage of using a well known brand name rather than starting your own brand from scratch. If you are considering or already have become a Body Shop Consultant then you should be aware that your are required to be self employed and this brings tax responsibilities, regardless of how much you actually earn. So here is some tax advice especially for Body Shop at Home Consultants to help you understand:
- How to register for self employment;
- What taxes you need to pay as a Self Employed Body Shop Consultant and how much;
- Fully understand your HMRC self employment responsibilities.
What is Self Employment?
When you work as a Body Shop Consultant all the money you that you earn is untaxed. It is unlike when you work for someone else and they pay you after deducting all your tax on your behalf, and give you a payslip.
When you are self employed you are responsible for letting HMRC know how much you have earned and how much tax you need to pay (much like an employer would do if you worked in a job).
You report your earnings on a Tax Return and it is really important to remember that you must complete this return regardless of how much you earn, even if you earn below the threshold for paying any tax.
Going self employed is by far the simplest and quickest way to get started when you want to become a Body Shop at Home Consultant.
The Four Essentials of Self Employment:
- Visit the HMRC website and register as Self Employed;
- List out and keep all the receipts from your Body Shop income and expenses;
- Complete a Self Assessment Tax Return before 31 January each year summarising your business income and expenses;
- Pay any Tax and National Insurance due by 31 January each year (and payments on account by 31 January and 31 July each year).
Registering as Self Employed Online with HMRC
The process of registering as Self Employed on the HMRC website can take 10 days to complete. Upon which HMRC will post you a UTR number (Unique Taxpayers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.
Your Responsibilities being Self Employed
Self Employed Individuals are responsible for reporting their income to HMRC under Self Assessment by submitting a personal Tax Return by 31 January each year detailing all of your income as a Body Shop consultant along with any other earnings (from a salaried job for example), income tax and national Insurance due, as well as paying any tax you owe.
Your tax return submitted by 31 January covers the previous tax year (a tax year runs from 6 April to 5 April). So for example, your tax return due by 31 January 2018 details your earnings between 6 April 2016 to 5 April 2017 from being a Body Shop Consultant as well as any other income you have (such as employment income, rental income, bank interest or dividends).
Payments On Account
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years income tax bill and class 4 national insurance bill, so make sure you budget for this additional payment too.
If you already Submit a Tax Return
It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CWF1 to notify HMRC that you have a new form of income (in this case self employment) that you need to report to them on. Again, you can do this online here and you will need your Unique Taxpayers Reference.
How to Work Out Your Earnings as a Body Shop Consultant
When you are self employed the tax you pay is based on the income you make as a Body Shop Consultant. Confusingly, income actually means profit – all the money you make less all the costs you have incurred.
Self Employed Body Shop Consultant Income
You income will be everything you make selling products and any extra commissions you earn in the tax year from your Body Shop. You can find this by adding up all your orders each month.
When you are self employed it is really important to understand which are allowable as they reduce the amount of tax you have to pay.
Generally speaking most things you pay for as part of your Body Shop business will be allowable, here are some examples:
Computer & Printer
If you need to buy a computer and printer to use as part of being a Body Shop Consultant these will be tax allowable so make a note and keep the receipt to discuss at tax time.
It is a common to have something, like a laptop, that you use for business and personal reasons. In these types of cases HMRC allows you to only claim for the portion of the item being used for the business. So if for example you use your laptop 60% of the time for your business and the other 40% for personal things like internet shopping, facebook etc then you would only be able to claim for 60% of the cost of the laptop against your taxes.
Body Shop Fees & Commissions
If you incur any Body Shop charges or fees in the course of your business, then again you will be able to claim these against your taxes.
Telephone and Internet
If you use your phone as part of your Body Shop business (mobile and/or landline) and your internet, then your business portion will be an allowable expense.
If you need to travel around you will incur costs. Keep hold of your receipts for trains, tubes or taxis as they should all be allowable expenses and help reduce your tax bill.
If you need to use your car to travel around then you should note down the mileage as this falls under the category of travel. Record your miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.
Use of Home
When you work from home then there are rules that will allow you to claim an amount for the running costs of doing so from your home as a portion of your household bills such as gas, water, electricity or rent.
Alternatively, HMRC allows you to claim a flat rate of £4 per week for using your home for work purposes and you don’t need to substantiate this claim with receipts.
If you need some assistance and support from others then the cost of these individuals will be tax allowable since they are an incidental cost of your Body Shop at Home business.
Any marketing you do (online or offline), paid ads or anyone you pay to help you with your marketing is also fully allowable so make sure you download or ask your marketing assistant to send you an invoice before you pay them.
Accounting & Bookkeeping
If you choose to use an accountant to complete your self assessment tax return again their fees will be an allowable expense. Keeping accurate records will definitely help keep their fees down too as well as giving them all the information they need to make sure you receive all the deductions and reliefs to reduce your tax liability.
It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account is an allowable expense.
All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. It is also really important to be aware of which expenses are allowable for your business because incorrect claims can result in penalties. If you are unsure, always seek the help of a professional.
Top Tax Tip:
Even if you are currently not making any money as an Body Shop at Home Consultant, you must still register with HMRC and complete a tax return. This may feel onerous, but completing a tax return means you can record all your expenses to create a tax loss. This can then be used against any money you make in future tax years and save you tax at this point.
Next: How Much Tax Will You Pay