Q. I work as a Ltd Co contractor as a Business Analyst, but in my spare time I have set myself up as a hobby breeder of pedigree cats. I plan to be producing kittens later in the year, some of which I may sell as there are likely to be too many to keep within my breeding programme. How will the income from any kittens I sell affect my tax position?
A. Someone who occasionally buys and sells may argue that their activities do not amount to a trade as they are making negligible profits. However, assuming your cat breeding activities generate profits then these will have to be declared on your Self Assessment Tax Return on the self-employment supplementary page. Tax will be paid on the profits accordingly via Self Assessment.
Furthermore, Class 4 NIC, in addition to Income Tax, will be payable at a rate of 9% on profits above £8,060. This is paid via Self Assessment.
The additional income may affect your tax remuneration planning, e.g if you extract profits from your company by way of low salary: high dividends, keeping below the higher rate threshold, then you may have to consider reducing your salary and/or dividends so as to take into account your self-employed profits.
Depending on your annual profits from the cat breeding business you may also have to pay Class 2 NIC. Net profit in excess of £5,965 will trigger a Class 2 NIC charge of £2.80 p.w. As from April 2015, Class 2 NIC is collected via Self Assessment.
Cat breeders make a loss rather than a profit, as there are a lot of overheads – would I be able to offset this loss against my Ltd Company income as a Contractor?