Self employed - but not sure how to keep track of my earnings

mrpete

Hi,
I am self employed (have been for a couple of months) but do all my work online.

This means i get payments through paypal, a lot of US cheques sent over, money in egold etc.

How am i meant to keep track of it all? Say for example the following-

• Someone pays me $200 USD to my paypal. I'll get about $180 or whatever (due to paypal fees) but its not actually in my bank account - its still in paypal. I may keep it in there and just buy things (either business expenses, or things of ebay etc). but then i've got to work out the exchange rate. Is it when it goes into my account, the exchange rate then? Or when i buy something? But what if i buy and pay in USD? And then what about the fact that paypals exchange rates are always worse than normal ones?
• Now a much simplier one. Someone pays me £200 through paypal. ill get about 180 (not too sure on exact amoutn. probably quite higher, 190 ish) actually in my paypal balance. do i count it as i got 180?

So many questions and problems. Does anyone know where i should go to find out? At the moment i'm keeping a daily record by recording whatever goes in in USD (Well, the amount i get in my paypal balance), and converting it to GBP (using Googles converter - not paypals), and writing that down.

Also, about expenses. I make a lot of small purchases to do with my business, like earlier today just a $2 one (~£1). do i HAVE to declare how much i'm spending? it seems pointless. even recording larger costs is pointless too imo. i don't care about claiming anything back, prefer to just do without the hassle of recording everything. and also, if i have to record it all, say something was £0.97p. do the government care if i just say its a quid? is there some government body i could write a massive list of questions to and get answers (i have many many more ...!) ?

Conor_3

It sounds like you don't have a damned clue to be honest.

It's up to you whether you bother to list business expenses but remember that if you don't, you'll be paying income tax on that amount. That's the whole point of being self employed - to write off as much as business expenses to reduce the amount of Income Tax and National Insurance you pay. You can't do it if you have no records. Hell, I even claim for a single First Class stamp.

For example: I buy a ream of paper at £4. If I list it as an expense, it reduces my net profit by £4 and therefore my tax bill is reduced by roughly £1.


If something was 97p and you say it was a quid, THAT IS FRAUD and they WILL care.

You need to get yourself a lot more organised on the paperwork side otherwise you're going to be in a world of hurt come Self Assessment time and even moreso should the Inland Revenue carry out an audit. If you've no accounts, they just look at what the average a similar business earns and send you a bill based on that which could be for £10,000's or more.

Why are you using Googles convertor? Paypal is the one deciding how much you have.

TBH, ALL OF THESE THINGS YOU SHOULD HAVE SORTED OUT BEFORE STARTING UP.

You have registered as Self Employed haven't you? You should have already had a Class 2 NI bill in July if you have.

mrpete

Conor wrote: »

It sounds like you don't have a damned clue to be honest.

It's up to you whether you bother to list business expenses but remember that if you don't, you'll be paying income tax on that amount. That's the whole point of being self employed - to write off as much as business expenses to reduce the amount of Income Tax and National Insurance you pay. You can't do it if you have no records. Hell, I even claim for a single First Class stamp.

For example: I buy a ream of paper at £4. If I list it as an expense, it reduces my net profit by £4 and therefore my tax bill is reduced by roughly £1.


If something was 97p and you say it was a quid, THAT IS FRAUD and they WILL care.

You need to get yourself a lot more organised on the paperwork side otherwise you're going to be in a world of hurt come Self Assessment time and even moreso should the Inland Revenue carry out an audit. If you've no accounts, they just look at what the average a similar business earns and send you a bill based on that which could be for £10,000's or more.

Why are you using Googles convertor? Paypal is the one deciding how much you have.

TBH, ALL OF THESE THINGS YOU SHOULD HAVE SORTED OUT BEFORE STARTING UP.

You have registered as Self Employed haven't you? You should have already had a Class 2 NI bill in July if you have.

Thanks for your reply . Yeah I'm registered as self employed. And yes, i've paid one ni bill so far.

I use google's because i can't find one with paypal.

As for the 98p thing, i was just wondering if they cared about small amounts. i know it all adds up though .

do you know if i have to pay any additional things cos most of my income is coming from the US?

Jo_F

To do it the easy way, you need to list all your income and all your outgoings, so if you have a payment for £200 and it costs you say £10 in fees to get that payment, then you list £200 in your income and £10 in your expenses. You also need to keep all receipts for anything that you spend, cos if the IR want to do an audit then you need to be able to account for everything you have spent.

mrpete

Do you think that if i just print out every paypal etc record, that'll count as a receipt? And do they need receipts (well, invoices) for every payment that i recieve?

Becles

Yes you need to keep reciepts and invoices to show where your money comes from and where it goes.

Have you ever done any work with accounts?

If not, I suggest going on a basic book-keeping course. My local college did a 10 week course for free - 3hours, one evening a week. That will teach you enough for a simple set of business accounts.

If you can't manage that, as not everone is good with figures, you need to find someone to do the books for you.

If you don't keep accurate records, you won't be able to complete your tax return.

Conor_3

mrpete wrote: »

Do you think that if i just print out every paypal etc record, that'll count as a receipt? And do they need receipts (well, invoices) for every payment that i recieve?

It's certainly better than you're doing at the moment. You need to keep records of all money received, whether by Paypal, cheque, cash, postal order, BACS.

I'm sure that some of the third party auction manager software you can use on Ebay can do some of this for you, especially in regard to the Paypal side.

mrpete

Ah ok.
Is there anywhere i can go/phone/speak to that'll be able to answer all my questions?

(And its not on ebay or anything like that that i'm working with)

Jo_F

Speak to one of the advisors at the tax office, that's what they are there for

Conor_3

Business Link will be of more use. The Tax Office will just tell you what you need to do for them. Business Link will tell you what you need to do to run a business.

mrpete

Ok thanks. Will give Business Link a call