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Childminders Club: TAX PEOPLE GRRRR(6 Posts)
Just phoned to register as self employed. Sorted for National Insurance, and also my tax return apparently.
So I say, what do I do about taxes? Phone this number it's your local tax office. We don't deal with taxes (but you do with tax returns?eh?)
So phone the number, "oh they should have sorted that out." well they didn't. you tell me. "so you have to make x x x payments a year, the third one being the balance, the first two reflecting your tax payments last year."
i just said ive JUST started self employed.
"oh well you only make the balancing payment in a year. that will tell you the rate you shouldb e paying at for the year previous."
so how much should I put aside till then?
"dunno till you get your tax return."
So the tax return comes next april, and I have to make my first tax payment when that's due which is the January after - 2007.
So I have to save this mega lump of money for two years and they won't tell me how much it should be!
I know if I consult all you CM, or my local ones I can find out what % to save. But how is that helping someone newly self employed? Confusing, and a rather stupid system.
Not a childminder myself but have done tax returns on self-employed income for a few years. The IR are pretty rubbish until you have submitted one tax return ime, they need to see it all on their forms before they can understand you.
Once they have seen your first year return, they will start asking for payments on account for current tax years, based on the amount you earned in the previous year, ie once your 2005/06 return is dealt with, you will get a request for payment on account for half of your anticipated tax bill for 2006/07, probably in around the December. So in that first year, you will need to make 2 payments very close together, one for 2005/06 in full, and the other for 50% of the 2006/07 liability.
So, best thing is to put away the right proportion each month from the very start, as I'm sure you are doing. I would personally, if you can afford it, not try to factor in personal allowance, costs at this stage, just put away if basic rate on everything if you can afford it, and then you will know that you are ahead of the game and should have no nasty shocks when the bill arrives (plus you will probably find you have a little lump sum left over, and all that interest). I got caught out big time in my first year as I had no idea they would bill me on account too at the same time, and I was not prepared for that.
A friend who is self employed recommended I put by a quarter of all my earnings. However, I've been childminding four years and have yet to earn enough to pay tax.
I read somewhere that Childminding is a trade with one of the highest expenditures going. Don't forget to keep a record of all your expenses. If you are an NCMA member they give out information on all the things that are tax deductable (there is an allowance for water rates, wear & tear, gas & electricity etc as well as all your toiletries, cleaning, food snacks, drinks, stationery, travel costs, toys & equipment, toy library/toddler groups/admission fees/tickets, insurance & mcma/local group membership).
Phone your local tax office and talk to the Small Business Adviser...they are normally great and can offer loads of help - mine did my first self assessment
I work with small businesses, and self employed people, am self-employed myself.
You pay tax on your profits, that is what you get paid, less what you spend on valid business purchases. Your literature from the Association of childminders should be able to help you work out what are valid purchases.
Generally I say put away 1/4 of everything you earn. Open up a building society account, and be strict with yourself about putting £25 out off every £100 into it.
That said, I know 2 childminders, who don't earn enough money to pay tax (over £4700 per year, assuming you have no other income). So you could not put any money away until after you reach that amount.
I do think it's a good way of making yourself save tho'. My childminder followed my advice, and when no tax was due she used the money for some pension contribution, and put some towards the family holiday.
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