New business, and haven't yet paid tax.

[mongoose]

I have just started university in September, and around last october started dabbling in a bit of internet trading to supplement a meager grant. When I started out, all I wanted was enough to cover my rent at the end of the month and maybe a few beers if I was lucky. Around March, after doing a bit of tweaking, it all started to go a bit haywire. At the minute I am making a profit of around £2,500 a week and it seems to be increasing week-on-week. As I am a bit wet behind the ears in all things financial, I never bothered doing anything about tax. The money is just coming in to my bank account every week and basically, for the most part (other than the rent and beers), I am just leaving it there.
I know how naive I must be coming across but I would be the first to admit when it comes to money, I haven't got a clue.
Basically what I'd like to know is where do I start. Do I have to pay VAT or register as a business? What sort of tax do I pay and how much?
I know that because I have a student bank account I do not have to pay tax on interest, but what about the rest?
Also, and purely to satisfy my own curiosity, how the hell would the tax people know what I was earning if I didn't tell them? The money is paid to my bank every week by an electornic payment processor and as I just moved to the UK from Ireland to start college, I don't even have a national insurance number.
Any help or pointers offered would be gratefully received.

[King_Maker]

What do you mean by "internet trading"?

Are selling goods - (say) on Ebay?

Or is buying and selling stocks & shares?

Or something else?

[deanshepherd]

As you only started in October 2004, the first Tax Return you will need to complete will be for the 2004/05 tax year. The deadline for submitting this Tax Return and paying the tax due is 31st January 2006 so you have plenty of time to get yourself back on track.

Your immediate concern should be to register with the Inland Revenue and unfortunately if this was not done within 3 months of starting to trade, then you may be subject to a £100 penalty. However, if your profit for 2004/05 was below the small earnings exception - which from what you say it may well be - then this may be avoidable.

If you wish to discuss your situation further then please feel free to contact me.

Dean Shepherd
dean@mmi-online.co.uk
www.mmi-online.co.uk

[Cooler_King]

Sounds interesting what you're doing!

The best thing is to get the paperwork started as soon as you can. Trying to remember exact circumstances 12 months down the line is a nightmare.

Key things to consider...
You might HAVE to register for VAT if your 'business' breaks about £58k which by the sound of it you'll reach by the end of the year. PLUS, you might be able to claim VAT relief on some of your stuff. Like the PC you use etc.
Accountants are there to do alot of legwork for you but shop around - always ask for a full quote of the fees and what they expect from you. Better still get a recommendation (a Dad, a mate or somone you know and trust) About £500 should get you sorted for last year and set up in the right direction for next year.
Book keeping is easy (eventually) and saves silly fees going out. Just keep your business receipts in one box.
Get your tax return sorted before Christmas - it gives you a month to sort out how much tax you'd have to pay for last year (up to April 2005) And remember you'll probably have to pay 'on account' for the coming year too.

Oh, and yes, I've been there before.
Get the help you need. Don't just think it'll go over you. The tax man will find you - especially when you start your first job and it all gets 'official'

Best of luck!

[AA UK]

If you are domiciled in the Republic of Ireland you probably want a better structure than you have...