Business Accounts - Self Employed - Working From Home

Chimera

Hiya,

I'm trying get to my accounts into order - I ahve loads of questions.. hope not too many - perhaps there is a website I can get all thsi info on - if so I would be grateful for the link (save you typing) or any help you can offer.

Thanks in advance...

I've managed to set up a spreadsheet which seems to do the trick.

I have seperate workbooks for each month, and have section out goings to make it easy to see where money has come from / has gone.

The only thing I'm unsure of is the Rent & Bills.

From what I've been told I can claim the percentage of the house which is for the business. I have put down 1/3, even though it's usually more.

I have a 3 bed house with conservatory living area and it's split up as follows:

Bed 1 - Personal
Bed 2 - Stock and Spare bedroom
bed 3 - Office
Living Room - Personal (though also used as a workshop..grrrr)
Dining Room - Through room from the Living room - Should eb personal - but mostly used fro stock
Conservatory Living Area - WORKSHOP (Business)
Shed? - WORKSHOP (Business)

Is my estimation of 1/3 ok?
DO I use that percnetage for the Gas, Electric and Water as well? (apparently I can't use it for council tax)

I have also put into the speadsheet the
BT Business: Phoneline, Broadband & BT Fusion.
O2 Business Mobile Phones.
Is this ok? or can you only claim a percentage?

We have two cars, but it's my partners that is mainly used for business. Proabbly more than half his journeys.
I ahve been told I can claim a percentage of teh insurance, petrol and maintanence. I have just out down 50% for everything car wise - appart fro road tax which I believe you can't put as a business expense.

Is there anything else I need to put down on the books?

Also - We do not pay ourselves a wage out of the business as I work full time anyway, so we try and take as little as possibel out. I just work out income by the diffence in the end of month speadsheet balance and actual balance (in bank and paypal). Is this ok? It's never a huge amount, as we try and put as much as possible back into the business.

Thanks

Nici

billbob

Nici,

Are you VAT registered?

Chimera

Nope - estimated gross £30k at most

WHA

I'm assuming you are a sole trader or partnership and not a limited company.

In which case, you can indeed claim the appropriate proportion of all your household costs, including power, insurance, etc., but you have to make sure that the proportion is right for both floorspace and time.

You also need to claim just whatever business proportion of broadband, telephone, mobile, etc - not wise to claim it all, as there is bound to be a private use. Home telephone rental is probably not claimable at all.

For motoring, again claim whatever proportion is right - you need a log of mileage between private and business to give you that proportion - you can't guess and there is no official percentage.

You are taxed on profit, not what you take out. If you are putting all the money back in, to buy stock or equipment, you will have a profit on which you pay tax because you only get capital allowances for equipment, and there is no tax deduction for stock until you sell it. So, for example, if you have taken nothing out, but have bought £5000 of stock unsold at the year end, and another £5,000 on equipment, you'll have a taxable profit of £7,500 (given 50% capital allowance on the equipment). This is the main error in small business accounts, so watch out for it.

It's not clear from your explanations, but you need to show your sales income gross, before any deductions, paypal charges, etc. Your top line sales figure is the amount your customers pay you.

Finally, remember to include debtors, i.e. money owed by your customers, if any and creditors, amounts you owe to suppliers. Accounts and tax returns work on the "accruals" basis, meaning you have to bring in the amounts owed at each year end and reverse them the following year. You can't do your tax return solely on the basis of "cash in and out" unless you owe nothing and no-one owes you anything either.

Chimera

Eeek... I'm gonna have to have a re-think then...

UP till now - I've just put in the net Paypal amount...
So - I have to put fees in seperately.

We are not a limited company.

Do you mean we pay income tax on the money used to buy stock? I don't understand.

I think I need an accountant

Chimera

SO - I've adjusted the speadsheet to include paypal fees... Now my gross turnover is correct as the fees are in outgoings...

I have running totals of what my Totals by reciepts and invoices for each month, plus actual balance (based on current account and paypal balance at months end).

I need to adjust the phone and broadband costs accordingly - to be honest - we mostly use them for the business (we are always working!! Grrrr)


Now I just need to get my head round this profit thing...

I have Gross Turnover, the I have all outgoings (stock, materuals equipment, rent etc), The difference is profit?? yes?

What Tax is placed on this - as it goes back into the business for the next month etc.

I have only worked out the difference in speadsheet balance and actual balance so that I can work out exactly how much we have spent on/from the business.. we use our personal money quite a lot for the business. Hence we keep track of everything via invoice & reciepts - not bank accounts.

We have no creditor or debitors.. apart from a credit card - I ahve all the staements - and have noted any payments made to it on the spreadsheet.
I have paid money into the account - which I ahve kept track of in the spreadsheet.

I think I'm just confused on tax...

WHA

Chimera wrote: »

I have Gross Turnover, the I have all outgoings (stock, materuals equipment, rent etc), The difference is profit?? yes?

No. Don't include the amount spent on equipment and stock.

For equipment you don't deduct the cost, you claim capital allowances instead - currently 50% of the cost in the year of purchase, and then 25% of what's left over in year 2, and so on, so the cost is spread over several years.

For stock, you only deduct the cost of what you sold. So if you bought £10,000 of stock, sold £5,000 and have £5,000 left at the year end, your deduction is only £5,000 not the £10,000.

Chimera

Right..

Let me get this straight.

What is classed as equipment. So far I have a printers and some hand tools for the workshop.. would they be equipment or materials... ??

I still don't understand the stock thing. When I buy in some stock - I put it on outgoings as stock? yes?

Do I have to have a colomn on for stock sold? surely this wouldn't be correct invoices include postage etc... Or do I need to seperate that again - (My god - this will take forever!)

Most of the money goes on parts (well that's the colomn I ahve for them) which is the parts we buy in to make things. We make costumes and props so I buy in 'stock' items as well which are the extras to go with a costume etc..

I'm really confused. This is what I do now...

Total Credits - Ebay sales, Non ebay, misc
Total Debits - Paypal fees, postage, materials, equipment, debt, parts, rent & bills, phone, eqipment etc

I put them all into the speadsheet which gives me:

Total Credits
Total Debits
Profit (Credits - Debits)

The above is purely for THAT MONTH

I then keep records on:

ACTUAL BALANCE (Any money in Bank, paypal & cash)
SPREADSHEET BALANCE (previous months acutual balance + credits - debits)
INCOME (Variance between SPREADSHEET BAL and ACTUAL BALANCE - basically shows me what money I've spent from the business that has not been accounted for - or if I've paid out too much money)

I also keep a personal balance when I have paid money into the business account

There is probably a much easier way of doing this... Am I just not seeing it.. I am happy to send spread sheets to someone to have a look over if they can help

Nici

Lifeisbutadream

Chimera wrote: »

Right..

Let me get this straight.

What is classed as equipment. So far I have a printers and some hand tools for the workshop.. would they be equipment or materials... ??

I still don't understand the stock thing. When I buy in some stock - I put it on outgoings as stock? yes?

Do I have to have a colomn on for stock sold? surely this wouldn't be correct invoices include postage etc... Or do I need to seperate that again - (My god - this will take forever!)

Most of the money goes on parts (well that's the colomn I ahve for them) which is the parts we buy in to make things. We make costumes and props so I buy in 'stock' items as well which are the extras to go with a costume etc..

I'm really confused. This is what I do now...

Total Credits - Ebay sales, Non ebay, misc
Total Debits - Paypal fees, postage, materials, equipment, debt, parts, rent & bills, phone, eqipment etc

I put them all into the speadsheet which gives me:

Total Credits
Total Debits
Profit (Credits - Debits)

The above is purely for THAT MONTH

I then keep records on:

ACTUAL BALANCE (Any money in Bank, paypal & cash)
SPREADSHEET BALANCE (previous months acutual balance + credits - debits)
INCOME (Variance between SPREADSHEET BAL and ACTUAL BALANCE - basically shows me what money I've spent from the business that has not been accounted for - or if I've paid out too much money)

I also keep a personal balance when I have paid money into the business account

There is probably a much easier way of doing this... Am I just not seeing it.. I am happy to send spread sheets to someone to have a look over if they can help

Nici

Hi Nici,

I am by no means an expert, but I am in second year of running a business. We have currently got an accountant, but I do pretty much what you are doing and my long term plan is to get my head around it a bit and then do the accounts myself. You may need to do that for at least the first year.

It is a bit of a headache really - I am dreading our tax bill this time - the first year we have made a profit, because I know it is going to be much higher than my accounting spreadsheets say - and to be honest - I didnt know about 'stock'!!! mind you - we dont really keep much stock and I dont even know exactly what we have as stock!!

Anyone who thinks running a business is easy is very very wrong!!

Good luck though - I am sure it will be worth it in the end!

Chimera

Thanks so much for the encoragemnet, butadream.

I've just been reading up on the gov website.. and it doesn't seem all that bad. I'm going to get OH to phone up about NI and TAX this week... so he will be officially registered as self employed.

I will keep on trying to get my head round stuff.. I think I amy ahve to employ an accountant at some point...