Self-assessment tax return

Errodiel_2

I'm a bit apprehensive about this, so any words of advice would be greatly appreciated! I'm hoping it's a fairly simple scenario, but neither myself or my partner has tackled a tax return before, and we're scared! Here's the story:

My partner works in the fitness industry (personal trainer/group fitness instructor). Most of his income is paid through PAYE but the portion for teaching his fitness classes is not; we invoice the club every month and they issue us with remittance advice and pay by BACS. This is a relatively small sum (usually £180-£220 per month), so I don't think the tax bill will be big enough to warrant getting someone to do it for us unfortunately. This situation arose in autumn of last year, at which point we registered him as self-employed on the appropriate government website, so with any luck we'll be getting a tax return to fill in this year. This scares the bejeezus out of both of us, so my questions (for now) are:
- Assuming the average amount that we're talking about per month is £200, for a total annual income of £2400, am I right in thinking that the bill will be just over £500? We're putting something aside each month and want to make sure we've got enough.

- How do tax deductable things/business expenses work? My understanding (which is shaky at best) is that if he's bought something for work then we keep the receipt, put it on the tax return, and this will reduce the tax return in some way - by deducting the equivalent amount of VAT maybe?

- Given my partner's occupation, what kind of things are we going to be able to claim? We were told that fees for professional qualifications, licenses, and professional affiliations/memberships will probably be claimable, but that things like trainers and gym gear won't (as you can use them outside of work).

I know these are basic questions, and apologies if they're things that come up often! I've tried googling for info a few times but always seem to get lost in jargon (or the never-ending, circular maze of the HM revenue website). Any replies will be very gratefully received

fengirl_2

In answer to your questions:
1. This depends on his other income - from PAYE employment and any investments. £2400 @ 22% will be £528, so you are probably about right.
2. He can deduct from his self employed income all expenditure relating to the earning of that income. It has nothing to do with VAT - he needs to keep a record of all business expenditure and group it together under things like travel, special clothing, phone, etc, then add it all up at the end of the year. The total expenditure is deducted from the gross income to give the taxable income. You include any VAT paid on these expenses. It reduces the amount of tax payable on the income.
3. yes, his licence, subscriptions, etc should be included, along with his travel to where he teaches (as he would be classed as running the business from home). Simplest thing is to include 40p per mile for the first 10000 miles and 25p per mile thereafter. Keep accurate records of all business mileage. Gym gear is a bit problematic. he could argue that he needs to look the part if he is leading a class, whereas if he was in the gym alone working on his own fitness, it wouldnt matter. I would include a proportion of gym clothing, but be prepared to argue the toss in the unlikely event that its challenged. (In order for HMRC to challenge this, they would need to open a formal investigation and I think they have better things to do.) Anyway, you will only be declaring the turnover and the expenses will be lumped together - unless they are ridiculously high, they wont attract attention.
You wont find anything on business expenditure on HMRC's website as all businesses are different and traders run their businesses as they see fit. the important thing is to keep good records and ask for help with forms if you need it.

Errodiel_2

Thank you so much for that reply! Really, really helpful

Our current thinking on gym gear is that standard stuff (T shirts, shorts, etc) we'll not bother putting on. But he also has stuff with class-specific logos and things on, which he only uses for teaching those classes. We'll claim these, and because they're such stupid prices it'll probably be about half his clothing costs anyway! Travel is easier since he cycles, so I guess we'll claim a proportion of his bike maintenance costs, say 50%.

Thanks again, that was really useful.

marginalnut

I have received much confusion over tax as well.

I work as a swimming coach self employed and claim relief on things like goggles, swimming kits and the odd pair of trackies.

I want to know if you should claim per mile or if i can claim direct cost of petrol for expenses?

Cheers

J

fengirl_2

There are 2 ways you can include the costs of running a car for business:
1. 40p per mile for the first 10,000 business miles and 25p per mile thereafter - this covers all running costs of the car, from petrol to depreciation, to repairs.
2. The actual costs of running the car, less private mileage. You would need to keep records of everything you spend on the car - petrol, tax, insurance, repairs, MOT, oil, etc, add them all up at the end of the year and include the cost in your accounts. Then you would add back for tax purposes the proportion of privtae miles done. You would also then claim capital allowances on the cost or value of the car (loads of resources on here about how to calculate that).
the choice is younrs, although if you are VAT registered, you have to do (2).

marginalnut

Method 2 sounds complex. I'll have to sit and do the maths to see which works better obviously. Including the amount of time that its going to take to calculate 2.

Thanks fengirl.

J

Tozer

Fengirl is spot on.

Method 1 is what I always prefer. Nice and simple.