Full time employed plus part time self employment = potential tax rebate?

immoral_angeluk

Hi all! I work FT paying tax via PAYE. In August 12 I set up a self employed sole trader photography business and will be doing my first tax return this coming april.
Currently, the SE business is running wih expenses of around £1800 and a received income of about £564 (with an addtional £800ish invoiced but not yet received as not due until next tax year.)


Couple of questions, when declaring my income for the business, so I declare the received income or the full invoiced amounts including that which isn't due yet?
Also, if my SE business declares a loss, will I get any kind of tax rebate on the tax I pay through PAYE?

Was going to call the SE helpline when it comes time to do the return but figured someone might know the answer on here and put my mind at rest

Many thanks in advance

jimmo

You declare the value of the work done i.e. the amounts invoiced plus any other amounts where you have done work but haven't yet issued an invoice.

When you declare your (s/e) loss there will be a number of options

1) set the loss against other income for the same year

2) carry the (early years of trading) loss back to set against other income for earlier years.

3) carry the loss forward to set against future profits from the same business.

Assuming your regular job gives you a steady annual income, between £10k and £40k the simplest thing to do is option 1and get a rebate.

It gets much more complicated if you are bordering the tax threshold, currently £8105 or bordering on higher rate liability and HMRC will not help you in tax planning issues.

But this could be worth a read.

http://www.hmrc.gov.uk/helpsheets/hs227.pdf

However, are you sure about the current level of losses?

Did your business not need to acquire some pretty expensive, professional quality, equipment?

immoral_angeluk

My set up costs and Equipment etc has already been added but need to see what I can claim for travel, broadband, electric etc yet so will have more to add yet!
I'm a bit confused as to how I'd declare the weddings. I've taken deposits but the actual weddings aren't until the next tax year with the full remaining balance payable the week before. So although I've received income I haven't yet done that much work bar brief consultations?
Thanks for the link, will have a read. I'm already way over the threshold on my paye tax so it should be straight forward.

Thanks

jimmo

Ah! I should have thought of deposits in your line of work.

As a general principal a deposit is a payment in advance and, at the end of your business year, you will not have earned the money so it is not income. In bookkeeping terms those who have paid you a deposit will be creditors (people you owe money to).

Strictly speaking, you could, possibly, evaluate the time you have spent on “consultations” and declare that as part of your income but it might be easier to view the “consultations” as selling, time you spend trying to generate business.

immoral_angeluk

jimmo wrote: »

Ah! I should have thought of deposits in your line of work.

As a general principal a deposit is a payment in advance and, at the end of your business year, you will not have earned the money so it is not income. In bookkeeping terms those who have paid you a deposit will be creditors (people you owe money to).

Strictly speaking, you could, possibly, evaluate the time you have spent on “consultations” and declare that as part of your income but it might be easier to view the “consultations” as selling, time you spend trying to generate business.

That makes sense, so either I could claim the deposit as payment for consultations or just claim the whole amount at the time of it being paid in full in the next tax year?

jimmo

Again, strictly speaking, it depends on the facts. The last wedding I attended had 3 video cameramen and 2 (still) photographers. Well OTT in my opinion but I wasn’t paying the bill. In those circumstances I imagine the deposit was pretty hefty and there was quite a lot of preparation work planning for inside the church, outside the church, outside the reception and inside the reception.

In that sort of circumstance there is probably an argument for saying that at least some of the deposit money was earned before the wedding took place but if you are a one man band there should really be no need to make things so complicated.

At your level of income I would regard the deposits as deposits and declare the income as income on the date of each wedding.

If your business really takes off you will need an accountant who may be able to do all sorts of clever things with deposits but, for now, try to keep your tax affairs straightforward.

immoral_angeluk

jimmo wrote: »

Again, strictly speaking, it depends on the facts. The last wedding I attended had 3 video cameramen and 2 (still) photographers. Well OTT in my opinion but I wasn’t paying the bill. In those circumstances I imagine the deposit was pretty hefty and there was quite a lot of preparation work planning for inside the church, outside the church, outside the reception and inside the reception.

In that sort of circumstance there is probably an argument for saying that at least some of the deposit money was earned before the wedding took place but if you are a one man band there should really be no need to make things so complicated.

At your level of income I would regard the deposits as deposits and declare the income as income on the date of each wedding.

If your business really takes off you will need an accountant who may be able to do all sorts of clever things with deposits but, for now, try to keep your tax affairs straightforward.

Thanks, that makes total sense. I have the deposits set aside as well so it's not like the income has actually been used for the business as yet.
Thanks again

jimmo

Just one other thing. When you declare your loss, if you want to set it against your other income yo do have to make a claim. Here's somone who didn't realise that.
https://forums.moneysavingexpert.com/discussion/4370583

immoral_angeluk

Oh thanks will make sure I keep an eye out for that!