Many Network Marketers start out in the industry by using the products or services of a particular organisation for themselves. They might sign up as a distributor because it gives them access to discounts on products that they like using themselves. Over time, some might start selling the products to their friends and family and consider it as a longer-term business venture. Others continue simply using the products for themselves.
So at what point do you need to start thinking about registering your business?
You only need to register with HMRC if your annual gross income from self-employment such as Network Marketing is more than £1,000. This is also known as the trading allowance which means that you do not have to pay any tax on this income.
To be clear, using products for yourself is not actually trading at all, because that activity in itself is not being undertaken with a view to making a profit.
Once your trading income goes above £1,000 you will need to register with HMRC and complete a self-assessment tax return in the following year. We talk more about this in this blog. At this point you will also need to decide on a suitable business structure i.e. whether you would like to operate as a sole trader, a limited company or partnership.
Most organisations provide their distributors with resources and training to help them grow their business. Typically, distributors at the beginning of their career will work closely with their upline as a mentor and coach. This will often cover information on how to advance through the business’s marketing plan (i.e. progress within the ranks), how to attract new customers and more general information on running a business.
If we can help you with any tax or bookkeeping related questions, please call our dedicated Network Marketing team on 01444 458252 or email us at info@prbmp.com.