A few self assessment questions

Legacy_user

Hi, It is coming to the end of the tax year after the first year of opening a small business and I have a few questions about self assessment:

1. Do HMRC deduct your yearly tax allowance themselves or will I need to do this myself?

2. Can you tell me the rules behind deducting rent, lighting, heating from my accounts. I cannot seem to find much information on this.

3. If you have any other tips on how to reduce my self assessment tax bill that would be great. Probably clutching at straws but hoping there is something I don't know about that will help reduce my bill. In recent month I have only made around £500 profit, do you get extra allowances when you do not earn much?

no-oneknowsme

dburford9 wrote: »

Hi, It is coming to the end of the tax year after the first year of opening a small business and I have a few questions about self assessment:

1. Do HMRC deduct your yearly tax allowance themselves or will I need to do this myself?

2. Can you tell me the rules behind deducting rent, lighting, heating from my accounts. I cannot seem to find much information on this.

3. If you have any other tips on how to reduce my self assessment tax bill that would be great. Probably clutching at straws but hoping there is something I don't know about that will help reduce my bill. In recent month I have only made around £500 profit, do you get extra allowances when you do not earn much?

Question 1 - Do you intend to file your first tax return on paper (which will be due to be filed with HMRC by 31st October 2011) or by filing online which means that you get a little bit longer to file as it doesnt have to be filed until 31st Jan 2012. The benefits of filing online is that HMRC do the calculations of tax and NI for you . Meaning that when your return is completed online you know immediately how much you owe . Any tax and class 4 NIC due has also to be paid by the deadline of 31st Jan 2012. HMRC will be aware of your personal allowance and will do the calculations accordingly.

Question 2 - Have a read through the info in this link regarding using your home/part of your home for business purposes http://www.hmrc.gov.uk/manuals/bimmanual/bim47820.htm .

I suppose it all depends on your own specific business and how much of your home is used ?

Please be aware that if using your home for business purposes you need to factor that in when chosing home insurance as you will need to let the insurer know that the property is used for business use.


Question 3 - If you post up what type of business you have then maybe some of the others on here could point you to or advise you of a list of allowable expenses.

There are a lot of accountants and taxwise people on the boards so hopefully one of them will come and give you more advice .

System

I run a small ebay business by myself, simply buying in bulk and selling for profit.

System

no-oneknowsme wrote: »

Please be aware that if using your home for business purposes you need to factor that in when chosing home insurance as you will need to let the insurer know that the property is used for business use.e .

I do not own the house, I live with my parents and pay rent. The insurer is not informed that I use the house for business use. Is that a problem? I would not have thought you would have to inform the insurer unless the owners themselves run the business? :S

no-oneknowsme

dburford9 wrote: »

I do not own the house, I live with my parents and pay rent. The insurer is not informed that I use the house for business use. Is that a problem? I would not have thought you would have to inform the insurer unless the owners themselves run the business? :S

To be honest , I do not know the correct answer to this question so I think you should wait until some-one who does no the answer comes along . Just so you get the correct way of it.

I personally would think that as it is only ebay sales then it should be ok as most of the business work being under taken in the home is clerical work . I imagine that the term business use of the property would be more relevant if you had clients coming into the home for business meeting etc .

You also asked about reducing your tax bill...are you factoring in all allowable expenses ? The ones I can think of from the top of my head for an ebay business would be Internet use , the cost of buying the items you are selling , postage cost , fuel costs (to drive to the post office) listing/final value fee's. You would then have to work out what percentage of your home costs you want to claim for.

Theres probably more but thats as many as I can think of at the min.

System

no-oneknowsme wrote: »

You also asked about reducing your tax bill...are you factoring in all allowable expenses ? The ones I can think of from the top of my head for an ebay business would be Internet use , the cost of buying the items you are selling , postage cost , fuel costs (to drive to the post office) listing/final value fee's. You would then have to work out what percentage of your home costs you want to claim for.

Firstly...thank you for helping me out.

Yes I have taken into consideration most of those things and have been keeping records of them all year. I have not yet deducted fuel, rent inc Internet, electricity etc. These seem tricky to work out. Are HMRC ok with estimates?

Fuel costs would be low as the post office is only half a mile away, I'm not sure if thats even worth bothering about.

I am not sure how to work out the Rent inc internet, electricity etc costs (I would do this monthly) I read that rent is to do with the percentage of the house you use for business use but not quite clear how to work this out, if you have any ideas that would be great. As for the electricity, heating and internet use I also have no clue how I am supposed to work this out.

jennifernil

As you live there anyway, are you actually incurring EXTRA costs by operating this business from the house?

If so, you would need to be able to show this if asked. Same with electricity and internet.

If you only claim a nominal sum, something like £3 per week, HMRC are unlikely to question it.

If you start claiming higher expenses, you may find yourself getting involved with things like business rates and insurance, so you need to tread carefully.

cornerstone13

I am also self employed providing office services - I work for one client at their premises and for another from my home.

For the electricity etc question, HMRC advised me that I could offset a set rate of £3.00 per week and would not need to provide any sort of back up. Or, I could work out the actual amount - which they told me to do by working out the total quarterly charges for gas, electric, water, council tax divide by the number of habitable rooms in the house (exc bathroom/kitchen) and multiply by the number of rooms I use for the business (1). This comes to more but is obviously a phaff and they could ask me to prove the figures, whereas with the £3 per week, they just accept that.

For fuel, you say the post office is only half a mile away but how many times a week/month do you go. My client is a mile away and I go up to three times a week - so far this tax year I'll be offsetting 208 miles; it soon adds up.

I have an excel spreadsheet where I keep track of all my incomings and outgoings - for my business the outgoings are under the headings Purchases (for me that's paper to print on and an audio transcriber); Rent, Rates & Powers (as my first paragraph), Phone & PC (where I allocate a percentage of our monthly phone bill to the business, also ink cartridges, a hard drive for backups etc) and Fuel (as my second paragraph).

The thing to remember is to offset as much as you possibly can but that it must all be provable, in case HMRC ever asked you.

I found our local HMRC (Woking in Surrey) extremely helpful with all my silly little questions

Hope this helps