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May Question and Answer Corner
Newsletter issue - May 09.
Q. I recently started a graphic-design business and I have applied for a VAT number but it hasn't come through yet. Should I be adding VAT to my invoices or not?
A. The application for a VAT registration can sometimes take many weeks to be processed. If you haven't received your VAT number you can't issue a full VAT invoice that shows the separate VAT due and the VAT number. However, you will be required to pay over VAT on all sales made after the effective date of VAT registration that you put on the registration form. So you can't show VAT on your invoices, but you will need to charge your customers a sufficient amount to include the VAT due. When your VAT number arrives you will need to issue full VAT invoices to all those customers you have invoiced since the effective date of VAT registration. Please contact us if you need more practical help on how to do this.
Q. The only income I have is about £10,000 from letting rooms in my own home. As this amount is covered by the rent-a-room relief of £4,250 plus my personal allowance of £6,475 I should have no tax to pay. But do I have to inform the Tax Office about this income?
A. Yes you do have to tell the Tax Office, and they should issue you with a self-assessment form to complete. Even if you have no tax to pay you need to declare the taxable income to the Tax Office. If you haven't declared this rental income for some years you should make it clear to the Tax Office that you want to declare this income for the past years.
Q. I am under retirement age but not in employment. All my income comes from investments and a let property. Do I have to register to pay national insurance on any of my income?
A. You don't have to pay national insurance (NI) on your savings or rental income, but you will have to complete a tax return to report your rental income to the Tax Office (see previous question). However, you should consider whether you have paid NI for enough complete tax years throughout your working life so far to qualify for the full state pension. If you will reach state pension age after 6 April 2010 you will only need 30 qualifying years in which you paid sufficient NI, to get the full state pension. You will also get NI credits for periods you were not in work such as a carer for a young child or disabled person. You may want to pay voluntary class 3 NI to top up your number of qualifying years to 30.
