Hi, I know this is a hugely open question but im just interested in how everyone here started up their business.
Im new to this, ive been baking for family and bringing in buns and traybakes to the law firm where i work for a few months but really love baking and want to take it further. ive invested in most of the cutters and nozzles, etc i need and have priced wholesale boxes and boards and am spending every weekend practising!
The thing is, i work full time so this is not going to be my full time job and i will be starting off so small i.e. word of mouth of friends and colleagues that im obviously not going to register as a business and pay tax and insurance and stuff like that yet.
The problem with that is obviously if someone reported me to the tax office (i live in the UK) or got food poisoning (unlikely i know). what would happen in a situation like this? I really want to hand out flyers round my neighbourhood but am scared of taking that step outside friends and colleagues!
Please Help!!!!
Hi Cathy,
I would really suggest getting insurance if you plan on selling anything. There is a company (A Plan) that will arrange insurance for home bakers and it's not too expensive. The IR will not take any tax until you make a profit. I am a bookkeeper, so I do my own returns but an accountant would help you make the most of your allowances. I have found Environmental Health very helpful in my area, and if you are only making cakes etc you won't have to jump through too many hoops. Food legislation is important, have you looked at the Food Standards Agency website? Labelling is VERY important. Trading standards will come down hard on you if that's not right.
HTH
The IR will not take any tax until you make a profit.
Income Tax - Not to be confused with sales tax, which, if applicable to baked goods in your state, must be collected and turn in to the state on every sale regardless of profit status. There is also self-employment tax ... not sure how that is figured (profitability or not?); some states have an inventory tax that is paid on assets in your inventory.
It is worth a consultation fee to talk to a CPA about what businesses taxes you need to track and pay.
It looks l like you're in the UK, but I can tell you the down side of havingout a food biz with proper licensing - you get sued. And you will lose, because you know the rules, as stated in your original question. Without insurance and proper licenses, you're gambling your bank account, car, house, etc. That's not a nice thing to do to your family.
Income Tax - Not to be confused with sales tax, which, if applicable to baked goods in your state, must be collected and turn in to the state on every sale regardless of profit status. There is also self-employment tax ... not sure how that is figured (profitability or not?); some states have an inventory tax that is paid on assets in your inventory.
Indydebi - the OP is UK-based, so the above doesn't apply. They wouldn't collect our equivalent of sales tax (VAT) unless they had a turnover above a figure which I'd venture would be pretty hard for a home kitchen to meet. Only income tax and NI would apply in this situation.
Cathy, I would ditto taniabanana and get yourself registered with Environmental Health. They are incredibly helpful and it's not too difficult at all to get your kitchen registered. You need to be registered to get insurance (you can get a good inexpensive policy through the BSG if your turnover is under £7,000 pa) and I personally wouldn't be selling without insurance.
Taxes for a cake business out of your kitchen (assuming you are self-employed and don't set up a limited company) will be straightforward, but the IR (now HMRC) has *excellent* workshops which explain what records you need to keep and how to categorise your expenses. They will also explain how your employee earnings vs your self employed earnings work. If you are serious about setting up as self employed, make sure you keep all of your receipts for equipment etc NOW as you'll be able to claim them back once you are registered .
There are other areas you need to look into once registered - e.g. your house insurance will need to be changed to reflect a working kitchen and if you are going to use your car to transport cakes you will need to let your car insurance provider know as well. My house insurance actually went down(!) and my car insurance went up by around £6pa.
There is an excellent book by Cathy Moore on setting up a cake business in the UK and it would be worth trying to get your hands on a copy.
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