Category Archives for "Self Employed"

how to link personal tax a/c to self assessment

Are you sitting comfortably?… Well, don’t!

It’s very easy to get comfortable at this time of the year; the dark mornings and evenings are long, you can keep the central heating on for an extra hour or so, chuck on your comfy clothes… and, now, put off filling in your tax return for a month.

Really? Well…read on.

You see, our friend, the Chancellor of The Exchequer, Rishi Sunak, has decided that self assessment tax-payers now have until February 28 to file their tax returns.

The pandemic really has got in the way of everything, including, it seems, filling in your self-assessment form.

While this might seem good news on the face of it, getting too comfy with your tax returns and letting dates come and go can be a slippery slope.

There is also a sting in the tail (isn’t there always?!)

You could be left with a nasty surprise if you think the extension also applies to paying your tax.  HMRC still wants its dosh and any late payments will see you hit with interest at 2.75% and a 5% surcharge if not paid by 1 April.

“But…,” I hear you cry, …”if Dishy Rishi says we have more time – why the panic?”

Well, there’s no panic, but with Making Tax Digital just around the corner you might want to get used to filling in your tax returns on time – ‘cos, come April 2024, working with HMRC isn’t going to be a once-a-year thing you do through gritted teeth.

A reminder…

If you are VAT registered and below the VAT threshold you can voluntarily join the Making Tax Digital service now but you will be required to follow Making Tax digital VAT rules for your first return starting on or after April 2024.

So, my advice to you is to make sure you get your self-assessment tax return completed by 31st January as you never know what’s around the corner that could delay you (or your accountant) in February to stop it being completed.

 

Making Tax digital doable, chartered account in Berkshire

Making Tax Digital Doable for Income Tax Self-Assessment

A few years ago, the Conservatives pledged to abolish the tax return.

Bravo!” I hear you cry!

Of course, accountants like me despaired, we’re talking head in hands time.

Naturally, the taxpayer went “woo hoo” and gave it no more thought.

I don’t blame you one bit.

However….as ever, the tax devil was in the detail. Cue sneaking music…(Enter stage left, creeping).

The Treasury believes they are missing lots of tax revenue by people under declaring income or over declaring allowable expenses, so this tax gap exists. By fixing this, then there will be more money slushing around the public purse in order to give back to the people that need it.

However….to do that, need “more up-to-date information about businesses and their finances” to enable “easier identification and better targeting for taxpayer support”.

And lo…the time will soon be upon us when we will have to embrace “Making Tax Digital” because guess what, the tax return hasn’t really been abolished, it has just been tweaked!

Help! What will I have to do if it applies to me Louise?

Don’t panic Mr Mainwaring!

Here’s the situation in a nutshell:

● Keep digital records of all business or property income & expenses
● Send quarterly updates direct to HMRC electronically with no human intervention
● Submit an end of period statement to finalise the self-employment accounts
● Do a finalisation return which then pulls in all the other sections of the tax return.

Now, I guess you have spotted the fun – this is 6 returns for each tax year! It is a “big bang” approach in that everybody needs to go on this from the 1st April 2024.

“OH PHEW!” That’s AGES away” I hear you cry!

Not so fast! Go to the dressing up box and find your best thinking cap, you will need it.

OK, thinking cap on, what do I need to do now Louise?

May I humbly suggest snaffling a copy of the FREE guide I have written just for you?

You can grab it here.

Don’t worry, I’m not going to spam you!

Watch this quick video and be reassured:

 

 

Meanwhile, get thinking.

You need to know these things and think about what you need to do to comply with the changes.

Look at it as an opportunity to understand where your money comes from, but more importantly, being able to analyse where your money goes.

● Do you need to spend £5K a year at various coffee take-away places?
● Do you need all these subscriptions for things you never use?

Seeing this as you go along can really hammer home what works for you and what works against you. That £4.99 a month subscription is not very much, but if you have 3 or 4 of them, that can be £20 a month going out the window for no reason. The benefit is better management of your business.

There’s a lot to cover which i cannot possibly summarise in a blog, so grab the free report and you can find out the following:

● Who is caught by MTD ITSA?
● What YOU will have to do.
● All about paying tax quarterly
● Any exceptions to this whole thing
● Can you leave the system?
● What software you might need
● Potential complications and other banana skins

What can Louise and her team do to help me?

Firstly, we will be keeping you up to date with as many webinars as we can for when changes take place and will start to review available software after the tax return filing season is over, plus considering what we can do to help you with your bookkeeping.

Updates will be on our website and in our Facebook groups for performers

(), plus for clients and those on our mailing list, there will be regular updates from February 2022.

May I humbly suggest snaffling a copy of the FREE guide I have written just for you – Making Tax Digital Doable? You can grab it here, don’t worry, I’m not going to spam you!

Small Trader Relief

Small Trader Relief

A new tax allowance was introduced from April 2017 (called small trader relief) that not many people know about, so if you have a small amount of self employed income or even rental income, you may want to make use of it for 2017/2018, or evening 2018/2019 as it still exists – I know, jumping ahead, but you will need to keep appropriate records. What is this new allowance? I hear you say. Listen up

Transcript of the Video

Great news. From the new tax year, on the 6th of April, 2017, there is something called a small trader relief of £1,000. There’s also a £1,000 property income relief.

Trade can be buying and selling things on eBay. Or simply just a bit of self employment. Property income might be the odd nights of Airbnb, or the odd lodger popping in and out.

What does this mean?

So if you only had a turnover of £1,000 in that tax year, you don’t have to declare it on your tax return. You just tick the box to say you’ve had £1,000 of income, and that’s it, nothing else needs to be done.

So, why is that good news?

Well, the odd bit of PA work you might want to do. The odd bit of filming that you might think about running some videos through for somebody. A little tiny bit of trading on eBay won’t hurt anybody. Well, that’s the view of HMRC as well. Why do they want to chase down small amounts when there’s bigger fish to fry? Now there is a slight problem with that, in that you might have £1,000 worth of income, but how much does it cost you to generate that income? Did you buy and sell on eBay, but you sold at a loss. If so, this does not allow you to offset any costs, and therefore create losses. So you’ll have to think about, was it just income, and there was no costs incurred? Or should I really declare this as a kind of self employed business.

You could earn more than £1,000 but have very little costs. So what you can do then, you can elect to have that £1,000 allowance. Offset it on your more than £1,000 income, and just pay tax on the difference.

There’s an example below this video on how this works, where I’ve assumed somebody has rented their driveway space, or their parking space for Wimbledon. See how it works, and how much tax they could save if they used that election.

The Woo Hoo moment

So, £1,000 of self employed odd income. £1,000  of odd property income. No declaration, keep it tax free, and laugh your way to the bank.

Want to know more?

If you want to wade through a chunk of HMRC/Gov details, you can find it by clicking >>> HERE <<<.

Give us a bell if you need help on it.

 

Changes in Tax Reporting

For all you self-employed and landlords – this is a quick heads up. Company owners, you do need to know about this as well.

Overworked Character Showing Exhausting Workload

Back in March 2015, the government announced the end of the tax return and we all jumped for joy (except for accountants of course). Well, that state of play is getting closer for the freelancers/self-employed people and landlords if their income from this type of source is over £10,000.

Consultation documents were issued by HMRC in August 2016 all about “making tax digital” (MTD). The idea is that individuals with income which is not taxed at source greater than £10,000, will need to do quarterly reporting to HMRC via online accounting systems or apps, or via a standalone system that can send data directly to HMRC. Gone will be the days of using excel (other spreadsheet systems are available) to collate your numbers and then load the totals onto the HMRC portal. You will note that it says income, not profit. HMRC require that everybody caught will need to keep their records online, and these records include your bank transactions for your business whether it is a bank account, credit card or PayPal type systems; sales invoices, purchase invoices & receipts, plus records of cash spend and income.

The idea being is that these records are entered or electronically loaded on a regular basis, and at the end of each quarter (or more if you want to), a summary of data is transmitted to HMRC within 30 days of the quarter end. It is only a summary of the data in specified categories and not actual copies of receipts and invoices.

The consultation documents propose that this kicks off from April 2018, and the first reporting could be as early as May 2018 depending on how people want to set up their reporting. The maximum time between reporting is three months. At the end of the year, there is a nine-month period that you can amend your numbers of any adjustment like mileage allowance, home office calculations, accruals, etc. So the numbers have to be finalised by the 31st December (if your year end is 31st March) or 5th January (if the year-end is 5th April). So the 31st January will not exist when this comes in. You lose a month.

stick_figure_depression_800_wht_11168What people may not realise is if you have a year that is not the 31st March/5th April, for example, a teacher may pick 31st August for a school year. Then you still have quarterly reporting, but your final assessment deadline is nine months after the 31st August (31st May) rather than 31st January 18 months later. That is doing to be a huge change for these people as they will be effectively working on three tax returns at the same time rather than two. The year end of 31st August 2019 ends in tax year 2019/2020 would need to be on the tax return by the 31st Jan 2021 under the old scheme, but under Making Tax Digital, it needs to be finalised to the tax man by 31st May 2020.

There are specific exemptions noted in this consultation:

  • Self-employed businesses and landlords with income below £10000;
  • Charities;
  • Community Amateur Sports Clubs;
  • Insolvent businesses and insolvency practitioner;
  • The Digitally Excluded, e. those without computers or broadband, or for other reasons.

Another piece of workTo add a nail in the coffin a bit more, unlike self-assessment tax returns and payroll systems, HMRC will not be providing any free software for MTD. They are looking to the software providers to make available free software for the smallest of businesses, but commercially why would the software companies do this. It is more likely that the software is something that the company needs to pay for on a monthly basis and find ways of making it work for them and that then just adds to the administrative burden & cost for the business. I am already looking at package solutions for clients to overcome the problems of MTD from a DIY & review pack through to a fully serviced option. More on that another time.

I’ve seen things on social media sites that people are saying this is voluntary and you don’t have to do it. That is not correct. All self-employed businesses will have to go down this route unless they are in the exemption categories. The bits that are optional is if you use a cash accounting method, if you want to report more frequently than quarterly, or if you want to make payments on account after each reporting period.

Of course, if you don’t file things on time each quarter, there will be a penalty system. At the moment they are proposing that if you are late, you get a “point”, and once you have 4 points, you get a penalty. Those 4 points stay for 24 months, and each time you get another point when you have 4, another penalty. Of course, this is up for question as well.

If you run your company, don’t sit there and smirk as VAT registered companies will come into the game on the current rollout programme from April 2019, and all companies from April 2020.

 

latemanrunAs I say, this is still at the consultation stage that ends on the 7th November. Some people think the final plan will come out with the finance bill on the 23rd November; others believe it will be finalised in March 2017. A critical area of concern is the start date being April 2018 and if it should be April 2019. The starting level of £10,000 is being questioned of being too low and a look at the VAT threshold (£83,000 of income) before this comes into play.

I’ll be keeping a close eye on this as it will affect most of my clients. One of the best things you can do at the moment is take out that second personal bank account as your business account and get used to putting all your business transactions through it. Leave your real personal account as private costs like rent/mortgage, council tax, utilities, food, clothing, having fun, etc. Just do transfers from the “business account” to the real personal account when needed. When the MTD reporting comes on board, you only have one account to deal with and process through to an accounting system for HMRC. Also start to look at accounting systems and what they can do for you. At the moment, we will be considering Xero as the accounting system linked with Receipt Bank or Entryless for taking photos of receipts to load into Xero and Tripcatcher for mileage records.

If you have any questions, please feel free to ask. As this gets closer, I’ll probably need to get a support desk system in place, and use an FAQ page on my website to help people get through the pain of all this.

Should you desire to read the documents and put your opinion to HMRC, then the documents can be found >>> HERE <<<