Self Employed Help

Anthony91_2

Hi, i'm currently on my way to becoming self employed (sent off the form yesterday) and was planning on going to the local Citizen's Advice Bureau for a chat to double check a few things before remembering this forum, so I thought I would try here first. Everything else I understand except the expenses part.

Can I claim back expenses even if I haven't earnt enough income to be charged tax?

If I can claim/earn enough to claim then how far can it be back dated, if at all? For example, i've recently done my car tax, can this be reclaimed?

Ofcourse i'm planning on getting an accountant in April to go through everything, i'm recording everything in a spreadsheet which is backed up constantly, and keeping all receipts for anything i've bought for business use.

Also another expenses question: My mobile phone, i'll be using the same one for private and business use, it will probably end up being mostly business, could that be claimed back? Say halve of the contract? Or would I have to set up a seperate phone for business?

Any other advice would be appreciated.

Thanks in advance.

Anthony

Gertie_Walker

In answer to your questions:
1. Its important to remember that you can never claim back any expenses - the government does not subsidise your business. However, all the expenses you incur in your business have to be included in your accounts and these will reduce the tax you pay. If, at the end of the year, your expenses are more than your income, you have made a loss and this can be offset agasinst other tax you have paid ion the year (or carried back up to 3 yrs if you havn't paid any tax this year).
2.Motor expenses can either be included in your accounts on the actual basis, ie car tax, MOT, petrol, repairs, etc actually paid in the accounting year. YOu then add back on your self assessment the private mileage. You cannot include car tax until it is paid, so if you paid it just before you started, you will be paying it again just before the end of your accounting periods. You may find it easier to include 40p pm for each business mile travelled up to 10,000 miles and 25p thereafter. This covers all the running costs of the vehicle.
3. I would go and see an accountant now so that you can make sure you are clear about your record keeping and that you are presenting info in the best way. In April you will be 6 mths down the line and it could be expensive to go back and correct things.
4. The phone - you make your own estimate of the business use - HMRC will accept anything reasonable. This is where a chat with an accountant now will help you think about other dual purpose items such as office space.

Pennywise

I'd echo the advice about seeing an accountant now. Your accountancy fees will be a lot higher if they have to wade through six months of dodgy spreadsheet in the wrong format - it'll be quicker for them, therefore cheaper for you, if you ask them upfront how they want you to keep your book-keeping records - a proper package is usually far better than a cobbled-together spreadsheet.

chrismac1

If you do nothing else:

1. Open a business bank account and keep it for business stuff as much as poss - it's not for your gas bill or the trip to Tescos! When you get a statement hole punch it, stick it in a Lever Arch file.
2. When you raise sales invoices hole punch them and put them in a separate file.
3. When you get a supplier invoice - no surprises - hole punch, separate file.

Whatever system you use - manual, spreadsheet or package like Quickbooks or Sage - these 3 steps will go a long way to keeping your accountancy fees down. Whatever system you go for, in my opinion the most important thing is that you feel comfortable with it - that way, you'll be confident you're entering things correctly. if you've not used a system before, try before you buy! Make sure you can get your head round the right way to enter things correctly before you pay for software.

Anthony91_2

Gertie_Walker wrote: »

In answer to your questions:
1. Its important to remember that you can never claim back any expenses - the government does not subsidise your business. However, all the expenses you incur in your business have to be included in your accounts and these will reduce the tax you pay. If, at the end of the year, your expenses are more than your income, you have made a loss and this can be offset agasinst other tax you have paid ion the year (or carried back up to 3 yrs if you havn't paid any tax this year).
3. I would go and see an accountant now so that you can make sure you are clear about your record keeping and that you are presenting info in the best way. In April you will be 6 mths down the line and it could be expensive to go back and correct things.

1) Ah ok, that was very helpful explaination, thanks!

3) I'll do that ASAP and report back if needs be.

chrismac1 wrote: »

If you do nothing else:

1. Open a business bank account and keep it for business stuff as much as poss - it's not for your gas bill or the trip to Tescos! When you get a statement hole punch it, stick it in a Lever Arch file.
2. When you raise sales invoices hole punch them and put them in a separate file.
3. When you get a supplier invoice - no surprises - hole punch, separate file.

Thanks! I already have a bank account for business only, i've bought some things from my main account but will start using the business one as soon as.

I was planning on keeping them in a divided folder (something like: amazon.co.uk/gp/product/B000SHRBKM - can't post a link, hopefully this is acceptable instead) Would this make it just as easy or would you really recommend seperate files for each?


Thanks to all 4 of you who replied, much appreciated help. I knew setting up as self employed would be hard, just having small amounts of trouble with this part.


Oh also, I'm currently working part time (weekends, about 7 and halve hours a week) on PAYE. I rang the HMRC to find out how this would affect going self employed and the person on the phone said that they would work that out.

I'm assuming I have to tell the accountant how much I earn with this part time job for the whole year? So he can work out all the details for tax etc, or will HMRC do this themselves and leave it out of the self employed parts of work?

Sorry for another question, but thanks again! Hugely appreciated.

Gertie_Walker

If you have relatively few transactions, then you wont need a separate file for each type of expenditure. Keep it simple but clear.
Your PAYE earnings will be included on your self assessment, so your accountant will need your P60 in due course. The tax calculation will then take into account your self employed profit and your PAYE earnings and give credit for the tax paid.

tyllwyd

How complicated will your business accounts be? If your profits are under the personal allowance for income tax (including any PAYE income) then your tax bill will be £0. So accountants fees will look very expensive compared to your tax, and the accountant won't have any scope for saving you money on your bill to offset the tax!

If you intend your business to expand, then obviously the safest approach will be to get an accountant to make sure it is all done properly from day one. But if it is just a little pocket money job, nothing too complicated, it might be a lot cheaper to get some books and do your self-assessment form yourself.

Anthony91_2

For now, not very complicated, if all goes well it will be my full time job. This year I can't see me breaking the tax limit, and if I do, then I hardly doubt by much. I received the template spreadsheet from someone who has also set up their own business, but several months back. She spoke to her relative who is an accountant and he gave her the spreadsheet, so the spreadsheet itself should be perfectly fine.

I was mainly unsure about the first questions I had. For example the car thing, as it is social aswell, do I have to record the miles I use for social? Or just business miles? And is it either I claim a percentage of tax/repairs/petrol OR do 40p/mile, or do I claim tax/repairs + 40p per mile? Instead of using petrol receipts?

Mentioned above is about taking tax claims back 3 years, I need to buy certain tools/stationary and equipment up front now, most of which I have, and recorded in the spreadsheet, if I don't hit the tax limit this year and decide to hand in the tax return myself as it will be simplier and most cost effective than getting an accountant, i'm assuming next year when I do go above the tax limit i'd be able to claim for those upfront supplies?

Once again thank you for all your help, sorry if i'm abit slow in understand this tax returns.