One of the first things you will need to do when you are planning to start selling your cupcakes is to register as self employed.
This will notify the HMRC of what your employment status is and let them know that you will have an income that is liable to be taxed (personal allowance £10,600 2011-2012).
Not doing so is against the law in the UK and hefty fines can ensue.
Keep a note of everything that you spend and everything you earn while running the business. You can use software such as Microsoft Excel to make basic spreadsheets where you can keep your records in a easily viewable place.
Send Out Invoices For All Orders
Don’t let people pay you without giving them an invoice for the order, this will be put into your accounts to keep a record of what incoming money you’ve have had.
An invoice should include:
• A section including the order number, date and customer name
• A section including the item they’ve purchased eg. 12 cupcakes in a gift box, delivery address and delivery charge
• A section including how you would like to be paid, your address, contact details and name / business logo.
Sending out invoices including all of the appropriate information will also help the customer feel more comfortable dealing with you as everything has been outlined clearly.
Keep All of Your Outgoing Receipts
Everything you spend on the business, from eggs to mixers needs to be accounted for when the time comes for your Self Assessment.
You should keep this up to date and not put it off as this will let you see how much profit you are making on a regular basis and if you need to increase your price.
Where Can I Register as Self Employed?
You can register as self employed on the HMRC website, just fill out their online form and you will receive a Unique Taxpayer Reference through the post along with other details about becoming self employed. You will then use this number to complete your online submission.
Information You’ll Need Before You Register
• Your National Insurance number.
• Your contact details (and the contact details of your business if you’ve started self-employment).
• Your ten-digit Unique Taxpayer Reference number, but only if you have previously completed a Self Assessment return. You’ll find this on letters or forms sent by HMRC about your tax return.
• The date your circumstances changed.
More information about self employment can be found on the HMRC website here.