Self Employed Tax Return, please help!

veddycent

Hi,

I hope that you guys could help me and any help would be much appreciate

Basically I've nearly completed my tax return but I want to clarify some points before I submit it.

So I'm a self employed electrician sub contractor.
The profits that are made for the business are essentially my wages.

So for example:

My turnover for the year is (before any tax (including deduction made by contractor)) = £40,000

My expenses are (Van + other = £4,000)

Profit = Turnover - Expenses
Profit = 40,000 - 4,000 = £36,000

But the profit is before the deductions made by contractor.

So after the deductions made by contractor the profit equates to £30,000 which is essentially my wage.

So should I add my wage to the expenses. Doing this would basically make the profit £0 after the deductions made by contractor + other taxes

Is this the right way to do it??

Also I have added to my wage to amount I pay for my pension, as it is a personal pension me being self employed and all. The pension amount is then added in the pension section later on in the application. Is this also correct?

Thanks for any help

BoGoF

Dear oh dear. You need an accountant.

chrismac1

Mmm. If your sales including deductions is £40k then the CIS deductions should be £8k. Your profit is still £36k. There is a separate box - 37 - where you put the £8k. Note that if your year-end is anything other than 31 march / 5 april it is not quite as clean as this, because the CIS deductions are an advance payment of tax for tax year 2010-11 so they run 6 April to 5 April regardless of your accounting date.

Anyway, if we take your taxable profits as £36k, then:

Tax is 20% of (36,000 - 6,475) = 5,905
NI is 8% of (36,000-5,715) = 2,422.80

Tax already paid = 8,000

Still to pay £327.80

I have to say, though, that if you were a client of mine you'd be the only one not getting at least a £400 tax REFUND on submission of your tax return. For this reason, I have all my CIS clients primed and ready to update me with every deduction statement up to 5 April, so that as soon as the HMRC database rolls over - usually 10 April or so - I can bang in their returns and get the cash moving to them. I suspect you're not claiming all the expenses you can - cue howls of anguish from the HMRC fans who post on here!

veddycent

Thanks for the reply's.

You've just confused me there chrismac1.

The values that I gave are not actual representatives of my numbers, I made them up to make the calculations simpler.

Turnover = 36,000
Expenses = 3,000
CIS (20% vat) = 20% of 36,000 = 7,200
Profits = 36,000 - 3,000 - 7,200 = 25,800 (- other taxes

So 25,800 is my wage so..
Would my wages go down as expenses?

chrismac1

No they are not a business expense they are drawings, as are any payments of NI or tax you've included within expenses. Your profit on the numbers above is 33,000 because the CIS 20% deduction is NOT a business expense. As per my earlier note it is an advance payment of income tax. To be frank, I recommend getting some quotes from local accountants because you are in the single highest risk sector for an HMRC investigation and some of your questions are not inspiring confidence that you're going to get this right.

ceeforcat

Please take the advice and go to see an accountant as you are so far off the mark on the most basic (to an expert) principles. You are an electrician and, no doubt, a very ggod one. You would not be advising an accountant to rewire his house. Horses for courses.

chrismac1

So long as your records are half decent, you're looking at 200 to 350 plus VAT for accounts and tax from an accountant for this. What I say to people is if I do year 1 and it looks to you like it was easy peasy stuff, feel free to copy it in year 2 and do it yourself. So far just one single client has taken me up on this offer. If you get an accountant to deal with this you are probably less likely to get HMRC attention just by virtue of that fact - or for £80 you can cover yourself against the costs of any HMRC visits and then are completely free of worry on this score.

As per my earlier post, it's quite likely you're not claiming all the expenses you are entitled to, so the accountancy fees are not the full story as there will be a smaller tax bill than if you do it yourself. I recommend making a few appointments! Do it now, as the 31 Jan is the deadline and January is going to be hell for people trying to sign up due to the hefty late filing penalties.

pjclar02

Hello there

As a self-employed individual, you do not draw wages, and therefore you do not include this as an expense.

For tax purposes, you are taxed on any profit you make, regardless of what is drawn personally. As such, you will be liable to tax and NIC on profits of £25,800 in your second example.

Hope this helps.

veddycent

Thanks for the replys.

In my original attempt I had profits of about 24,000 (not including my wages) and the calculation online said that I owed £155, I though this was incorrect so I asked on here.

As for expenses there really isn't anything from the last financial year that I can include.

I've included:
Petrol
Van Tax
Van Insurance
Van Maintenance (parts MOT etc)
Mobile Phone

My tools I've had for years and acquired them before I became self employed.
Same for my van that I bought out right before I became self employed.

Any materials for the job are provided by the company.

Record keeping is done me, on paper in my living room. So I have no office and haven't needed to buy any office supplies.

I don't think I have missed anything.

ceeforcat

pjclar02 wrote: »

Hello there

As a self-employed individual, you do not draw wages, and therefore you do not include this as an expense.

For tax purposes, you are taxed on any profit you make, regardless of what is drawn personally. As such, you will be liable to tax and NIC on profits of £25,800 in your second example.

Hope this helps.

Think it might be £33000 as he has claimed CIS deductions as a business expense.

ceeforcat

veddycent wrote: »

Thanks for the replys.

In my original attempt I had profits of about 24,000 (not including my wages) and the calculation online said that I owed £155, I though this was incorrect so I asked on here.

As for expenses there really isn't anything from the last financial year that I can include.

I've included:
Petrol
Van Tax
Van Insurance
Van Maintenance (parts MOT etc)
Mobile Phone

My tools I've had for years and acquired them before I became self employed.
Same for my van that I bought out right before I became self employed.

Any materials for the job are provided by the company.

Record keeping is done me, on paper in my living room. So I have no office and haven't needed to buy any office supplies.

I don't think I have missed anything.

May I ask for clarification?:

What is your total turnover?
What are your total expenses excluding CIS deductions?
What are your CIS deduction?

With those three figures I or someone else, will work out your tax and NIC liabilty and we will see how you stand.