Self Employed Tax question - how????
#1
Scooby Regular
Thread Starter
As most know, I left my job on Wednesday this week to concentrate on my business full time, so I am now officially self-employed.
Question is - what do I do about paying tax/NI etc? Who do I need to contact to get it all sorted?
I would ask my dad, who has been self employed for about 30 years, but he is from the old school of "dont tell the taxman til they come after you". I would prefer to do it properly though, so what do I have to do?
DW
[Edited by Dream Weaver - 1/18/2002 11:49:18 AM]
Question is - what do I do about paying tax/NI etc? Who do I need to contact to get it all sorted?
I would ask my dad, who has been self employed for about 30 years, but he is from the old school of "dont tell the taxman til they come after you". I would prefer to do it properly though, so what do I have to do?
DW
[Edited by Dream Weaver - 1/18/2002 11:49:18 AM]
#3
Dream Weaver - it's quite simple - just send all your money to the tax office!
It might be worth looking at the IR website http://www.inlandrevenue.gov.uk/ to see what they say but as far as I know, you have to let them know. They'll then probably arrange to take basic national insurance payments from you, and of course you'll have to do a tax return.
Getting a good accountant is well worth it though.
Hope this helps and all the best for your business!
It might be worth looking at the IR website http://www.inlandrevenue.gov.uk/ to see what they say but as far as I know, you have to let them know. They'll then probably arrange to take basic national insurance payments from you, and of course you'll have to do a tax return.
Getting a good accountant is well worth it though.
Hope this helps and all the best for your business!
#4
Dream Weaver,
Get a good Accountant / Tax Advisor and take his advise.
The longer you do not pay the Tax Man the harder it becomes.
All the best,
John Catlin
Old enough to be your Dad as well !!!!!!!!!!
Get a good Accountant / Tax Advisor and take his advise.
The longer you do not pay the Tax Man the harder it becomes.
All the best,
John Catlin
Old enough to be your Dad as well !!!!!!!!!!
#5
Dream Weaver,
as above, a good accountant will sort all of this for you. otherwise, contact your local tax office (look in the phone book) and ask for form CWF1. this is notification of commencement of self employment, and informs the inland revenue and national insurance contributions office, as well as setting up a direct order for class 2 nat. ins. cont'ns. (only £2 per week).
if you expect your sales to go over £54K in the next 30 days, you will also need to contact HM Customs & Excise and obtain form VAT1 in order to register for VAT.
the best option is definately to contact an accountant.
roj
as above, a good accountant will sort all of this for you. otherwise, contact your local tax office (look in the phone book) and ask for form CWF1. this is notification of commencement of self employment, and informs the inland revenue and national insurance contributions office, as well as setting up a direct order for class 2 nat. ins. cont'ns. (only £2 per week).
if you expect your sales to go over £54K in the next 30 days, you will also need to contact HM Customs & Excise and obtain form VAT1 in order to register for VAT.
the best option is definately to contact an accountant.
roj
#6
Good advice all round.
If you are already earning income, inform the IR straight away, as you will need to start paying NI contributions. It may be advisable to think about contacting the VAT, as you will need to become VAT registered if your predicted turnover exceeds £54,000.
Presuming you are starting as a sole trader. Once registered the IR will send you a tax return & self assesment form at the end of your first complete financial year (in this case April 4th 2003 ) You will be taxed on the profits of your business from startup (now) to April 4th 2003, and will end up with your first tax bill in around Feb/March 2004. You will need the services of an accountant to fill in your return and sign off your books.
From day dot, keep an accurate ledger of ALL purchases and deposits. Any purchases made relating to your business in any way is tax deductable. Save reciepts, chequebook stubs etc and proof of purchases: the revenue may ask you to prove in the case of a future tax investigation. Try and keep a good filing system and be organised. Place money aside for your annual tax bill, they ALWAYS hurt.
This is the very basics. Above all, get a good accountant, who will be able to analyse your nature of business and advise you on every single possible way to lessen your tax bill every year.
Good luck with the venture.
[Edited by Olly - 1/18/2002 9:31:51 PM]
If you are already earning income, inform the IR straight away, as you will need to start paying NI contributions. It may be advisable to think about contacting the VAT, as you will need to become VAT registered if your predicted turnover exceeds £54,000.
Presuming you are starting as a sole trader. Once registered the IR will send you a tax return & self assesment form at the end of your first complete financial year (in this case April 4th 2003 ) You will be taxed on the profits of your business from startup (now) to April 4th 2003, and will end up with your first tax bill in around Feb/March 2004. You will need the services of an accountant to fill in your return and sign off your books.
From day dot, keep an accurate ledger of ALL purchases and deposits. Any purchases made relating to your business in any way is tax deductable. Save reciepts, chequebook stubs etc and proof of purchases: the revenue may ask you to prove in the case of a future tax investigation. Try and keep a good filing system and be organised. Place money aside for your annual tax bill, they ALWAYS hurt.
This is the very basics. Above all, get a good accountant, who will be able to analyse your nature of business and advise you on every single possible way to lessen your tax bill every year.
Good luck with the venture.
[Edited by Olly - 1/18/2002 9:31:51 PM]
#7
ditto the above,get a good accountant who will do all the mundane and complex (to me!!) tax returns etc, and if he's really good you will be suprised how little tax you will have to pay,although its always painfull whatever the amount!
mike
mike
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#8
Just a couple of things I would add to the above
Make sure you register with the NI Contributions Agency within 3 months or you'll get a £100 penalty
Olly isn't quite right about your first tax return...it will actually cover the period until the end of the current tax year i.e. 5 April 2002 with the tax payable on 31 January 2003
Bas
PS Just think...every time you fill your car up now, you'll be saving tax!
Make sure you register with the NI Contributions Agency within 3 months or you'll get a £100 penalty
Olly isn't quite right about your first tax return...it will actually cover the period until the end of the current tax year i.e. 5 April 2002 with the tax payable on 31 January 2003
Bas
PS Just think...every time you fill your car up now, you'll be saving tax!
#9
Bas,
You get taxed after your first complete financial year, plus any time elapsed between startup and the beginning of the forthcoming financial year. Hence you do not recieve a tax return for only 4 months in business (now till April 4th): it is done after 12 months plus 4 months.
And you have to have your self assesment forms completed and sent to the revenue by the deadline 31st January. This is not the date you have to pay. The bill comes as soon as the revenue check the figures, hence Feb-March.
You get taxed after your first complete financial year, plus any time elapsed between startup and the beginning of the forthcoming financial year. Hence you do not recieve a tax return for only 4 months in business (now till April 4th): it is done after 12 months plus 4 months.
And you have to have your self assesment forms completed and sent to the revenue by the deadline 31st January. This is not the date you have to pay. The bill comes as soon as the revenue check the figures, hence Feb-March.
#10
Olly,
sorry, but you're wrong.
even though you haven't yet traded for a full year, your first tax assessment will be for the period between start of trade and the following 5th april.
also, the 31st january is the deadline for both submission of the tax return, and the payment of any tax due. failure to pay by this date will result in interest charges. failure to pay by 28th february will result in an automatic 5% surcharge of the tax bill. this will also accumulate interest.
you will know how much tax to pay, since if you submit your return after the 30th september deadline, you have to calculate the tax yourself.
Roj
sorry, but you're wrong.
even though you haven't yet traded for a full year, your first tax assessment will be for the period between start of trade and the following 5th april.
also, the 31st january is the deadline for both submission of the tax return, and the payment of any tax due. failure to pay by this date will result in interest charges. failure to pay by 28th february will result in an automatic 5% surcharge of the tax bill. this will also accumulate interest.
you will know how much tax to pay, since if you submit your return after the 30th september deadline, you have to calculate the tax yourself.
Roj
#11
Scooby Regular
iTrader: (2)
I would recommend registering for VAT even if your T/O will be less than the statutory limit. You will then be able to claim on all "business" related expenses, particuarly the running of a car.
With regards to keeping records, ther are several account books from the likes of WH Smiths that can help you keep on top of things. I use the Collins "Self-employed account book", which will deal with VAT, employees and NI etc.
Regards
Nick
With regards to keeping records, ther are several account books from the likes of WH Smiths that can help you keep on top of things. I use the Collins "Self-employed account book", which will deal with VAT, employees and NI etc.
Regards
Nick
#12
Scooby Regular
Thread Starter
Thanks everyone - some great advice there.
I have looked into it a bit more this weekend, and found some good books.
Templar - Olly is actually correct according to my books. They base tax on your yearly profit. Therefore until you have traded for a year they dont know how much you will need to pay. The advice I have had is to save 30% of all monies coming in to a tax account. After 12 months when I get the bill I should have more than enough in there.
DW
I have looked into it a bit more this weekend, and found some good books.
Templar - Olly is actually correct according to my books. They base tax on your yearly profit. Therefore until you have traded for a year they dont know how much you will need to pay. The advice I have had is to save 30% of all monies coming in to a tax account. After 12 months when I get the bill I should have more than enough in there.
DW
#13
DW
Templar is actually correct and Olly is wrong
As I said above your first taxable profits will be from the date of commencement until the next 5th April and the tax will be payable the following 31st January
If your accounting year does not coincide with the tax year then you will have to take a proportion to get this year's taxable profit
Bas
PS I know I'm right cos I'm sick to death of self assessment tax returns this month...I'm at work as I speak!
[Edited by Bas - 1/20/2002 1:32:55 PM]
Templar is actually correct and Olly is wrong
As I said above your first taxable profits will be from the date of commencement until the next 5th April and the tax will be payable the following 31st January
If your accounting year does not coincide with the tax year then you will have to take a proportion to get this year's taxable profit
Bas
PS I know I'm right cos I'm sick to death of self assessment tax returns this month...I'm at work as I speak!
[Edited by Bas - 1/20/2002 1:32:55 PM]
#14
DW,
as you can choose any date for your accounting year to end, and your first accounting period doesn't have to be an exact year, i would advise you to choose the end of the tax year (ie 5th april) as your year end. this avoids complications, and is also beneficial for tax purposes, assuming rising profits, due to overlap profits under self assessments (don't ask) and the time value of money (ie the same amount of tax payable costs you less the further it is in the future).
also, for VAT, I would only suggest voluntary registration if most of your sales will be to vat registered indidviduals, who can claim back this vat. if most of your sales are to the general public, you will probably lose out.
Bas,
cheers for backing me up i've also spent the last two months doing nothing but tax returns. haven't worked any weekends though
roj
as you can choose any date for your accounting year to end, and your first accounting period doesn't have to be an exact year, i would advise you to choose the end of the tax year (ie 5th april) as your year end. this avoids complications, and is also beneficial for tax purposes, assuming rising profits, due to overlap profits under self assessments (don't ask) and the time value of money (ie the same amount of tax payable costs you less the further it is in the future).
also, for VAT, I would only suggest voluntary registration if most of your sales will be to vat registered indidviduals, who can claim back this vat. if most of your sales are to the general public, you will probably lose out.
Bas,
cheers for backing me up i've also spent the last two months doing nothing but tax returns. haven't worked any weekends though
roj
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