Self Assessment Confusion

Dlxke · 19 April 2017 at 10:13PM

Hi all,

I'm trying to save myself money for an accountant, and have been keeping track of my expenses etc myself. I've been a soletrader since mid July 2016 and was confident I had done all my research and am aware of most things I need to fill out my self assessment, especially as I had been told by a few people that as long as my business doesn't get too complicated (I invoice every 4 months to the same company) it should be fairly easy to do - however, I ran into a question even these people ironically can't help me with, so I thought I'd seek advice here.

So I've been working as a soletrader since the 18th of July, I did a 2 week unpaid internship with expenses paid (therefore this was included in my first invoice). I invoiced for the first time on the 19th of august 2016.

The question I am struggling with is the following:

My 'basis period' (the self-employed period for which I am taxable) is not the same as my accounting period

What's my basis period?
Ideally I'd like my accounting period to be April 6th until April 5th, to make my life easier in years to come. However, I'm open to shifting that around if there is a benefit?

Would my 'Basis Period' be matching my Accounting period? I've figured out that the basis period is from when I've started trading until the end of the tax year (in my case as I am a new business anyway), but I'm still very confused by the question.

And would that make my basis period 18/07/16 - 05/04/17 or 19/08/16 - 05/04/17?

Thank you in advance, and I'm sorry if these are simple questions. I've read quite a lot about it and this specific problem still confuses me. Thank you!

Dlxke · 20 April 2017 at 12:40AM

eggha wrote: »

basis period - in first "year" of trading is the period to the next 6th April (therefore normally not a full 12 months)

accounting period - can be a duration of your choosing commencing from date of the start of the business, but would normally be 12 months

So my accounting period has to be 12 months from when I started my business? I can't make the accounting period until the 5th of April and then next April do 12 months?

In other words, can my accounting period be from the 18/07/2016-05/04/2017 and then next year 06/04/2017-05/04/2018?

And thanks for those links, will try and get my head around that if I can.

[Deleted User] · 20 April 2017 at 7:47AM

Dlxke wrote: »

So my accounting period has to be 12 months from when I started my business? I can't make the accounting period until the 5th of April and then next April do 12 months?

Absolutely you can. The accounting period does not have to be tweleve months from when you started but the first basis period will always be from the date of commencement to the following 5th April

In other words, can my accounting period be from the 18/07/2016-05/04/2017 and then next year 06/04/2017-05/04/2018?

Again - that is correct

And thanks for those links, will try and get my head around that if I can.

You are correct in what you are saying.

If you prepare your first accounts to 5th April (short period) your basis period will be the same as your accounting period. This will follow if you continue to use 5th April in the future - your basis period and your accounting period will be 6th April to 5th April - and you won't have to get your head around the links posted by eggha.!
You can, of course whatever date you like to prepare your accounts. The 5th April year end is much easier to work with but not necessarily the most tax advantageous, particularly if you have a very slow start to your business with continuing rising profits. Perhaps when you have completed a full year in self employment you can come back to us?

In your case, for example, with a year end of 31st July.

Accounting periods:

Year 1 - accounts for 54 weeks(18th July 2016 to following 31st July 2017)
Year 2 - - accounts prepared to 31st July 2018

Basis periods:

2016/17 - 18th July 2016 to 5th April 2017
2017/18 - 1st August 2016 to 31st July 2017
2018/19 - 1st August 2017 - 31st July 2018

You will see that the period from 1st August 2016 to 5th April 2017 is taxed twice - the overlap period and profits previously referred to. Perhaps for another day?

Dlxke · 20 April 2017 at 11:40AM

[quote=[Deleted User];72427821]You are correct in what you are saying.

If you prepare your first accounts to 5th April (short period) your basis period will be the same as your accounting period. This will follow if you continue to use 5th April in the future - your basis period and your accounting period will be 6th April to 5th April - and you won't have to get your head around the links posted by eggha.![/QUOTE]

Thank you for your help!
Actually went through the links he posted yesterday already, and with what you've just said, I believe I can make sense of it.

However, even if not completely financially optimal for me, I will likely make my accounting and basis period 18/07/16 - 05/04/2017 this year, and then have both be 06/04/2017 - 05/04/2018 next year and so on. I'm not sure how long I will stay in self employment, if there is a good opportunity for me I will happily put freelancing on hold, so I wanna make things as simple as possible for me.

And as far as I understand it I won't have any overlap profits if I do it this way. Especially as I only earned around £17k this year, £14k from self employment and around £3k from PAYE (but hadn't paid any tax on that as I was earning only around £600, sometimes less per month at the time before going into self employment).

So I'm assuming I'll pay a little less tax this year, and then more next year as based on my current day rate my income for next year would be around £25k.

Self Assessment Confusion

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