MLM is a great opportunity to work for yourself in your own time with a ready-made business plan. Here we explore how to maximise your earnings from MLM with good business management.
How to Maximise Your Earnings from MLM
Most MLM brands require a small investment to get started. Make sure to do your research and find this out before you commit. But once you get started you can see profits accumulate quite quickly. This is great news, however you need to make sure that you are putting enough aside to pay for the taxes that you will owe to HMRC on your earnings. It sounds counter-intuitive, however if you overlook this essential part of managing your MLM business, you could be stung with a tax bill that you cannot afford. Especially if you have a thriving and lucrative MLM business. This is because the more that you earn over the tax threshold, the more tax you will legally owe to HMRC.
How do I Pay Tax?
If you have never worked for yourself before, you will need to register for Self-Assessment. Registering with HMRC online is a quick and easy process. You will receive a Unique Tax-Payer Reference (UTR) number within 10 days of registering, by post. You will need this to log into your self-assessment account online to submit your tax return. You will need to submit a self assessment tax return every year. The tax year runs from 6th April to 5th April the following year. You need to submit the total sum of your earnings, minus allowable expenses relating specifically to your business. You then have until 30th January, following the tax year ended on 5th April, to file your self-assessment tax return and pay any tax that you owe. Self-employed workers are entitled to a tax free allowance. You start paying income tax on any amount you earn over this threshold. Which is why it pays to record all expenses that relate to the services you supply, to avoid overpaying tax. You can find the up to date tax thresholds on gov.uk. Allowable expenses can include travel and subsidies like lunch. Basically anything that you would not have paid for if you weren’t running your MLM business. Tickets for travel are easy to record. If you travel by car you can record costs for mileage as per the government’s up to date guidelines.
How Much Tax Will You Owe?
It stands to reason that the more you earn the easier life will be. But tax is an important consideration, since the more you profit, the more tax you will owe, exponentially. This is a really important calculation to be aware of. Especially if you are new to freelance working. The first time you earn more than the tax threshold in one tax year, you will owe tax and you will be required to make a payment on account.
Payment on Account
This means that you need to put aside a proportion of your earnings every month towards these costs. Whether your business grows or shrinks, you will still owe the amount of tax that corresponds to the previous year. For example if you started working as a self-employed individual in May 2023, then your first tax year will run from April 2023 to April 2024. Your tax return would have to be filed and paid by the deadline of the 31st January 2024. So far so simple. If your Self-Assessment tax bill is over £1,000, then you will be asked to make a “payment on account”. If you started your sole trading business in May 2023, then your first payment deadline will be the 31st January 2024. That being the case, under the “Payment on Account” terms, you will need to pay your tax bill by midnight on January 31st, 2024 but you will also need to pay half of what is expected in 2023/24 on the same deadline. Your second payment on account will be due by 31st of July 2024.
Sole Trader Account
A sole trader bank account is simply a business account for one person. Some sole traders start out using their personal bank account. This may seem simple when you are trading small amounts. However this approach can quickly make your accounting complicated and may cause mistakes in reporting your profits, which could cost you money. There is no law against using your personal bank account as a sole trader. However we recommended that you open a dedicated sole trader account as this helps you keep a good record of your business finances. Opening a sole trader bank account will help you claim all of your allowable expenses. Plus this saves you having to present HMRC with details of all your personal spending if they ask to see your records. This helps you to put aside the surplus you need to save to pay for your tax bill and any forthcoming business expenses.
Quickbooks
We are Platinum Partners for Quickbooks Online which is a world-leading accountancy software package’. Quickbooks helps you manage your MLM business finances.
Using QuickBooks means you can keep on top of incoming revenue and outstanding bills and debt. A huge plus point is that QuickBooks can help self-employed and limited companies stay compliant in relation to the latest HMRC rules and guidelines. The software can monitor your finances and highlight compliance within the customised reports section.
At MLM Accountants We Know How to Help You
At MLM Accountants we can help you understand the best solutions for the success of your business. All you need to do is get in contact with us at MLM Accountants. Call us today 0203 237 2927 for help and guidance.
