Sole trader tax

Kaster_2

LippyDoodle said:

Kaster_2 said:

LippyDoodle said:

Kaster_2 said:

LippyDoodle said:

Kaster_2 said:

Hopefully this is pretty straightforward to answer, although it feels quite specific and it was hard to narrow down a search online to find one.

I’m a sole trader and I’ve read different advice that you should/shouldn’t have a separate bank account. I do not have a separate business account. 

I’m a few years behind in my accounting/tax and am now putting it together using Sage online. I’ve always used my normal bank account to accept my incomings (I have hardly any outgoings as a writer) and my bank balance on Sage obviously won’t match my real bank account as I’m not inputting household bills and general lifestyle spending into the system (although I know I can make some claims on rent/internet/elec/phone bills etc).

So, do I need to worry about bank reconciliation, or just input all my business related incomings/outgoings? I have every invoice should I ever have to undergo a tax audit. 

You need to either read your terms and conditions or contact your bank to see if they will allow you to use your personal bank account for your business too because a lot don't. 

There are/were some business accounts that are free for the first 1 year. Just do a google search. 

Thanks for this. I did check and just found out my account doesn’t allow it. So going to have to separate the two ASAP (or at least once I get my all figures into Sage). Will probably need to get an accountant/bookkeeper involved to help me figure out what to do about moving money around etc.

Happy to help. 

All business related incomings & out goings should be used with your business account. So for eg. anything you purchase for your business, tools, machinary, renewables such as paper for invoices, letters, advertising etc. If you pay yourself a wage, it comes from your business account and goes into your personal account. Bills for your buisness are taking from your business accout ect. 
Keep your personal comings and goings, home bills, etc to your personal account. 

It would be good to speak to an accountant because you can claim tax relief on certain things you buy/pay for your business. They can put you on the right track. 

Also remember that as a sole trader you are responsible for any debt your business my occur and you would have to pay these from your own personal assets. You have no protection like a Ltd company does. 

Thanks. I have next to no outgoings as writer, so the chances of incurring any business-related debt is incredibly small. But yes, will separate the two once I get my figures straight and then talk to an accountant about next steps.

What kinds of things do you write? 

Content writing - websites, blogs and am also a film critic.

LippyDoodle

Kaster_2 said:

LippyDoodle said:

Kaster_2 said:

LippyDoodle said:

Kaster_2 said:

LippyDoodle said:

Kaster_2 said:

Hopefully this is pretty straightforward to answer, although it feels quite specific and it was hard to narrow down a search online to find one.

I’m a sole trader and I’ve read different advice that you should/shouldn’t have a separate bank account. I do not have a separate business account. 

I’m a few years behind in my accounting/tax and am now putting it together using Sage online. I’ve always used my normal bank account to accept my incomings (I have hardly any outgoings as a writer) and my bank balance on Sage obviously won’t match my real bank account as I’m not inputting household bills and general lifestyle spending into the system (although I know I can make some claims on rent/internet/elec/phone bills etc).

So, do I need to worry about bank reconciliation, or just input all my business related incomings/outgoings? I have every invoice should I ever have to undergo a tax audit. 

You need to either read your terms and conditions or contact your bank to see if they will allow you to use your personal bank account for your business too because a lot don't. 

There are/were some business accounts that are free for the first 1 year. Just do a google search. 

Thanks for this. I did check and just found out my account doesn’t allow it. So going to have to separate the two ASAP (or at least once I get my all figures into Sage). Will probably need to get an accountant/bookkeeper involved to help me figure out what to do about moving money around etc.

Happy to help. 

All business related incomings & out goings should be used with your business account. So for eg. anything you purchase for your business, tools, machinary, renewables such as paper for invoices, letters, advertising etc. If you pay yourself a wage, it comes from your business account and goes into your personal account. Bills for your buisness are taking from your business accout ect. 
Keep your personal comings and goings, home bills, etc to your personal account. 

It would be good to speak to an accountant because you can claim tax relief on certain things you buy/pay for your business. They can put you on the right track. 

Also remember that as a sole trader you are responsible for any debt your business my occur and you would have to pay these from your own personal assets. You have no protection like a Ltd company does. 

Thanks. I have next to no outgoings as writer, so the chances of incurring any business-related debt is incredibly small. But yes, will separate the two once I get my figures straight and then talk to an accountant about next steps.

What kinds of things do you write? 

Content writing - websites, blogs and am also a film critic.

Sounds interesting

Kaster_2

One final question to figure out if anyone can help.

I used a US freelance platform so payments have been converted from dollars. Sometimes payments of invoices were transferred from their system into my bank account in groups, so a few years on I can’t determine the conversion rate for each individual invoice. Also, rates have changed, so should I just use the current rate against the individual dollar invoice (which I do have) as historically it would be impossible now?

sheramber

https://www.gov.uk/government/publications/exchange-rates-for-customs-and-vat-yearly

Kaster_2

sheramber said:

https://www.gov.uk/government/publications/exchange-rates-for-customs-and-vat-yearly

That is perfect. Thanks so much.

Kaster_2

Thanks for the help from everyone on this so far.

This is my first time processing tax, so it’s pretty daunting at the moment.

I understand I have to register for self assessment by October 5th, so I’ll just make it my skin of my teeth.

if I submit digitally I have until January 31st 2022 I believe - is that for tax 21/22 or 20/21? Little confused about that.

Also, my figures won’t be in ‘legible’ form (as in, all inputted into Sage and reviewed by an accountant) by October 5th, but is registering likely to trigger HMRC to look into my past few years before I submit my accounts? I’m hoping to have everything ready by November some time. 

I’m trying to get everything sorted but last thing I want is going onto the HMRC radar in a bad light while at the same time I’m actually preparing to submit the figures to them. 

Jeremy535897

Time limit for 2020/21 is 31 January 2022. Registering as self employed is unlikely to trigger HMRC into looking at the past few years.

Kaster_2

Jeremy535897 said:

Time limit for 2020/21 is 31 January 2022. Registering as self employed is unlikely to trigger HMRC into looking at the past few years.

Thanks Jeremy. But it makes sense to account for every year and not just 20/21 when I declare doesn’t it? As they could easily ask where the intervening years have been.

Jeremy535897

Kaster_2 said:

Jeremy535897 said:

Time limit for 2020/21 is 31 January 2022. Registering as self employed is unlikely to trigger HMRC into looking at the past few years.

Thanks Jeremy. But it makes sense to account for every year and not just 20/21 when I declare doesn’t it? As they could easily ask where the intervening years have been.

Yes, I forgot you originally said you are behind by "a few years". You would be well advised to seek professional advice on how to go about things. The deadline of 5 October will have already passed as it was 5 October after the end of the tax year in which you started (so if you started in the year to 5 April 2019, the deadline was 5 October 2019).

Kaster_2

Jeremy535897 said:

Kaster_2 said:

Jeremy535897 said:

Time limit for 2020/21 is 31 January 2022. Registering as self employed is unlikely to trigger HMRC into looking at the past few years.

Thanks Jeremy. But it makes sense to account for every year and not just 20/21 when I declare doesn’t it? As they could easily ask where the intervening years have been.

Yes, I forgot you originally said you are behind by "a few years". You would be well advised to seek professional advice on how to go about things. The deadline of 5 October will have already passed as it was 5 October after the end of the tax year in which you started (so if you started in the year to 5 April 2019, the deadline was 5 October 2019).

Thanks. So there’s no value in registering for sole trader status today for 21/22 accounts? If I’m submitting a number of years together an account will be able advise on how to navigate things? Just thinking that if I don’t register today then I’d have to wait until next October to register for it.