I get a lot of queries about TFL Oyster card travel and TFL contactless travel, with people stating they don’t know how much their business spend is on their cards as they don’t have any detail.
Well, we can deal with that. It’s very, very simple. All you need to do is register your Oyster card or your contactless payment card at the TFL website (https://oyster.tfl.gov.uk/oyster/entry.do) . That way when you register it, you’ll be able to go in each month and download a copy of your statement which will show you every single trip that you have done in that month. When you download it, you can highlight the ones that are business and leave the ones that are personal.
Sometimes I suggest to people, you might want to get two Oyster cards or two different payment cards. That way you use one for business and one for pleasure. There is a downfall to that, in that if you are doing travel for a day, and some of it is business, some of it is personal, using two different cards mean you have the potential of not breaking the threshold to get your travel free after a certain amount. So there is a downside to that.
Now, I did mine years ago, that’s because I’m old. I get an email every Wednesday showing me what my travel was in the previous week. I can go through, print that off and say, “Here you go. This is how much I’ve travelled and that is business.” Luckily, I don’t live in London, so it’s not that much of an onerous task. But for those people who do, I really recommend keeping the diary to say what you are doing, whether you are auditioning, rehearsing, whatever you might be doing for your business, and register your contactless cards and Oyster cards at TFL, and that way you’ll be able to pull the data.
Beware though, the data does not remain on the TFL website forever. I thought originally it was six weeks, then someone said it’s six months, and then somebody else said it’s a year. So always check it. I suggest pulling the data at the start of the next months just to make sure you get the data.
I want to give you a bit of a health warning about online trading and UK tax issues.
I’ve seen a massive increase in people playing on online platforms for bits of spare money they might have. Be it Bitcoin, Chip, Coinbase, Trading 212, interactive investors, eToro and various other platforms like it, including playing on platforms within the EU.
The problem you’ve got is that these platforms may not keep adequate records in order for you to complete your UK tax return. A lot of people think, “Well, it’s EU trading. I don’t need to worry” or “I’ve not made much or any profit, so I don’t have anything to declare”. Unfortunately, yes, you do.
You need to make sure that whatever platform you can use, they can provide an end of year consolidated tax statement for the UK. It has to be in the year 6th of April to the following 5th of April, not a European year. Some of the platforms do provide this, but not all.
The statement should include dividends paid to you, any interest paid, but more specifically, the capital gain & loss per sale and a summary for the year.
If this is not provided, you will have to keep very detailed records of when you buy an investment as to when you sell it, and if you partially sell it, how much of the individual investment did you sell?
You may only make a small profit or maybe a loss, but you need to tick the box that you had capital gains. If you sold over £49,200 worth of stocks and shares in the tax year, even if the initial investment you have played with is a small amount that you have just reinvested lots of times, you must report it on your UK tax return and detail out the sales proceeds, purchase costs, losses and gains, plus attached back up to the calculation. You might’ve produced a loss which you can carry forward. You might’ve produced a profit and it could be covered by the capital gains tax threshold, so you may not think it’s important. It is important and must be declared even if no tax to pay.
One thing that’s been picked up very recently is HMRC get reports from UK and European trading platforms, and it will show if people in the UK have been dabbling on these markets and what income they have received. The problem being is HMRC only get to know the income. So if you’ve sold some investments, they just know how much you sold it for. They don’t get the information about how much it was purchased for. Therefore, it looks like you could have had an income of, let’s say, £100,000, but they don’t know you actually spent £95,000 to get that income. They just know the income and they will open an investigation if you end up on the naughty person list. it’s up to you to collect these records to prove that you don’t have that £100,000 stashed away.
If you received any dividends from European trading platforms, then foreign dividends need to be declared either in the foreign box on UK dividends page if less than £2000, or in the foreign section of the tax return.
It may take a couple of years for those reports to come through, but they will be followed up with.
This is just a heads-up. Some of these online platforms are pretty useless at keeping the information. So unfortunately, it is down to you to keep detailed records of what you’ve purchased, what you’ve sold, when you sold it, did you get any other income for those returns.
What’s new for Class 2 National Insurance for tax year 22/23 onwards?
For those of you that have already completed your tax return for this year and didn’t have a high level of self-employed profit, you may notice something strange is going on.
You always have an option to pay Class 2 National Insurance if your self-employed profits are under £6,725. It means you do not have to pay the £3.15 a week for the 2022/23 tax year. It is optional. I always encourage it as it goes towards a few state benefits, but more importantly it adds a year towards your state pension.
This is the same that has been all the time if you’re below a small profits threshold. No change there.
Should your self-employed profit be over £11,908, then you have to pay the full Class 2 amount. Again, no difference with that. For 23/24, it will be £12,570 because the government brought Class 4 National Insurance thresholds in line with income tax threshold. Yay. Makes things so much easier.
Where it gets strange is if you have self-employed profits between £6,725 and £11,908, then the government says you don’t have to pay Class 2 National Insurance and they’ll give you something called a notional credit and add that year to your National Insurance record. You get the full year that goes towards your state benefit, but you don’t have to pay for it. Woo hoo. No, they don’t actually pay you back the £163.80, it is notional. I have been asked that several times.
So this is something to think about. If you have no other income and your self-employment profit is low, try and get your profits between £6,725 and £11,908. That way you won’t have to pay Class 2 National Insurance and you’ll get the credit.
But beware, there is no point in increasing your self-employment if you breach the threshold of income tax with other income such as PAYE income, rental income, etc because increasing your self-employed profits to save the National Insurance will actually then push you up and more pay income tax. So that’s just the heads up.
There is a bit of tax planning you can think about, but don’t think too hard about it. It all depends if you have other income apart from self-employment.
I know it sounds like a daft question, but it is not that obvious as you could live in England and work in Scotland, or live in Scotland and work in England. So where do you pay your taxes?
The simple answer is: if you live in Scotland, then you are a Scottish taxpayer irrespective of where you work. The taxpayer status applies to the whole of the tax year, and the rules state you cannot be a Scottish taxpayer for part of the year and a non-Scottish UK taxpayer for the other part.
If you live outside of Scotland but work inside of Scotland, that does not make you a Scottish taxpayer, as it is based on where you live.
For a PAYE person, HMRC will make that determination and your tax code will have an S on it.
However, for the self-employed, it is your responsibility to decide if you are a Scottish taxpayer or not.
Now, if you moved into Scotland or out of Scotland, then you need to look at where your main residence has been in the tax year, and if you’ve been resident for more days in Scotland for the tax year, then you are deemed a Scottish resident and a Scottish taxpayer. It’s also vice versa if you spend most of your time in England, Wales, or Northern Ireland, then you would be deemed a non-Scottish taxpayer. So you might have to count your days of where you are residing, and you count a day from midnight at the end of that day.
The complication comes is if you have two or more homes at the same time. Then you have to establish where your main residence or main home is. You look at where you live, or spend most of your time. It doesn’t matter if you own the home, if you rent it, or you live in it free of charge. Woo-hoo.
But there is a but. Isn’t there always? If you have two places to live, e.g., a home, a family, and your social life in Edinburgh, but you work in London for most of the time and you rent a flat in London, you may work more days in London than you are residing in Edinburgh, but that does not necessarily make you a non-Scottish taxpayer. You look at where your life is carried out. If your immediate family is in a family home in Scotland, you spend most of your social life there, your doctor and dentist is there, that then puts you as a Scottish taxpayer. A Scottish taxpayer therefore has to pay tax based on the Scottish rules, which are 19%, 20%, 21%, 41%, and 46%.
Wales started this idea of a Welsh Tax resident from tax year 2019/20 and they follow the same rules based on where you reside. At the moment, they have the same income rates and tax rates as England and Northern Ireland.
So there you go. That is how you determine if you are a Scottish taxpayer. There is already a button to press to tell HMRC where you are tax resident, and when you start the 19/20 tax return, Wales will be an additional option.
Hi guys. Well, no doubt you have seen all these adverts for accounting systems saying the way we report numbers to HMRC is changing and it has to be digital & online every quarter. They want to sell their “MTD” accounting systems to you, but they don’t actually say what is changing or how their system can help. If you don’t know what you are doing, these systems can really hinder you, so please don’t rash buy.
So – what’s it all about Alfie?
You will hear the acronym MTD being brandished about all the time – and that stands for “Making Tax Difficult”, oh no sorry, “making tax digital”. It was decided a few years ago tat everybody should file all their taxes online from accounting software or possibly spreadsheets with links enabled, so there will be no human contact and provide better information to HMRC. As we know rubbish in rubbish out. This will eventually cover on a quarterly basis income tax & national insurance, corporation tax and VAT
Where HMRC are starting from April 2019 is with VAT. If you are VAT registered with a vatable turnover of more than £85000, then you will need to comply with the new rules with your first VAT return period starting on/after 1st April 2019. There are lots of things that have to happen, and I will be publishing all the steps by the end of May 2019 in order that people affected by their 1st VAT period 1 April to 30 June can be ready, and it is these people that need to think about software and how to use it. Those VAT registered people/companies less than £85K turnover may have to come into the programme from April 2020 – watch this space.
For people that are not VAT registered, then this new quarterly digital reporting does not affect you and you do not need to panic or worry about it yet. Nothing will change for you before 2021 at the earliest according to an announcement in the Spring Statement 2019, so please do not go into a meltdown, so not buy software if you don’t need it or want it yet. I do encourage you to consider some form of digital / online accounting system whether that is Xero, Clearbooks, 1Tap etc, but it cannot be a half hearted decision. If you decide to go this route, you need to keep it up and be consistent with it, otherwise it is not going to help you with the business side of being a musician, actor, VO artist, dancer, teacher etc.
If you are VAT registered:
In the meantime, if you are VAT registered and with a turnover (fee income) of over £85000, then you will have to comply with the new reporting rules. If you are not VAT registered, then keep it in the back of your mind that things are changing , and consider if you want to go part of the way to be compliant and fully ready when it kicks in for quarterly digital reporting.
What now?
I am more than happy to answer questions on it all, and if there is enough demand, set up a zoom conference call for people to join in (probably a Wednesday afternoon) and we can go through what the systems are, their pitfalls from where I stand as an accountant, and just do an open discussion. Comment below if you think this will be useful or not.
Other Reading
Of course, if you would like to read more on MTD yourself, please refer to to the government pages by clicking >>> HERE <<< but as I say, don’t panic yet.
When you complete your self assessment tax return and the self employment section, there is a question about if you have used “the cash basis” to do your accounts.
Many people understand it to be if you have created your accounts based on money received and money spend in the year. It’s supposed to be a simple process, but there are hidden problems that most people are not aware of. This is all around losses & capital allowances for it you have purchased equipment like a new computer or an instrument etc.
Hopefully I have explained it in this video as well as what is known as the accruals basis (the opposite to the cash basis).. It is a little on the long side, so please bear with it. Ooh – and i mention cake ! No surprise there.
Here is the approximate transcript.
This is a question that gets asked plenty of times because there is a box in the self-assessment tax return that asks the question whether you have used cash accounting to do your self-assessment and your self-employed accounts in. Cash accounting is exactly what it says on the tin. It says you make your accounting records when you physically receive payment into your business or into your bank account, or into your cash. It doesn’t matter if it’s received via PayPal, received directly into a bank account, received physically in cash or check. It’s when you have received the actual money.
Let’s say for example, you raise an invoice to Mr. and Mrs. Blythe for their daughter’s singing lessons. You raise it at the beginning of the term, but you don’t actually get paid it until near the end of the term, ignoring the annoying part of that. You would only account for that invoice when you received the money from Mr. and Mrs. Blythe. You don’t account for the invoice when it’s raised. Equally, on the other side you account for your costs when you have physically paid for them. Now, that is very easy if you actually pay in cash. It’s very easy if you pay by direct debit or transfer out of your bank account, or indeed if you pay via PayPal, because they’re fairly instant payment methods.
The trick comes if you pay by a credit card, you might have put the cost on a credit card but you haven’t actually paid for it until you pay the credit card bill. If you only pay a credit card bill a certain amount per month, it’s very hard to know whether you’ve paid for which business expense. That’s what cash accounting is. There are problems with it. You have to keep very good records as to know when you physically have paid for things, but in your business, if you make a loss in your business, then you cannot do anything with that loss. It could be your first year of business you’ve had a lot of setup costs, not too many people know about you, so they haven’t employed you very often, but that loss is dead, so you cannot carry it forward to next year and use the loss against any profit in the following year.
It also means if you have purchased any capital items, so a new instrument, a computer, an expensive printer, or various things like that, under the cash accounting rules, it is a cost incurred at that time, because you’ve paid for it at that time, and therefore it goes into the accounts for that tax year. That means you cannot claim any capital allowances. All costs come out of that year. Again, if you make a loss, you cannot carry forward that loss or the capital cost into next year. The only positive side of that is if you’re buying a new instrument on a loan agreement, then technically you’re only putting towards let’s say 100 pounds a month, instead of 3000 pounds for the instrument. You’d actually expense out 100 pounds a month.
That is what cash accounting is. Very simple, because if you were HRMC, they have two hats. They say you have to have the invoices and receipts to be able to do proper accounting, but then under making tax digital, they’re encouraging people just to do their accounts from bank statements. They want their cake and they want to eat it. Now, the other side is what is accrual accounting. This is the correct form of accounting that accountants will use all the time and it is definitely our method of doing accounts. What this is, when you raise the invoice, that is when it hits your accounts.
Mr. and Mrs. Blythe, you have invoiced them in let’s say the beginning of the term, which is January, they didn’t pay you until April, which is the end of the term, but you would account for the income in January, and you ignore when they actually paid the bill, which may be a little harsh because it might be across two tax years, but by the time you actually have to pay the tax on that payment, they should have already paid you. Now, the good thing about that is you base it on a supplier invoice date. Even though you might not pay it until two weeks later, two months later, six months later, you account for it at the time you incur the cost, at the time the liability hits you, really.
There are various accounting rules we can jiggle around with, so if you’ve taken a deposit upfront for something, so I don’t know, you’ve taken a deposit for a concert but the concert’s not until four months’ time, then you can defer that income ’til four months’ time, in order to match the income off with the costs. That gets a bit complicated. Accountants can easily do it. It’s what we’re trained to do. Now, there are great things with that, in that you can have the capital allowances. If you do incur losses, you are able to carry them forward for future years. That is much the preferred method.
However, if you are a limited company, the cash accounting system is not open to you. You can do cash accounting for VAT, that’s a completely separate blog post, but actually to run your accounts and your corporation tax, you cannot use cash accounting. Many people do, because they don’t understand the difference. Several people will do cash accounting throughout the year and their accountant will then pull it back into line to say, “It has to be under an accrual basis.” Cash accounting is really only open to the self-employed.
That’s it. Never tick the “Have you used a cash basis?” on the self-assessment tax return if you are doing the accruals basis, or if you’re doing it, you tend to know when you’ve raised the invoice, that’s when you’re accounting for it. Don’t tick the cash basis, because it may cause problems later on down the line.
As you can imagine, I get lots of paper arrive via the postman (I’ve yet to have a postwoman), and in it are loads of receipts that the client expects i can create a set of books and then accounts from them. Well – that is my job. But sometimes it is hard to explain what an appropriate receipt is in case their tax return is pulled up by HMRC for inspection. It’s worse still if the client is VAT registered, as not only do you have to have an appropriate receipt, it needs to be a VAT receipt.
Just a wee bit of advice below on what you need to provide either your bookkeeper, accountant or me, or if HMRC want evidence of costs. It is relevant for the self employed and limited companies, so buckle up – it is only a short one !
And here is the transcript if you would prefer to read the text.
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People ask me about credit card receipts and debit card receipts. Well, they are not really an allowable receipt for your business. The reason being is there’s no detail on what was purchased, there’s no evidence that the purchases are wholly and exclusively for your business and if you’re registered for VAT there’s no split on the VAT account. So really, using your debit or credit card receipts is not a very effective accounting, bookkeeping you need. What you always need to do is make sure that when you go into a store, you get a proper till receipt or a proper itemised receipt that you use for your business.
Now if you’re using an online accounting system then you need to make sure you only take the picture of the full receipt and not the debit card because the systems going to think they’re two different receipts and it’s going to book it twice. Me as an accountant, when I get a shoebox of stuff, the first thing I do is put everything into date order and match the two credit cards and the debit card receipt to the actual receipt. It takes a lot of time, your paying an hourly rate, so it’s something you can probably do yourself.
I always advise, match the credit card receipt to the actual receipt, only put through the actual receipt for your bookkeeping and then if you do spend cash, separate it out. So yes, debit card receipts you can use but please always, always, always collect the proper receipt, especially if it’s something for entertaining or subsistence. If I see a receipt for the Mcdonalds say, for £30, I know it’s really not just for you, unless you’re very, very hungry. The debit card receipt for that goes straight to entertaining. So ignore the debit card and credit card receipts, go for a proper receipt, use those in your bookkeeping.
When it comes time for that dreaded tax return, I get asked a lot about what information a client needs to provide. Of course if you are reading this and you are not a client of ours, this will help you understand what you need to provide your client or indeed the information you need to have to hand to do your own tax return.
This quick 192 second video will go through the typical things you will need, but don’t worry about pausing it and writing it all down, as a complete check list is at the bottom of this post which goes into the main categories. There are areas missed out like seafarers allowance, residency, maintenance payments etc, but the bulk of it is covered.
Any questions, please let us know, or feel free to join the performers tax & accounts group on facebook – a safe place to ask the questions you can’t find the answers to , or not sure if you have found the right answers. That link is here >>https://www.facebook.com/groups/PerformersTax/
Louise
Checklist for Self-Assessment – 2016/2017
This is a checklist of the most common information we will need to prepare your tax return. It does assume a self assessment year to the 31st March 2017 / 5th April 2017 so if you have a different year end under self employment, then the date range will be different. It will be your accounting year that ends between 6th April 2016 and 5th April 2017, so if you are a teacher and you make up accounts to 31st August, then I will need your self employed information for the year to 31st August 2016, but all other tax information as at 5th April 2017. Sorry – I know it gets confusing.
Just so you are aware, HMRC do check tax returns against information from banks & building societies so make sure you get your interest certificates; they also run checks against employers PAYE returns when they compare your national insurance numbers. If there are differences, HMRC will open an enquiry into the tax return – although the delay is often 9 to 18 months after submission.
Employment(s) – All employments in the year
Salary and tax paid
P60 for employment as at 5th April 2017 (normally available April / May)
P45 for each employment left in the year
If you have a student loan, then the last payslip for each employment left so that we can see how much student loan was deducted for that employment
Benefits & expenses
P11d from all your employers in the year if you had any benefits (normally available June / July)
Notice of coding for 2016/2017
Not vital, but it shows what HMRC are expecting on your tax return
Employment expenses
A list of tax deductible expenses with regards to your employment – e.g. professional subscriptions, uniform cleaning, travel expenses etc
Pension income
State pension letter for 2016/2017
This will be dated around Feb 2015 and says how much per week you will get. We cannot use your bank statements showing actual payment.
Personal/occupational pensions
P60 or certificate of pension paid. Normally tax will have been deducted.
Other taxable benefits
If you have taken a lump sum as your pension, you should have been issued a P45 or other certificate showing amount taken and tax deducted.
Self Employment
If we are doing your bookkeeping for you (pre-arranged) then we need all your business records including bank statements, invoices issued, remittances for money received, invoices paid, expenses paid, fixed asset information, car mileage, working at home allowance details etc.
If you are providing you bookkeeping information, then please provide the summary sheets and back up files (we have standard workbooks to help), plus justifications for tax sensitive entries.
Property Income
Details of income under the “rent a room” scheme
Accounts per property for rental including mortgage details showing the split between capital & interest. If we are doing the bookkeeping for your property, then please provide the rental statements, and invoices/expenses paid, along with the mortgage statements
Details of the property as to whether it is furnished or unfurnished, or if a holiday let.
Investment income
This needs to include any joint account (please advise the split to be made) as well as any accounts that may have been closed in the year. We do not need details of interest on cash ISAs or dividends received in stocks & share ISAs.
Interest from banks & building societies
Certificates of interest received
Bank statement sheets (normally April) showing how much interest has been paid and the tax deducted
Statements showing if interest has been paid gross
PPI settlements received
The amount received will also have some interest paid and tax deducted so a certificate/letter will be issued along with the repayment.
Dividends from UK companies / unit trusts
Dividend / distribution vouchers showing dividends received, date & tax credit. If you are a director/shareholder of your own company, it is vital you have this information yourself or from the company accountant.
National savings interest received gross
Statement of interest received
Overseas income – Dividends or other income
Dividend vouchers
Income withheld certificates from each country where income has been received from and a note to tell us if included in self employment accounts.
Other Income and State Benefits
A note on child benefit received, and if either parent has income over £50,000
State benefits received as some are taxable
Outgoings
Payments in to a personal pension (not employer pension)
Payments made – dates, amounts, policy details
Payments made into an annuity
Gift aid
A list of payments made (charity, date and amount) and if a regular payment or a one-off. Gift aid certificates are available if through an on-line giving site, or your knowledge if you signed a gift aid form.
Student loan repayments
This is often found on payslips, but you should be able to get a student loan statement showing payments made for the year to 5th April 2016
A note to say if you expect the student loan to be repaid in the next two years.
Capital transactions
If you have sold any major assets (main residence), or sales of shares etc which may give rise to a capital gains tax transaction.
What is a temporary place of work and how does it impact you from a tax perspective?
Before you walk on passed this post, it affects the employed and self-employed.
The ability to claim travel costs to this workplace depends on how long you have been going there, and also the proportion of your income that job brings in for you.
Have a squizz at the video , and feel free to contact us if you have any questions.
When you complete your self assessment tax return and the self employment section, there is a question about if you have used “the cash basis” to do your accounts.