The Great 'Working for Yourself' Hunt

Chip_Hazard

I've got in a heck of a mess with my self-employed finances...:mad:

I started working as a self-employed courier in March 2007 and still haven't filled in a self-assessment tax return yet. I know I must owe the tax ( and a fine to boot ) but can't afford an accountant to sort it out. My turnover from the business last year was around £7,000 maximum ( March 2007 - Feb 2008 ) but a fair chunk of that went out in fuel, both personal and business, and a little bit of other stuff ( con.charges, stationery etc ).

Is there an easy way to sort it out? I want to start with a fresh slate but also realise that I need to sort my money out. The vast bulk of that £7,000 came in four lumps ( Jan, Apr, Jul and Oct ) when I work for a good customer. Should I try and put aside as much as I can out of this July's money to settle last year's tax bill? Shall I then use the residue from October and January's lumps to settle next year's?

I also get WTC ( £48 a week ) and HB ( £70 a week ) as well. It's all a muddle and I'm finding it increasingly difficult to not worry that I'll come a cropper somewhere along the line.:eek:
Any advice gratefully received, many thanks in advance! :T

Frugaldom

ChipHazard - have you registered as self-employed with the Inland Revenue? If so, they will send you out this year's tax return form. Easiest thing to do is phone them, they are really very helpful and will be able to explain what you should do. Your first financial year has not long finished, so you aren't running late with the tax return yet, I shouldn't have thought. You'll get all the details you need from www.hmrc.gov.uk

harryhound

Hi Chiphazard,

Don't panic.
In theory you should have registered & been paying a little over a couple of quid a week in NI payments because net earnings might turn out to be more than 4,465 (I think that is the right number) between 6th April 2007 and 5th April 2008 BUT you may be able to argue that your earnings were obviously going to be so low that you thought you would not breach that figure.
We need to know a bit more about you before we can give better advice.
How old are you? (ie will not paying self employed NI jeopardise your future benefits such as State Pension?).
Have you told us about all your sources of income ? (Rich partner? PAYE part time job?)
What are your outgoings? Can we make some of these tax allowable to get your 7K down to 4K?
Are you using your own vehicle? If so how many miles did you travel on business?
The first 10,000 business miles are worth at least 0.40 per mile.

Quite frankly with gross income of only 7K HMC&R also cannot afford an accountant to check your figures.:D

You may have done little more than pay to keep the vehicle (the tool of your trade) on the road.
How are you paid? (Does "your customer(s)" make up a statement of what you claim to have done and them pay it? If you ask nicely, will they give you a detailed print out of what you did for the 12 months of the tax year (if you have not bothered to keep detailed records? ).
The March 2007 income is a bit of a problem as this should have been reported to the Revenue by 31/01/2008 but perhaps you made a loss on those few days of work? Or perhaps you did not get paid until 6th of April and you are keeping records on a "cash" basis.
DO YOU HAVE AN ACCOUNT YOU USE FOR BUSINESS?
(Should the Revenue decide to investigate you, they DO like to see the businesses income (and expenses if you are claiming them) kept away from your other income and day to day spending.)

If you play your cards right, you won't be paying out until some time in 2009 (but be warned, then the tax man will try to catch up to the point where you are paying him some tax on account in advance:eek:).

I'm not an accountant but I have in the past found myself in a position similar to yours.

Best of luck.

Harry.

welshasiancheapskate

hello again,
I have been registered as an intepreter since November 07 and since that looking at my pay cheques(up to date) they do not total more than £310 but this excluding my playwork wages which is only paid during school term.
What are my obligations, any advice much appreciated.
#not lazy but dumb#

moredosh

Kazza1 wrote: »

6) My final tip is this... Tidying the house, doing the washing etc don't matter. The business is more important. If you are earning enough, you can always pay someone to do household chores for you. Or, in our case, just get used to living in a pigsty!!

There's a potential pitfall here for the uninitiated. The above pigsty bit is fine if you live alone. I assume if you and a partner run a business from home and live together (with or without a family) it can also be fine, though I've not had that experience.

However, if you run a business from home and live with a partner (with or without a family) who doesn't run a business but goes out to work and wants to come home to a home which does not resemble a pigsty, this can put serious pressure on a relationship.

Chip_Hazard

harryhound wrote: »

Hi Chiphazard,

Don't panic.
In theory you should have registered & been paying a little over a couple of quid a week in NI payments because net earnings might turn out to be more than 4,465 (I think that is the right number) between 6th April 2007 and 5th April 2008 BUT you may be able to argue that your earnings were obviously going to be so low that you thought you would not breach that figure.
We need to know a bit more about you before we can give better advice.
How old are you? (ie will not paying self employed NI jeopardise your future benefits such as State Pension?).
Have you told us about all your sources of income ? (Rich partner? PAYE part time job?)
What are your outgoings? Can we make some of these tax allowable to get your 7K down to 4K?
Are you using your own vehicle? If so how many miles did you travel on business?
The first 10,000 business miles are worth at least 0.40 per mile.

Quite frankly with gross income of only 7K HMC&R also cannot afford an accountant to check your figures.:D

You may have done little more than pay to keep the vehicle (the tool of your trade) on the road.
How are you paid? (Does "your customer(s)" make up a statement of what you claim to have done and them pay it? If you ask nicely, will they give you a detailed print out of what you did for the 12 months of the tax year (if you have not bothered to keep detailed records? ).
The March 2007 income is a bit of a problem as this should have been reported to the Revenue by 31/01/2008 but perhaps you made a loss on those few days of work? Or perhaps you did not get paid until 6th of April and you are keeping records on a "cash" basis.
DO YOU HAVE AN ACCOUNT YOU USE FOR BUSINESS?
(Should the Revenue decide to investigate you, they DO like to see the businesses income (and expenses if you are claiming them) kept away from your other income and day to day spending.)

If you play your cards right, you won't be paying out until some time in 2009 (but be warned, then the tax man will try to catch up to the point where you are paying him some tax on account in advance:eek:).

I'm not an accountant but I have in the past found myself in a position similar to yours.

Best of luck.

Harry.

Hi there Harry,

Thanks a million for your detailed reply...:T :beer: , I'll try to answer your questions in some sort of order and detail.

1. I'm 40 years old.:rolleyes:

2. I'm pretty sure that I registered as self-employed with HMRC on March 1st 2007 but I haven't received a self-assessment form yet. If I'm not registered as s/e, can I not say I became s/e on April 1st 2007 so that I'm not liable for anything in that financial year. My sales would have been low for March anyway, probably less than £500 in total.

3. That's all my income. I am charged £115 a week for the house I rent from someone I work for so I just do work for him to the value of £115. This involves working approx. 11 hours a week for him...writing that down, it looks dodgy, doesn't it?:eek:

4. I use my own vehicle for business. I drove approx 25k miles last year, a slight majority was in business use, I'd say.

5. I have three main customers. One pays in cash, the second pays BACS about two weeks after the job has been done ( they just pay it, I don't invoice them ) and the third pays BACS 3-5 weeks after the job is done following an invoice from me.

6. Yes, I keep a separate account for business use. It's not strictly a "business account" as I wouldn't be able to get one but it's separate from my personal one.

Hope this is of help.

Martin

harryhound

What can I say ?

The tax man tends to work on the theory that nobody does anything for love - which of course isn't true, but difficult to prove.
I well remember my son writing about one of his first jobs "This is terrific fun - I'd pay them to do this".

1. I'm 40 years old.:rolleyes:

Time to realise you are not going to live for ever?

2. I'm pretty sure that I registered as self-employed with HMRC on March 1st 2007 but I haven't received a self-assessment form yet. If I'm not registered as s/e, can I not say I became s/e on April 1st 2007 so that I'm not liable for anything in that financial year. My sales would have been low for March anyway, probably less than £500 in total.

Something seems to have gone wrong with your registration, they should have been asking for some sort of NI from you on a weekly basis. I'm looking at a leaflet that is full of threats and urges me to call 0845 9154655 (or 084591505679 if the Debt Management Unit is already on my case).
Have you changed address ?
Presumably you have an NI number, that acts as a key to all this ?
Lets leave that for the minute.

3. That's all my income. I am charged £115 a week for the house I rent from someone I work for so I just do work for him to the value of £115. This involves working approx. 11 hours a week for him...writing that down, it looks dodgy, doesn't it?:eek:

Well it could be love -I do little jobs for relatives without expecting any payment but on the other hand I would not expect to be charged B&B rates if I stayed with them for a few days:D. First step might be to find out how the owner reports the property you "house sit" and maintain is reported.

4. I use my own vehicle for business. I drove approx 25k miles last year, a slight majority was in business use, I'd say.

You should keep a diary of what you did in this dangerous monitored fast moving hunk of metal and then prepare a schedule of where you went and how far it was.
The internet sites such as the AA will work out the mileage for you. Elsewhere on this threat you will find the rules for claiming business mileage.
The other option is to keep accounts of what you spent and depreciate the value of the vehicle by the taxman's rules for doing so. Unless you are running a big new van, the mileage method is easier and (until the present fuel price rise) probably the more financially worthwhile. Driving shall we say 15K miles should make a big dent in you profits and get you down into the 4 - 5K zone for NI purposes.
5. I have three main customers. One pays in cash, the second pays BACS about two weeks after the job has been done ( they just pay it, I don't invoice them ) and the third pays BACS 3-5 weeks after the job is done following an invoice from me.

Very efficient
6. Yes, I keep a separate account for business use. It's not strictly a "business account" as I wouldn't be able to get one but it's separate from my personal one.

Good news, even better news if the first payment is after 05/04/2007.

I think my first step would be to create simple cash accounts (what came in and what went out) from the records you do have. Then I would sign up for the on-line tax return system (that could take a month) and then I would try and key my figures into it. By playing "what if" games, without submitting the return, you will get the hang of how it all works and you will find out what it needs to know that you may not have to hand.
Only when you understand your position, would I telephone the NI and tax help lines.

In the final analysis the tax people are over worked and over stressed and the last thing they want to do is waste more money whipping you into line than the tax you owe can possibly be worth, unless they think you are extracting the Michael (to put it politely). So if you do all the spade work and take the line of "can you help me sort this out I think I've done all the hard work". The tax man will be only too glad to agree with you (however there may be something in the computer that makes it difficult - a bit like being caught by a speed camera doing 37 MPH on a dual carriageway at 02:00 hrs:mad:)

Harry.

BTW I don't think fines count as a legitimate business expense - but normal parking charges and tolls etc do.

welshasiancheapskate

welshasiancheapskate wrote: »

hello again,
I have been registered as an intepreter since November 07 and since that looking at my pay cheques(up to date) they do not total more than £310 but this excluding my playwork wages which is only paid during school term.
What are my obligations, any advice much appreciated.
#not lazy but dumb#

BUMPing it up.
Any replies,suggestions,opinions etc would be of immense value!

Thankyou

the_optimist

welshasiancheapskate wrote: »

hello again,
I have been registered as an intepreter since November 07 and since that looking at my pay cheques(up to date) they do not total more than £310 but this excluding my playwork wages which is only paid during school term.
What are my obligations, any advice much appreciated.
#not lazy but dumb#

The official answer is: you have to register as self employed for your interpreting work.

I'm guessing that your playwork is employment, so you needn't worry about that, but any work which you are not employed with, you need to tell the taxman about. As the earnings are so small you wouldn't have to pay NI for the interpreting work (you can apply to be exempt) but depending on how much you earn in total you may have to pay tax.

On the other hand, there are many people who have small additional earnings (Avon etc...) who don't bother informing the IR.....................

If you think that your interpreting work could turn into something bigger then I would be on the safe side and register as self employed.

Maybe somebody who knows better, will agree or disagree with me and give you a suitable answer.

Little_Miss_Moneysaver

Dear all,
Apologies if i'm asking a redundant question - i've only recently discovered Martin's amazing website!!
Question for the money saving experts: I became self-employed about a year ago, and formed my own Ltd. company. It's going well, but i can't seem to find any decent paying savings accounts that i can link to my Ltd Co. bank account. Seems as though "personal savings accounts" have super rates of interest 6%+, but "business reserve accounts" for use by ltd. companies are only shelling out 3% or less. I am making a profit of about 2k per month after expenses, so would really appreciate some guidance on where to put the hard earned money! My accountant has informed me i am not allowed to move the extra money from my ltd co account to my personal savings account :mad: . Does anyone know where i can get a decent savings account for my ltd. company?:rolleyes: