I wondered if I could ask some advice. I am new to this so please bear with me. I am just about to start trading and have one client (so far). I am also fully employed at this precise moment, but that will cease within the next few months.
So I am going to register as self employed and will therefore have to do a tax return for y/e 5 April 2017. My question is, I will not have much sales I won't have to pay much tax? And as I have done all my exams and been to seminars, bought equipment etc to set myself up - how much of that can be claimed back on my tax return?
Although I have done accounting for businesses for many years, self assessment is brand new to me. I have much to learn about it and wont be offering it initially to my clients don't worry! I wanted to post on here as I felt I wouldn't be judged for my lack of this particular knowledge!
Hi Caroline
Well done on the client - yes if you are going as self employed then register as self employed ASAP and dont forget to get your MLR and PII cover BEFORE you complete the client agreement/do any work.
Have you considered whether or not self employed is the best option or indeed if becoming limited will be? This needs deciding really before you go any further and is entirely dependent on your current and future (projected/planned) circumstances. For that I would suggest you speak to an Accountant as the relatively small fee they charge you for such a discussion could save you a lot in the long run.
You also need to take great care in deciding what your year end will be. Most people do not think of this at all when setting up. This is because you get some overlap periods - eg spans the tax year end (might not be a bad thing, again business/circumstances dependent), mid month carried across to month end, involving things such as basis periods, requirement to do two Corporation Tax reports for Limiteds - a variety of issues (again depending on the legal status of your business).
Tax is based on profits. Also - you need to take a LOT of care about what you put through as expenses and again the rules differ between you as self employed or you as an employee/Director of a Limited company.
Equipment if bought before the business has been created will need to be transferred in at market value. Depending on the type of equipment you will have to consider depreciation and Capital Allowances.
Also - be careful about training costs. There are very strict rules and some of what you have paid out may not be available to claim.
So - how about starting with a few questions on the training costs to get you started. What exams and training have you done prior to the business set up? What since the set up (I suspect none from what you have said). What kind of seminars (what for)? When?
Sorry to start with there will be lots of Qs. One of which is also - do you know any friendly accountants who can provide the advice re the business legal status? Plus also - actually produce your first year's accounts and self assessment - you can ask loads of questions and learn by seeing how its done rather than struggling and getting it wrong, at least at the outset?
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Many thanks for your reply Joanne. Was a bit worried as going to be a bookkeeper, but dont seem to know the basics of self assessment!
I am a sole trader and will be staying so as I have no intention of employing staff - I just want a flexible and comfortable lifestyle, have been advised I should stay Soletrader status. Therefore I presumed my year end would be the tax year? If not, I will choose the beginning of a month as my start date. I am sorting my PI and ML cert.
I have bought a new pc and done my ICB exams (my CIMA ones didn't validate me as a bookkeeper) and been on ICB seminar. Isn't it something that you can claim for improvement but not for new skills? I have also bought business cards, incurred website costs and will be advertising and printing costs to come.
I have got an accountant that is going to work with me, but I didn't want to approach him initially as I want him to give me some bookkeeping work and I dont want him thinking I don't know what i am doing! I do, just slightly unsure in this area. And that will come with time and I will also do my self assessment exam.
But that is a good idea, to maybe shadow gm, or someone else, to get experience..
Thanks for your help.
Caroline
-- Edited by meadow on Monday 3rd of October 2016 08:52:34 PM
Many thanks for your reply Joanne. Was a bit worried as going to be a bookkeeper, but dont seem to know the basics of self assessment! You could do bookkeeping to TB, as the self assessment is reaching into the realms of Accounting.
I am a sole trader and will be staying so as I have no intention of employing staff - I just want a flexible and comfortable lifestyle, have been advised I should stay Soletrader status. On the advice side, there are of course several reasons for going Limited, but I hope the person advising you has taken into account your personal tax position now and moving forward as the employing staff has little impact either way, generally (unless an employee wishes to sue for some reason then Limited might help mitigate the expense, but not always) - what i mean is you can employ someone whether you are sole trader or not. Therefore I presumed my year end would be the tax year? If not, I will choose the beginning of a month as my start date. I am sorting my PI and ML cert.
I have bought a new pc and done my ICB exams (my CIMA ones didn't validate me as a bookkeeper) and been on ICB seminar. Isn't it something that you can claim for improvement but not for new skills? I have also bought business cards, incurred website costs and will be advertising and printing costs to come. Careful here. Essentially in order for training to be allowable for tax, the first test is has it been incurred wholly or necessarily for the purposes of trade. As a sole trader - if learning a NEW skill AFTER the business has been set up/trading then that cost is not allowable for tax relief. New skills can be eg self assessment tax v eg VAT which couldbe considered CPD. Rules are quite different for a limited company. Worth having a good read of the relevant guidance via HMRC combined with their library of regulations.
I have got an accountant that is going to work with me, but I didn't want to approach him initially as I want him to give me some bookkeeping work and I dont want him thinking I don't know what i am doing! Is the Accountant looking to sub-contract personal tax work or pure bookkeeping? If the latter that solves your issue with them anyway. I do, just slightly unsure in this area. And that will come with time and I will also do my self assessment exam.
But that is a good idea, to maybe shadow gm, or someone else, to get experience..
Thanks for your help.
Caroline
-- Edited by meadow on Monday 3rd of October 2016 08:52:34 PM
Quick responses only just now Caroline - am bombed and got an appointment soon.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Therefore I presumed my year end would be the tax year? If not, I will choose the beginning of a month as my start date. I am sorting my PI and ML cert.
Hi Caroline
You can choose any period you want but for sole traders I like to stick to the tax year, and for tidiness purposes I opt for the 31st March rather than the 5th April. For subbies I opt for 5th April and I also have a couple of people who rent out property so I also opt for 5th April for them as well.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
