Self assessment - help please!

Katie-Kat-Kins

Hi there,

I'm currently doing a self assessment online and have hit a couple of issues I haven't come accross before so I'm hoping someone on here can help.

1. Disallowable Expenses

Ok I understand what expenses are allowable and what aren't. But when I input my disallowable expenses (personal drawings) it adds them on, which seems illogical, so I can only think that I am doing something wrong.

I am entering turnover as total income from all sources for the year, as an example £20000.

Then total allowable expenses I am going through my books and entering the figures for basically all the expenditure apart from drawings. Say for example £10,000. This leaves £5000 net profit.

When I then enter personal drawings of say £2000 into the disallowable expenses this adds £2000 to the net profit giving £7000. That doesn't seem to make sense. I can only draw on money that has been made, my drawings came out of my profit and although I appreciate that I need to pay tax on these I seem to be paying tax on it twice like this

Should I have reduced my turnover accordingly??? Does it expect that you are drawing on capital rather than on profit??? How should I make this balance?? The business has made very little profit generally so I can't afford to pay more tax than is necessary.


2. Artistic Spreading

I've read the guidence on this and I think I get it but does anyone know whether what I am doing is correct? As an example the business made a £2000 loss last year and a £6000 profit this year. Therefore do I enter in the box £6000 + (2000) = £4000 / 2 = £2000 as the amount to adjust by???

If anyone can offer some guidence I would greatly appreciate it, the assessment seems so much more complicated than the last few years..... I guess that is just because different issues are cropping up.

Thanks

tyllwyd

I'm having a guess - but are they assuming that you have included the disallowable expenses in the total expenses figure? So for example you claimed expenses of £5000 and profit of £5000 - but £2000 of those expenses were disallowable, so your profit is actually £7000?

Katie-Kat-Kins

I wondered that, I didn't because drawings obviously aren't allowable and the SA online asks you to list your allowable expenses on one page then the disallowable ones.

Your explanation would make sense to me, but doesn't seem to be what the form implies you should do.

I'm quite happy that I should pay tax on the drawings but the form makes it look like I have £7k profit not £5k. I don't remember having this problem last year......

belle1980

hi am also struggling with self assessment, (this is the first time ive posted on here so please excuse me if its incorrect!)
i am self employed, sub contracted by a uk company and have in this tax year worked in brazil (no tax paid) south africa (no tax paid) and norway (tax deducted, net received). i receiv my wages from the uk co into my uk bank.
Do i have to pay tax on the foreign earnings? thanks for any help!

musicmam

Hi Katie-Kat-Kins,

I think you're getting yourself muddled here; if you are SE Sole Trader you don't pay tax on you're drawings, its not like PAYE. You pay tax on your profit ie. Sales - Expenses = Profit.
You can take out as much drawings as you like, its your money.

I'm sure someone will be along soon to clarify this.

Hope I've been able to help.

Katie-Kat-Kins

So Musicmam, how do I do this on the SA form??

I understand what you mean you pay tax on your profit, not your drawings, although drawings come out of your profit so you are effectively taxed on them. But the SA form makes it look like my drawings are added to my profit!

Should I just not put them in as a disallowable expense - I don't want to look like I am being dodgy or risk any adverse consequences.

The drawings are there to be seen in the accounts.....

katies_mum

I`m glad someone has asked about disallowable exp as I`ve just got to this page (never needed to fill this out on written tax return) Are we meant to put down how much we have drawn from the business and what about the bit phone / fax etc private use. I`m confused as my figures for phone etc are worked out at 50% and I just put this 5% figure on the expenses should I be putting 100% figure and then 50% on the disallowable exp page? Sorry to confuse you all but I`m loosing the will to live. Many thanks

musicmam

Your drawings don't go on the tax return, just your turnover, allowable expenses and disallowed expenses (ie. expenses that need adjusting for personal use).

Your drawings should show in your accounts on the Balance Sheet not Profit & Loss.

Katie-Kat-Kins

Ah thanks musicmam, I think it is the wording on the form that is a bit misleading then, it says something about money withdrawn for personal spending......

I'll take it out!

Now then - any ideas about artistic spreading before I balls that up????