Outgoings for self assessment.

Joss1

Hi There... Im new here, so this may be a dense question. For my outgoings of my tax self assessment I do not usually include Postage costs because they are paid by my clients.. and unless the postage costs extra thats the only extra I add for outgoings, so although I am paid by my client to post the item to them I dont usually add it in the tot up for my outgoings as I figure its a NULL amount. Claiming for it would be wrong right?...Also, paypal fees on payments made to me, they ARE included? And Ive not added my National Insurance as an outgoing but I know someone who did... ? Basically some clarity on these issues, I'm new to self assessment and am just doing my numbers today.

Thanks Joss

CKhalvashi

Joss1 wrote: »

Hi There... Im new here, so this may be a dense question. For my outgoings of my tax self assessment I do not usually include Postage costs because they are paid by my clients.. and unless the postage costs extra thats the only extra I add for outgoings, so although I am paid by my client to post the item to them I dont usually add it in the tot up for my outgoings as I figure its a NULL amount. Claiming for it would be wrong right?...Also, paypal fees on payments made to me, they ARE included? And Ive not added my National Insurance as an outgoing but I know someone who did... ? Basically some clarity on these issues, I'm new to self assessment and am just doing my numbers today.

Thanks Joss

Anything that's wholly essential to business use can be included.

Postage and PayPal/bank fees can be included. Profit from postage should be declared as such.
The £2.60/week NI is included, but not the other bit.
I put the occasional bit of diesel in my car, 90% of which is for business use = 45 or 25p/mile claimed back (as I'm legally allowed to do this, as I pay for it)
Proportion of Electricity?
" " Phone?
" " Internet?

It may be beneficial for you to sit with an accountant.

CK

Joss1

CKhalvashi wrote: »

Anything that's wholly essential to business use can be included.

Postage and PayPal/bank fees can be included. Profit from postage should be declared as such.
The £2.60/week NI is included, but not the other bit.
I put the occasional bit of diesel in my car, 90% of which is for business use = 45 or 25p/mile claimed back (as I'm legally allowed to do this, as I pay for it)
Proportion of Electricity?
" " Phone?
" " Internet?

It may be beneficial for you to sit with an accountant.

CK

CKhalvashi Thank you for your reply...

A postage profit would go in my income I know. BUT its rarely the case. What does happen is I undercharge a client for postage and end up paying the extra it costs..the amount they supplied me is not really an outgoing because its not from my profits or income.. its theirs, they just pay me to post.

This extra amount I might pay... I would consider an outgoing as I am not benefiting from it is coming from my pocket . Say someone paid £10 for postage. That is not part of my outgoings as I woudlnt add it to my income to take it away as an outgoing.

ONLY if they over paid me and I was left with extra.
If however I charged them £10 and the postage was £12 I consider postage to have cost me £2 and thus is an outgoing.

My sincere apologies for the complexity of the postage lol

The rest of my accounts are very simple. Its outgoing and income simples. But at a later date think an accountant would be helpful perhaps with paypal percentages..

Thank you SOOO much for the reply Gonna start addin my NI I dont know what you meant by the other bit? xx

cotswoldaccountant

I am an accountant. Unfortunately you are not allowed to deduct Class 2 National Insurance in your tax calculation as a business expense. NI is a personal expense. The "other bit" of NI which was referred to is Class 4 NI, which is based on your profits for the tax year. You pay 9 per cent on annual profits between £7,605 and £42,475 (2012-13) and 2 per cent on any profit over that amount.

With regard to postage, the correct way for you to calculate your profit and costs is to look at the amount you are receiving from your clients, and the amount you are paying for postage as separate items. Say you sell an item for £10, and you charge £10 postage. Your total income, or "turnover" for that item is £20.

If it actually cost you £12 to post the item, then the full £12 will be shown as a postage expense. So you will have:

Turnover: £20
less expenses: (£12)
Profit: £8

The £8 profit forms part of your self assessment calculation.

cotswoldaccountant

CKhalvashi wrote: »

I put the occasional bit of diesel in my car, 90% of which is for business use = 45 or 25p/mile claimed back (as I'm legally allowed to do this, as I pay for it)

CK

If you are using the HMRC approved mileage rates (45p for the first 10000 miles travelled in the tax year and 25p for each additional mile) to calculate your business mileage expenses, then it is irrelevant how much of your car is for business or personal use, and you would of course also ignore any costs of diesel, as these costs form part of the approved mileage rates. You simply multiply the number of business miles travelled by the appropriate mileage rate, ensuring that you keep a record of business journeys, and ignore any other vehicle costs in calculating your business profits.

Joss1

cotswoldaccountant wrote: »

I am an accountant. Unfortunately you are not allowed to deduct Class 2 National Insurance in your tax calculation as a business expense. NI is a personal expense. The "other bit" of NI which was referred to is Class 4 NI, which is based on your profits for the tax year. You pay 9 per cent on annual profits between £7,605 and £42,475 (2012-13) and 2 per cent on any profit over that amount.

With regard to postage, the correct way for you to calculate your profit and costs is to look at the amount you are receiving from your clients, and the amount you are paying for postage as separate items. Say you sell an item for £10, and you charge £10 postage. Your total income, or "turnover" for that item is £20.

If it actually cost you £12 to post the item, then the full £12 will be shown as a postage expense. So you will have:

Turnover: £20
less expenses: (£12)
Profit: £8

The £8 profit forms part of your self assessment calculation.

---

Thank you so much for your reply :A

OK.. so because the postage in spite of no profit to myself is part of my business income, I put the postage as profit and then later when i equate it as part of my outgoings it is basically accounted for.

IE I put the entirety of a sale in my sums of profit as £1000 then in my outgoings - add up each sales outgoing ie, possible fee from paypal and postage from that sale? So I assume postage as part of my outgoings even though I never technically would have benefited from that postage?

I think I am doing this in a different order but coming to the same result...

Say I have been paid with paypal.
The client has paid for the item and the postage.
Before the paypal fee I have say £1000 but obviously when i transfer my money to my bank I have roughly 3.4% less on this amount.

In my assessment I put that entire amount in my profit... then In my outgoings put the cost of postage and paypal fee? Inspite of the fact the postage was NEVER mine to begin with? It is mine because its a payment to me to post to them?

I KNOW i sound rediculously dumb here, I do, but my assumption is I am actually being dishonest If I put it as profit when it isnt.. surely thats wrong?

Yes I didnt think NI should go in it.. thanks for saving my bacon there ... I have not included electricity, I do not use a car for business but I do have to use train for supplies sometimes... I guess I DO include that then.... I have been doing myself OUT of this so far. How much does an accountant cost..I expect my earnings to rise and I do not want any complications in my future.

AGAIN apologies for seeming dense here... I just want to be spot on and trying to get through to the assessment guys is a nightmare.

pecks x

cotswoldaccountant

It is really difficult trying to get through to the self assessment helpline at HMRC - one of the benefits of being an authorised agent is that we have a dedicated helpline to call on behalf of our clients, which is also staffed by more experienced HMRC staff. I wouldn't cope if I had to phone the usual HMRC helpline every time I had a query about a client!

With regard to your queries on "profit" and "expenses" there are a couple of fundamental concepts that you need to understand, and which will really help in filling in your self assessment return.

"Turnover" is the amount of money that you receive from your customers. It is the total amount that you invoice them for, and the amount of money that they pay to your paypal or bank account in return for your services. It might well include postage if you have added this to your invoice.

"Expenses" are the cost of any item which is wholly and exclusively bought for the purposes of your business. There are all sorts of tax deductible expenses - I'm not sure what your business is, but it sounds like your expenses are things like postage costs (you pay Royal Mail for these I presume), paypal fees (this is the 3.4% that paypal charge you), transport costs for train fares etc.

If you work from home, you are allowed to specify a £4 per week "working from home" cost as a tax deductible expense, without needing to back it up with electricity, council tax, gas bills etc. This is a useful tax deductible expense as it saves all the time and effort of gathering those bills together and working out the proportion of them which equates to your actual costs for working from home.

Once you have added together all of your income to get your turnover, and all of your expenses to get your total expenses figure, you can deduct expenses from turnover to get your "profit" for the year. You pay tax of 20% on profit above the personal allowance (currently £8,105) until you reach the higher rate tax threshold.

It would be dishonest to include or exclude items from profit incorrectly, and your tax bill would be wrong, but by including your postage income as "turnover" and your postage costs as "expense" you are actually calculating your profit correctly. One offsets the other, unless you are making a loss (a negative profit!) by charging less for postage than it actually costs you - but you will still be coming up with the correct result by working out your profit in this way.

Accountancy fees vary hugely. PM me if you would like more info with regard to your specific business, or have a look at Yell.com if you want to find an accountant in your area (although it's not essential to use a local accountant). It is well worth getting an accountant as they are able to advise on useful tax savings which you might miss if you do not know about them, and of course to make sure that your accounts and tax return are prepared correctly.

CA

CKhalvashi

cotswoldaccountant wrote: »

If you are using the HMRC approved mileage rates (45p for the first 10000 miles travelled in the tax year and 25p for each additional mile) to calculate your business mileage expenses, then it is irrelevant how much of your car is for business or personal use, and you would of course also ignore any costs of diesel, as these costs form part of the approved mileage rates. You simply multiply the number of business miles travelled by the appropriate mileage rate, ensuring that you keep a record of business journeys, and ignore any other vehicle costs in calculating your business profits.

Trip meter gets zeroed each morning when I leave home, and a nominal sum of 51mi is taken off when I leave work, 102mi if I'm going home from somewhere else; hence there's an accurate record.

CK

cotswoldaccountant

CKhalvashi wrote: »

Trip meter gets zeroed each morning when I leave home, and a nominal sum of 51mi is taken off when I leave work, 102mi if I'm going home from somewhere else; hence there's an accurate record.

CK

Not sure I quite understand the calculation! But what I meant was it is important to keep a record of business miles travelled, so that if HMRC were to enquire into your business mileage, you would have a list of dates, journeys and the appropriate mileage allowance charged to back up the total expense.

Joss1

cotswoldaccountant wrote: »

It is really difficult trying to get through to the self assessment helpline at HMRC - one of the benefits of being an authorised agent is that we have a dedicated helpline to call on behalf of our clients, which is also staffed by more experienced HMRC staff. I wouldn't cope if I had to phone the usual HMRC helpline every time I had a query about a client!

With regard to your queries on "profit" and "expenses" there are a couple of fundamental concepts that you need to understand, and which will really help in filling in your self assessment return.

"Turnover" is the amount of money that you receive from your customers. It is the total amount that you invoice them for, and the amount of money that they pay to your paypal or bank account in return for your services. It might well include postage if you have added this to your invoice.

"Expenses" are the cost of any item which is wholly and exclusively bought for the purposes of your business. There are all sorts of tax deductible expenses - I'm not sure what your business is, but it sounds like your expenses are things like postage costs (you pay Royal Mail for these I presume), paypal fees (this is the 3.4% that paypal charge you), transport costs for train fares etc.

If you work from home, you are allowed to specify a £4 per week "working from home" cost as a tax deductible expense, without needing to back it up with electricity, council tax, gas bills etc. This is a useful tax deductible expense as it saves all the time and effort of gathering those bills together and working out the proportion of them which equates to your actual costs for working from home.

Once you have added together all of your income to get your turnover, and all of your expenses to get your total expenses figure, you can deduct expenses from turnover to get your "profit" for the year. You pay tax of 20% on profit above the personal allowance (currently £8,105) until you reach the higher rate tax threshold.

It would be dishonest to include or exclude items from profit incorrectly, and your tax bill would be wrong, but by including your postage income as "turnover" and your postage costs as "expense" you are actually calculating your profit correctly. One offsets the other, unless you are making a loss (a negative profit!) by charging less for postage than it actually costs you - but you will still be coming up with the correct result by working out your profit in this way.

Accountancy fees vary hugely. PM me if you would like more info with regard to your specific business, or have a look at Yell.com if you want to find an accountant in your area (although it's not essential to use a local accountant). It is well worth getting an accountant as they are able to advise on useful tax savings which you might miss if you do not know about them, and of course to make sure that your accounts and tax return are prepared correctly.

CA

Thank You so kindly... yes thats all as I read in the manual and as accurate as can be, you tell it better ... The figures all work just fine... and I appreciate such an timely response to my density Im so thankful to have someone clear up an irritant of an embarrassing question actually... If I discover further density in my workings out... I will certainly come to you.. It looks like I would prefer someone to do it for me someday.. but I like to know how EVERYTHING works for myself before I put it in the hands of another.. you are a STAR... again many thanks to you.. and to ALL who got on this to help me out Respect x