Haven't registered as self-employed for 4 years!!

tableandchairs

So I made a massive mistake..:embarasse

I have been an online seller for just over 3 years now (over 4 tax years I think). I didn't know that you had to register as self-employed and do the self-assessment tax return every year. I sell on Etsy and I believed that Etsy would take the tax themselves every time they would deposit the money. Yes this is a pretty big mistake but now that I have found out I really desperately want to fix this issue ASAP. I just starting doing all the bookkeeping and it seems like I didn't really make much of a profit for most of the time and only did for the later part of this tax year. I know that I'm going to have to do the tax return form for the 4 years ASAP but my main issue is that a lot of my materials used to be bought from market traders and independent stores where they would never provide receipts, and unfortunately a lot of other things I would purchase for my shop I would throw the receipts away. Luckily recently the stuff I sell have changed and I'm making profit from it and have started collecting most of the receipts and organising everything, but I don't know how to go about the stuff I have purchased before. I can make a rough estimate but I don't know if this would cause an issue with HMRC. I know that I would face a penalty for doing this so late but I really do want to sort everything out because it truly was my mistake. If I make an understatement on how much I spent on materials would that be ok (e.g. I would spend between £7-£20 on materials per order but I'm not sure on the exact amount spent on each order, so I put the actual spending on the lower end, meaning my profit was higher so I would be likely to pay more tax on it)? Also would I need an accountant to help me with this because of course they are the experts but I don't want to spend money on something I am sure I can do myself, it's only the unrecorded spendings that worries me?

Any help or advice is much appreciated!!

littleredhen

https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-when-youre-self-employed

tableandchairs

Thank you for the link!
I saw this as well on the same website:

You do not need to send in proof of your expenses, like receipts, when you submit your Self Assessment tax return. You will need to keep records of expenses for five years after you submit your return for that tax year in case HMRC ask you to produce them.

Would you think that because I'm submitting my information late that HMRC is more likely to ask me to produce records? What do HMRC do in the case you don't have records, but the stuff I sell very clearly require materials so it is obvious I have had expenses, just no record of them?

01afraser4

tableandchairs wrote: »

Thank you for the link!
I saw this as well on the same website:

You do not need to send in proof of your expenses, like receipts, when you submit your Self Assessment tax return. You will need to keep records of expenses for five years after you submit your return for that tax year in case HMRC ask you to produce them.

Would you think that because I'm submitting my information late that HMRC is more likely to ask me to produce records? What do HMRC do in the case you don't have records, but the stuff I sell very clearly require materials so it is obvious I have had expenses, just no record of them?

HMRC select tax returns for an enquiry based on various risk indicators or it may be selected for a random enquiry. Just because you submit a return late shouldn't increase or decrease the chances of selection unless there is a timing issue risk.

Remember that HMRC only want you to pay the right amount of tax so you should provide your best estimate in this scenario where you do not have comprehensive records.

If they make an enquiry into the level of expenses claimed, be honest and state that you have not kept contemporaneous records and that you have made an informed estimate.

If they are satisfied that your trade is likely to incur expenses, then they will allow a reasonable amount although it may be slightly reduced in the absence of evidence.

tableandchairs

01afraser4 wrote: »

HMRC select tax returns for an enquiry based on various risk indicators or it may be selected for a random enquiry. Just because you submit a return late shouldn't increase or decrease the chances of selection unless there is a timing issue risk.

Remember that HMRC only want you to pay the right amount of tax so you should provide your best estimate in this scenario where you do not have comprehensive records.

If they make an enquiry into the level of expenses claimed, be honest and state that you have not kept contemporaneous records and that you have made an informed estimate.

If they are satisfied that your trade is likely to incur expenses, then they will allow a reasonable amount although it may be slightly reduced in the absence of evidence.

Thank you very much! That sounds reassuring! Do you think an accountant is necessary for this or is it something I can get around myself? Also how long do the forms take to fill out?

Pennywise

tableandchairs wrote: »

Thank you very much! That sounds reassuring! Do you think an accountant is necessary for this or is it something I can get around myself? Also how long do the forms take to fill out?

Why not try starting it on your own and see how you get on? No one can say whether you've the time, ability nor inclination to do it yourself. Lots of people do their own, lots of people use an accountant.

Retired_Mortgage_Adviser

OP, what are the amounts we are talking about here? Approximately how much revenue has your Etsy sales brought in in each of the last 4 years? That should be fairly easy to evidence from your Etsy account?


Also, do you have any other income besides that from Etsy trading?

glider3560

If your self employment income is low, it may be more beneficial to claim the trading allowance of £1000 instead of deducting expenses (for tax year 2017/18 and later - see https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income).

glider3560

tableandchairs wrote: »

Also how long do the forms take to fill out?

It depends how good your records are. Remember you are declaring all your taxable income (salary, savings interest, dividends, some benefits, etc) for the years in question, not just self employment income.

With good records kept during the year and experience of the form from previous submissions, I can complete it in around 25 minutes. Others will take hours or days, and some will pay an accountant.