Newbie Tax Questions

pr9spk

I have recently become self employed as a locum pharmacist. I just turn up to pharmacies do a days work and get paid cash.

I have been putting money aside for my first tax return in January 2006 and am aware that I can offset some expenses against the total figure.

When I use petrol to get to work, can I deduct the whole lot or just the tax that I paid on the petrol?

When I get my motorbike serviced/repaired can I offset this expense against my tax return?

If I can offset the whole price of a tank of petrol, then each time I fill up then I am basically reducing my tax return or getting free petrol. This doesnt seem right. ???

Rafter

I'd check the inland revenue website around mileage allowances.

I think you should be able to claim an amount per mile between home and work for each pharmacy given you have no fixed place of work.

The amount will then depend on the size of engine you have.

You can't then claim fuel costs or servicing costs but an element of these will be recovered through the rate you are able to charge.

Hope that helps.

R.

pr9spk

So now I am confused.

Do I need to keep my petrol receipts? I am not sure of the distances that I have been travelling but with a little work I could work this out.

On the tax return do I have to say HOW FAR I have travelled or HOW MUCH I have spent on petrol?

Debt_Free_Chick

I have recently become self employed as a locum pharmacist. I just turn up to pharmacies do a days work and get paid cash.

You have registered with the Inland Revenue as self-employed, haven't you? You must do this within 3 months of becoming SE.

Here

http://www.inlandrevenue.gov.uk/selfemployed/

I have been putting money aside for my first tax return in January 2006 and am aware that I can offset some expenses against the total figure.

If you first became self-employed after 6.4.2004, you will do your first tax return for the year ending 5.4.2005. You need to file this before 30.9.2005 if you want the Inland Revenue to calculate the tax you owe (or before 31.12.2005 if filing online).

You then pay all the tax you owe for this year in January 2006 together with another 50% of that amount as an account payment for the next year (tax year ending 5.4.2006).

As a broad rule of thumb, put aside 30% of what you earn to pay your tax bill.

You either need to do a lot of research to get things right or pay an accountant It's not difficult to DIY, but you need to be absolutely ruthless with record keeping.

HTH

pr9spk

I am quite good with record keeping so dont intend to pay an accountant. My question was about the offsettable things like petrol.

dunstonh

I am quite good with record keeping so dont intend to pay an accountant. My question was about the offsettable things like petrol.

Record keeping is one thing. Knowing what you can and cannot claim is another. That is when the accountant comes in handy

Vehicle depreciation, insurance, servicing, mileage etc can all be taken into account. As can clothing and virtually anything else. Including lunch for many people.

klondyke

See the link to inland revenue already given to you; download anything from the site which applies to/interests you; talk to IR people if unsure about anything - they are really very approachable and helpful (especially to those without accountants:-) )

MarkyMarkD

You can't use the fixed mileage allowance scales if you are self-employed.

You will have to record every vehicle expense you incur from the date of starting self-employment (including capital allowances - see later) and then claim the business proportion i.e. business miles/total miles.

Capital allowances = 25% of the vehicle cost, each tax year, on a decreasing basis. I.e. Cost £10,000, year 1 allowance £2,500. Year 2 allowance = 25% of £7,500 = £1,875, etc.

If you already own it when you start self-employment, it's a bit fiddle-faddly. You could go back to when you bought it, and work out its written down value when you started to be self-employed - that's probably right

johnllew

You can't use the fixed mileage allowance scales if you are self-employed.

I believe you can. Full details HERE.

Use of mileage rates in computing vehicle expenses.

The following guidance explains when self-employed taxpayers can use mileage rates to compute their vehicle expenses. They can use this method of calculating relief as an alternative to keeping detailed records of actual expenditure.

This method is intended to make things simpler for small businesses. No one has to use it. Taxpayers who do not use it should deduct the actual amount they spend. In either case the journey must be made wholly and exclusively for business purposes.

pr9spk

So am I supposed to keep my petrol receipts?

What percentage am I supposed to allow for personal use? Why is this so complicated - is it just to stop stupid people reducing their tax return?

Rafter

You have two choices:

1.  Maintain detailed records of all your vehicle expenses (petrol,  repairs,  capital allowances (loss in value of the vehicle).  Then keep detailed records of your business miles and personal miles and charge a percentage of the cost against your income.

or

2.  Just maintain records of your business mileage and make a claim per mile travelled.

Here is the link to the IR website.

http://www.inlandrevenue.gov.uk/manuals/bimmanual/BIM47702.htm


If you are driving a low value vehicle (or you even suggested a motorbike?)  I think option 2 may work out better for you.  For a car you can claim 40p per mile for the first 10000 miles and for a motorbike you can claim 24p per mile.

R.