Self-employed taxes and expenses in first year?

Jew

lovinituk wrote: »

I was self employed as a sole trader and now director of my company having just incorporated the business. My advice is to definitely see an accountant - I did. I'm familiar with self assessments having been a higher rate tax payer when I was employed but I still didn't know all the ins and outs. An accountant will know all the up to date rules and allowances.

Thanks and congrats!

How much do you expect it'll cost? Can everything be covered in one meeting. My business isn't really that complicated, so I would imagine it should be just one meeting.

heretolearn_2

Another option for you is to live somewhere cheaper on the outskirts of London, and then hire an office from somewhere like Regus when you need to hold meetings, or go to a hotel as already suggested. Plus, the majority of your meetings can be at the prospective clients' premises - this goes down far better with them than expecting them to travel to you.

HMRC - believe it or not, they are actually quite helpful for small businesses. When you talk of 'loopholes', well tax planning is an interesting and complex area and to be honest at your income level there aren't any 'loopholes/tax schemes' you can take advantage of. We normally start tax planning for clients once profits are up over about £50k per year.

Basic expenses etc are very simple as to what is and isn't allowed. Whether you agree with the law on that or not is immaterial. They will not expense a flat for you, full stop. You can claim a small amount towards the partial use of one room, no point arguing about it. The HMRC will very happily provide you with a full list of what is allowable as an expense. They aren't out to con you, honestly - and can give you good advice. They really aren't that interested in the small fry, it's not worth their time trying to con you out of claiming a couple of hundred pounds expenses.

On tax rates, in this country self employed people get the same tax allowances and tax band rates as everyone else. Personally, I think that's fair. On the whole you'll still pay less tax (because of expenses and a decent accountant who will ensure you maximise those within what is allowed) than someone with the same gross income going through PAYE. NI particularly is very much lower for a self employed person on a lowish turnover, compared to the same income through PAYE.

If you want to use an accountant most of us will give you a free first consultation and basic info, such as advising you on what records to keep. Then charge to do your tax return, on a simple small business such as this a couple of hundred pounds would be fairly average. Also of course their fee is an allowable expense.

lovinituk

Jew wrote: »

Thanks and congrats!

How much do you expect it'll cost? Can everything be covered in one meeting. My business isn't really that complicated, so I would imagine it should be just one meeting.

I didn't engage the accountant until I needed to complete the accounts and self assessment after the first year of trading. I think I paid about £300 in that first year. This included producing a set of accounts and completing/submitting my tax return. I did all my own book-keeping and handed a spread sheet over to the accountant.

Firefox1975

OP - with the greatest of respect, you are coming across as a bit "stubborn" and not listening properly to what we are telling you. You are persisting in your views that "you" beleive to be right, however what "you" believe to be right or should be right are not viewed that way by HMRC.

They have had years and years of practise in dealing with people looking for "loopholes" in their systems. These "loopholes" are few and far between and Im going to take a rough guess and place your age at around 21 - 24 with about 6 years "classroom" experience of how business and indirectly taxation operates.

Be aware that HMRC do NOT mess around when it comes to tax due. They will break down your door at 2AM in the morning if they feel you are lying to them, they will put you in jail and they will remove your rights to operate as a responsible person in any future organisation for the rest of your life.

Whilst your efforts to reduce Tax due are both persistent and admirable. I would suggest you direct your energies and youthful energy into increasing your sales revenues/products and growing your customer base. After all, if your Gross revenue is astronimical then the tax issue (whilst important) will not seem so bad after all, and if you earn thousands then you can pay one of these expensive accountants to maximise that part of the business for you.

Posted with the best intentions, but i feel you would be better suited working for someone else for a few more years whilst you get to grips with the finances of commerce

Jew

lovinituk wrote: »

I didn't engage the accountant until I needed to complete the accounts and self assessment after the first year of trading. I think I paid about £300 in that first year. This included producing a set of accounts and completing/submitting my tax return. I did all my own book-keeping and handed a spread sheet over to the accountant.

Ah, and how much did the accountant save you? Like, did he/she suggest any expenses you wouldn't have thought of, etc?

kelfen

OTTHM - off the top of my head.

ATM, I'm now in my second (tax) year of self-employment. I put down EVERYTHING that could count, so:

1. Petrol. Majority of travel is to and from lessons, about 20% is my own, so I take off the 20 for personal use, as with 20% of road tax, insurance and breakdown cover. I also allow an amount for depreciation every 3 months or so as it's easier

2. Stationery/books/textbooks - This is TOTAL business expense, so is put in and receipted as such - 100%.

3. Printer and consumables - to be able to keep up I got a cheaper printer that's good quality with cheaper inks. Again, 100% expenses as I don't really print much out - so 100% receipted and logged as such.

4. All pay from lessons - receipted and recorded. 100% income but is saved when hits +400 a month (which has only happened once this year)

I also keep an eye on my income, losses and profit. We're nearly halfway through so I know I won't hit taxable income, also I have a small business exemption on NI due to the low earning amount. Also get WTC to bolster my pay when times are hard/when things like this week happen and budget solely off that and my DLA. I do all my own bookkeeping and keep records for the last tax year and this. Will be contacting HMRC about help with tax returns as that flummoxes me still.

Notmyrealname

Jew wrote: »

Thanks Notmyrealname!

What's the 50% on account? I don't get it? So in the first year I'll be paying 100% more than what I actually owe?

Correct but it gets taken off the following years tax bill so overall, you don't pay any more than you should do.

No way, I can claim for walking?! That's so cool! :P

What about London Transport?

Walking is 2p per mile, London Transport is the cost of the Oyster Card, tickets etc.

What's OTTMH?

Off The Top Of My Head

£150 a year? That's pretty darn low.

I would be using the apartment for business about 50-60% of the time, and for personal the rest (most of it sleeping).

Same with utilities, kitchen, bathroom, etc.

So.. where does that leave me?

Thanks in adavnce!

Claiming the flat rate for the property of £150 unless you use a room such as second bedroom as an office solely for business use, and 50% of utility bills.

Jew

Notmyrealname wrote: »

Correct but it gets taken off the following years tax bill so overall, you don't pay any more than you should do.

But yeah, they make a nice little bit of interest don't they? :P

Walking is 2p per mile, London Transport is the cost of the Oyster Card, tickets etc.

Would I get 2 different Oyster cards? Or just approximate how much is for personal use?

I know that the wireless tech can interfere with each other.

Claiming the flat rate for the property of £150 unless you use a room such as second bedroom as an office solely for business use, and 50% of utility bills.

£150 a year? Ah, and 50% of utility bills is nice

At least that.

sanjj_2

Hi

I worked as selfemployed last year for the first time and earned a net income of £42000 and i think i have to pay total amount of tax £10,034.75. could you tell me how can i pay less tax legally by not decreasing my net income please.....


Thanks

lovinituk

sanjj wrote: »

Hi

I worked as selfemployed last year for the first time and earned a net income of £42000 and i think i have to pay total amount of tax £10,034.75. could you tell me how can i pay less tax legally by not decreasing my net income please.....


Thanks

See an accountant for advice.