Ok, please can anyone help me? I feel SO stupid!(20 Posts)
So, this year in January I started working for a company. It's only 6 or 7 hours a week and I bill per hour. About 4 times a year there are larger projects which I can take part in and boost my hours. So, every month (1st week of the month), I send an invoice. However, my first invoice wasn't sent until 16th April 2015 and covered January - March 2015 work. It wasn't really itemised.
I phoned up HMRC and they registered me as SE. I then received a tax return self assessment letter in the post. I have tried to fill it in a few times but keep stopping when it gets too hard. I really need to get it done this week so I can stop thinking about it!
So, I have just been keeping invoices. I wasn't going to claim for any expenses. I thought it would be easy. Then I hit the section on 'Date Your Books Or Accounts Are Made Up To'. HELP!
(DO I need to be keeping any other records? I don't know anyone who works SE to ask in RL)
Thank you for any advice.
Are you doing accounts on Cash Basis? www.gov.uk/simpler-income-tax-cash-basis/overview (turnover limit is £82,000 a year)
With cash basis accounting you only put money in your accounts when you actually get paid, not when you do the work or raise the invoice. So as you did not invoice until 16th April and presumably they did not pay that invoice until some time after that, I would say your turnover for 2014/15 tax year is zero, so you will have made a loss as you probably had some start up costs.
Nannynick, I'm not doing accounts . I didn't know I had too!
But, I don't have any expenses really (used my laptop I already had with internet I already had).
I did get a bank account especially for this work (my only work) and have my invoices and dates when paid.
(And yes, most definitely under £81k, more like £2k!)
Are you actually self employed or are you only working for them with them calling it freelance or self employment to avoid employers responsibilities and having to pay you and tax you on the books
If you are self employed then you will need to do accounts and file a tax return and if you are working from home then a portion of bills can be set against this as expenses
I would suggest you need an accountant, if you are in East Yorks then pm me and i can give you a recommendation of who I use if elsewhere in the country maybe someone else can recommend a good accountant for you
Zombies I fear I am self employed to make their life easier! That's one of the reasons I phoned harcourt to see if I should be classified as SE doing so little work for one company. I was told yes, I needed to register as SE.
How much is an accountant? It rather defeats the object when I don't earn much! (Feeling a bit depressed by it all).
I'd ring the inland revenue and ask for their help. They are v helpful. If you are self employed i think you need to have more than one client.
You can do it without an accountant - I've been SE for 12 years and never used them.
Very simply, your accounts for the year is just appropriate paper/electronic records of money into your business (income) and money spent doing your business (allowable expenditure).
Like most people I know, I make two spreadsheets each year - income and expenditure - which tally with my invoices and expenses receipts for the year.
If you are not planning to claim any expenses then it's not too complicated. And if you do, it's also not too hard - there's a box on the tax return where you enter your expenses (total) and it minuses it from your income to give you your true taxable profit.
Cocktail Queen - I had read that too, so that's why I phoned them in the first place!
Quodlibet - thanks. So when should I put for the date my accounts are "made up to"? I thought maybe 31 March as work done before that was all on one invoice. Do you think that's right?
I use 5th April but I expect it is fine to say 31st March. Just as long as you are consistent going forward.
Tick the box for Cash Basis on the tax return. You then record your expenses as they happen and record payments you get when you get them, not when you invoice them. I have a client I did work for in October who still has not paid their invoice, so they are not in the accounts book yet, they will go on the month I get the payment.
Use spreadsheets or simple accounts book - I use a ruled A4 book and use one page per month on which I list payments and any expenses (often none - though buying the accounts book was one expense that got listed).
You should aim to have more than one client. There is a IR35 related case where a 'company' worked for just one client and it was deemed that they were really an employee. This may be a useful read about things you can do to help show you are doing individual projects for clients.
Keep a track of all Gift Aid you do - now that you are completing a tax return you need to report total gift aid donations.
Thanks nanny nick. Interesting reading! So, I think I need to do work for someone else too. I don't have a contract, just work twice weekly on one project and then as and when is needed on bigger projects.
This is proving to be more trouble than it's worth (maybe... )
My tax returns are done by an accountant for less than £300. It's definitely worth it IMO.
Also, there's no way IR can know ( unless they investigate you) that you've only got one client. Surely all small businesses start with one client? I wouldn't worry overly about it for now.
I put to end of tax year 5 April so that it's all very simple- income relates exactly to the tax year.
Never used an accountant.
If you want to claim for a bought out right lap top I think that is regarded as a capital expense for which you get a capital allowance - something like 25% of it can be claimed in the first year, 25% of the balancei n the next etc or some such rule, rather than ordinary expenses like travel or paper where you just claim 100% of them as expenses.
Remember if you've paid any charitable contributions you might be able to claim extra tax relief on them on the tax return if you pay 40% tax.
IR35 can't relate to a sole trader. It's only for partnerships and limited companies, so ignore that.
The poster may mean "employment status indicator", but for sole traders, the person who needs to worry about that is your customer, i.e. the person engaging you. It's them who is hit by the tax/nic bill if they pay you as a sole trader when in fact you should have been on their payroll. The risks are all there's not yours.
OP I'm in a similar position - freelance but only providing services to one company.
At the moment it suits me - although I don't have the protection of 'worker' status, I have the flexibility to be able to turn down work if I want to.
I also know that if they suddenly dump me, I have the option of pursuing them through employment tribunal for redundancy and backdated holiday pay.
Employment law/status is a mine field - it doesn't help that HMRC and employment law have slightly different definitions of what self employed, worker and employee are, so HMRC may say one thing but a tribunal would say another!
OP there are face to face seminars offered by HMRC about how to deal with your tax affairs when self-employed. It used to be quite difficult to find the info about them but I will see if I can find a link for you. I went to one a while ago and the presenter gave his direct dial number to all attendees to ring him with any questions or problems. There are people at HMRC whose job it is to offer support like this, it's just a matter of finding them!
I've a feeling the face to face workshops are dealt with by local business support organisations rather than HMRC directly - the one I went to took place at a local enterprise support place. Find out about local enterprise support in your area and ask them about the HMRC business support team and whether there are events about tax and accounts being put on in your area.
The second link above takes you to a fairly comprehensive list of topics that should help you understand what records you need to keep. Record keeping is a statutory obligation. You need to keep the records that are necessary to enable you to work out the right tax.
Also, there's no way IR can know ( unless they investigate you) that you've only got one client
I wouldn't be so sure, hmrc have the connect computer system aka the all seeing eye
Which is why some employers will not let you be self employed unless you set up a limited company (hence when IR35 comes in) or unless you undertake in writing in the contract to indemnify the employer (pay them ) all employment costs if later it is held you are employed.
Going back to the original question you need to look at what tax return HMRC sent you. It will say on there income from which year they want declared. They have probably sent you the return for income you earned up to 5 April 2015.
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