You make the declaration of self employment to HMRC when you sign off income support. If you remain on income support and declare your earnings against your benefits then you do not need to declare the business to HMRC. The amount of tax you will eventually pay is dependent upon the profitability of the business. The reassurance you have is that you will pay no tax for two years. In year three you pay the tax for year one and so on. Use the first two years to build up the business. Keep accurate records regarding purchases, sales and expenses. This will save you a fortune later on. When you become liable for tax in year three engage an accountant to formalise your return. These people are worth their weight in gold! Remember to keep your NI payments up to date and good luck!
Gordon is right - you would need to register as self-employed as soon as you come off income support. Make sure that you have a good, solid business plan before you do this. You will not pay tax on earnings less than your tax allowance, which is over ��6000, but you will have NI contributions to make and business overheads to meet, so you will need a bit of money behind you before you start.
I am only 90% sure, but i think that if you are spending (or tell them you are) less than 16 hours per week on your new project, then you can continue claiming benefits. I would definately check up on this, but i think I m right.Good Luck.
