Tax year income query self assesment

Whitevanbri

Hi.
First year self employed has just passed,

I have a question and will try to word best as I can,

I'm not sure how to work my income. I'm paid 2 weeks I arears, so will my earnings be what was paid in my bank between the tax year start to end , or what I earnt in the last years tax year but was paid in the new one for two weeks ? If that makes sense? As the arears payment will take it into the next tax year?

Hope some one can clear this up! Thanks

dori2o

Whitevanbri wrote: »

Hi.
First year self employed has just passed,

I have a question and will try to word best as I can,

I'm not sure how to work my income. I'm paid 2 weeks I arears, so will my earnings be what was paid in my bank between the tax year start to end , or what I earnt in the last years tax year but was paid in the new one for two weeks ? If that makes sense? As the arears payment will take it into the next tax year?

Hope some one can clear this up! Thanks

For self employed the income is deemed as received when earned, i.e when the work was done. Unlike PAYE income which is taxed based on date of receipt.

Therefore even if you are paid in arrears and didn't receive the money until 6 April or later, if the money is for work done prior to 6 April then you should include that income on the 15/16 self employment pages of the tax return

polymaff

dori2o wrote: »

For self employed the income is deemed as received when earned, i.e when the work was done. Unlike PAYE income which is taxed based on date of receipt.

No, the self-employed may use cash accounting and declare based upon receipts.

https://www.gov.uk/simpler-income-tax-cash-basis/overview

Whitevanbri

Great thanks for info and link

dori2o

polymaff wrote: »

No, the self-employed may use cash accounting and declare based upon receipts.

https://www.gov.uk/simpler-income-tax-cash-basis/overview

Yes they may, but the OP didn't ask that though, they asked how to treat a payment made if the work was done before yr end but paid after, to suggest that is was an ordinary accounting method.

OP needs to confirm which accounting method they intend to use.

polymaff

dori2o wrote: »

Yes they may, but the OP didn't ask that though, they asked how to treat a payment made if the work was done before yr end but paid after, to suggest that is was an ordinary accounting method.

Nonsense, twiceover. Put technically, the OP asked if he had to use either cash or accruals accounting. You told him he had to use accruals accounting - which was totally wrong. End of story.

Whitevanbri

Cheers, I did mean to ask if I could use the cash accounting method with out knowing the formal name, appreciate the replys, the cash method is easier as I have already worked everything out in that way, then realised I may actually be doing it wrong until asking on here,

polymaff

Whitevanbri wrote: »

Cheers, I did mean to ask if I could use the cash accounting method with out knowing the formal name, appreciate the replys, the cash method is easier as I have already worked everything out in that way, then realised I may actually be doing it wrong until asking on here,

I have a number of smallish sole trader/self-employed clients. They all use cash accounting. If nothing else, it simplifies the case where the customer never actually pays. A situation where accruals accounting might be applicable is in presenting a true valuation of your business - such as when you might apply for a loan. Mind you, even then, the Bank Manager might well say "It's all very well to tell me about the birds you have in the bush...."

It is a long time since a debtor's word was his bond.

dori2o

polymaff wrote: »

Nonsense, twiceover. Put technically, the OP asked if he had to use either cash or accruals accounting. You told him he had to use accruals accounting - which was totally wrong. End of story.

Rubbish, at no point did the OP ask about cash basis.