We’ve all had a side hustle. If you haven’t, get on that. Whether it’s mowing lawns for our neighbors or selling football trading cards to our friends, most of us have a sense of making that extra coin to keep ourselves in the black. Some of us have expanded that side hustle to a personal enterprise. But what makes a business a “legitimate” business? You can make a profit off of rare items and services, for sure. At what point can you call it an actual, real, business?
Business Permit
Being legit means having a business permit. In the United Kingdom, getting a business permit means you have to meet two requirements: you have to register for income tax and you have to register for national insurance. All registrations have to go through Her Majesty’s Revenue & Customs or HMRC. You’ll get a 10 digit Unique Taxpayer Reference along with a self-assessment. That self-assessment is not fun for anybody. If you’re new to the United Kingdom, you’re going to have to get all your papers straightened out and in front of you. This might take a while.
Taxes
If you’re going to have a business in the U.K. You’re going to have to understand Value Added Tax or VAT. Calculating VAT may not be easy, but there’s a lot of resources and calculators online that can help you. Because you’re now a legitimate business, you’re an effective income generator for the government. That is, in essence, what being “legit” means: you’re not just making money for yourself. When you add VAT to a product, it is the cut the government gets for every sale that’s made. It’s set and corrected depending on the reported circumstance and item, but on the sales level, it tends to remain a constant and clear percentage.
National Insurance
If you’re going to be self-employed, you’re going to have to register to pay class two national insurance. Class 2 national insurance is based on two criteria: you’re self-employed and you make over GBP 6,475 a year. If you’re not making that much with your business, it may be time to start plan B.
If you’re lagging behind, you can opt to pay a “voluntary contribution.” That year. It’s advisable that you seek professional help prior to paying out this voluntary contribution. Why? Because in the end, you’ll have to pay back the amount when you’re financially sound. The government always gets their money. So the amount you put in should be both wise and attainable, granted you have plans on making more in the years to come.
Making your business legit really is about how much money you can contribute to your government. It means that through your enterprise, you can give to the greater good through TAX and National insurance. Those are the most common and often universal barriers to business. There’s little variation in the global model.
It also stands to ensure that you’re not hoarding the cash. You give it to Her Majesty’s Revenue and Customs, and they’ll distribute it as they please.
