tiintax

I have great difficulty working out the reasoning behind increasing the number of working hours necessary for someone to claim tax credits.

Whatever the reasoning, in the tax year just started some of the poorest working families in the country are going to… get poorer.  Because if you are working 16 hours a week at a badly paid job you will lose your tax credits, whereas if you are working 24 hours you will keep them.

Well, work is supposed to pay, and I suppose that one reasonable policy objective might have been to have people increase their hours – to wean themselves off of benefits and into work.  In the current climate, however, is it actually realistic for people to go to their boss and ask for more hours?

So here’s a thought.  How about self employment?

No, I’m not being facetious.  I’m suggesting that there are a couple of simple ways that someone on tax credits could boost their hours by taking on some kind of spare time work that fits in with their child care and other family responsibilities.  And self employment does count towards the tax credits threshold.  Make sure you inform HMRC of the hours you *intend* to work when you start up, and then tell them how many hours you *did* work at the end of the year.  So the first thing to do is pick up a notebook and write down every hour you spend on self employment activities, as well as every penny you spend on it, and every penny you make from doing it.

But what sort of self employment can someone with childcare responsibilities and no capital hope to undertake?

Well, how about internet trading?  HMRC themselves have started to crack down on people who trade on eBay, as opposed to people who use eBay to sell off the rubbish they’ve found in the back of the wardrobe.  HMRC has a useful guide here: but don’t be put off.  You don’t need to register with eBay as a business seller in order to be IN business – you just need to be selling stuff you didn’t already own, with the objective of making a profit.  And you don’t necessarily need to MAKE a profit, so long as you’re trying your best to make a profit.

So you could start with something you already owned – old clothes that don’t fit? That ornament you’ve always hated?  The teapot that you’ve had for ten years but can’t remember ever actually using?  But then when you’ve sold it, use the money you get for it to buy something else – go to a charity shop, a car boot sale, or even one of the internet sites where people give away the stuff they don’t want any more, like Freecycle – and then sell that.

The important point, for your tax credits, is that you need to spend enough time doing it to bring your hours back into the tax credit bracket.  If you’re doing 16 hours and the threshold is 24, then you need to be working at your self employed business for 8 hours a week.

I can’t give financial advice and I am not a tax credit expert, but it seems to me not impossible to lift yourself back up into the tax credit zone with self employment.  The essential thing to do is to keep a note of what you do and when you do it.

If you have access to the internet at home, then how about using your favourite tv programmes as a guide?  Coronation Street is on for two and a half hours a week, Eastenders for two and Emmerdale for three hours.  So if you had a computer at home and were on the eBay site during the soaps uploading details of your goods and answering queries from buyers, then you’d have worked for seven and a half hours a week already.  Add in a trip into town to shop at the charity shops for more stuff, not to mention a couple of trips to the post office to post the stuff you’ve sold (and the time you spend packing them up safely and addressing the parcels) you can see you could clock up eight hours working time relatively painlessly.

If you don’t have a computer at home, you’d have to do your eBaying at the local library so don’t forget to include travel to and from the library as well as the hours you spend at the computer.  Write down when you go and when you come back – so you can prove your hours – and how much you spent to get there.  No need to save the bus tickets, but if they have the date and time on them they might come in handy so stick them in a cardboard box somewhere and hang on to them.

In an ideal world you would need to own a digital camera or a phone that takes pictures, so that you can sell your items with photographs, but if you don’t have one you can still have a go on eBay.  You could then use any money you make from selling stuff without photographs to buy yourself a cheap digital camera and make it easier to trade the next time.  Here’s one on eBay for £2.49 plus £2.49 postage and packing, for example.

I don’t know.  I can’t see anything in the HMRC rules that suggests you can’t make up your tax credit hours through a combination of employment and self employment.  Yes, you’d have to tell HMRC you were self employed; you’d have to pay national insurance, and you’d have to prepare accounts at the end of the year and fill in a tax return.  None of this is as difficult as it sounds: if you count up everything you make on eBay and it comes to less than £73,000 (and, let’s face it, if you were making that much you wouldn’t need tax credits in the first place!) then you only have to prepare three line accounts where you would literally just need to add up how much you’d made from selling stuff on eBay – which you would have written down in your notebook every week – and put that in the line for “turnover”.  Then add up all your expenses – which you will also have written down without fail, every week, every penny, in your notebook, yes? – and that goes in the “allowable business expenses” line.  So your bus fares to the library, the amount you spent buying a digital camera, the money you spent on brown paper, padded envelopes, sellotape and stamps, and anything you spend in the charity shop buying stuff to sell, all gets added together as “allowable business expenses”. You can also add a small amount for the electricity and lighting and heating you use when you use part of your home for trading – perhaps a tenth of the total as a rough guide, or you can work it out more scientifically based on the number of hours you worked.

Oh yes, and one more thing – if you don’t have a computer of your own and start self employment using the one in the library, make sure to save up your takings in your paypal account till you’ve got enough to buy one of your own.  Because you can set off any asset you use wholly and exclusively for business purposes against tax.  Yes, work eight hours a week as an eBay trader and not only will the government carry on paying your tax credits, but they’ll let you buy yourself a computer out of money you would otherwise have paid in tax.  What’s not to like?