Q: I have 2 bouncy castles, which I plan to hire out just at weekends during the summer. I also have a full time job during the week so would I have to pay tax on any earnings from the bouncy castles (maximum earnings (£240 per week if both castles are hired on Saturday and Sunday)?
Jun 13 2006
Answered by: Clive Lewis Ask a question
The profits from your bouncy castle business will be subject to Income Tax and National Insurance Contributions. You have three months to notify HM Revenue and Customs (HMRC) of your new business. You can obtain a form CWF1 from the HMRC website or call the Self-employed Registration Helpline on 08459 154515.
After the end of the first year or the first 5th April whichever comes first you will need to complete the Self Employment part of your Tax Return showing the bouncy castle business’ Income, Expenses and Profits. The expenses to offset against the income might include the cost of getting the castles to the customers, maintenance of the castles and administration costs – telephone, insurance, stationery, etc. If you use a vehicle you can charge business mileage against profits up to 40p per mile for the first 10,000 miles but you need to keep a record of the mileage - destination, mileage purpose, etc. The original cost of the bouncy castles might also qualify for “capital allowances” (the Inland Revenues method of allowing for wear and tear of fixed assets). The net profit after expenses will be added to your earnings from your full time employment to calculate your total taxable income. Tax on the bouncy castle business profits is payable in two instalments on 31 January and 31 July together with an adjustment of any balance owing the following 31 January. If your total Income exceeds £38,335 (2006/7 rates) you will be liable to tax at 40%.
The National Insurance Contributions (NIC) position is more complicated because you will already be paying in your current employment. The Basic NIC is called Class 2 and for 2006/7 it is £2.10 per week usually paid by direct debit in 4 or 5 weekly instalments. But if your self employed earnings are less than £4,465 no Class 2 is payable. The additional NIC is called Class 4. On profits between £5,035 and £33,540 the Class 4 rate is 8% and on profits above £33,540 it is 1%. You are probably going to be under the minimum income limit at £250 per week for a twenty week season will bring an income of £4,800 per annum. In this case it might be simplest to apply to HM Revenue and Customs (HMRC) for a deferment of Class 4 using form CA72A in HMRC leaflet CA72. This has the effect of deferring payment to after the tax year when the total NIC liability can be accurately determined.
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