SE expenses - please help!

[busymum34]

I set up as SE in June 2011. I have had to buy all my equipment and a car in order to do this, as well as put DC3 into childcare 2 days a week.

I won't earn anywhere near enough to pay tax but realise I need to log everything. Also, it will affect my CTC.

Just wondering how I go about working out heating/electric/phone/car etc when they are for business and private use?

As I set up in June, when will I have to do my first self assessment? I estimate I will have earnt £2250 this financial year but my equipment was probably £500 then things I have previously mentioned. Can I also add the cost of the childcare?

Any tips on how you work things out would be greatly appreciated.

Many thanks in advance.

Have a look at the page I wrote for ebayers - much of which is generally applicable
cgi3.ebay.co.uk/ws/eBayISAPI.dll?ViewUserPage&userid=talkinpeace

I attended a free course run by HMRC when I first registered as SE, found it very useful. It will take you through what you're allowed to deduct for but also various methods. For example, you can either use a flat mileage rate (which is now 45p/mile) or to work out the 'car costs' and to use an appropriate percentage depending on how you use it for your business.

AFAIK you cannot use childcare against your tax, but you may be surprised about your tax credits. Have a look here www.turn2us.org.uk/benefits_search.aspx there is a calculator which you can try out a few scenarios. You need to be working 16+ hours a week to claim for childcare costs, but IME when you're SE you work all the hours you get!

You won't have to submit anything until January 2013 (yes, 2013) although it is obviously a good idea to get things together a bit before then!

For now, make sure you are logging all the business trips you are doing in the car (date, where to, what for, distance), and also have a note of the mileage on the car when you started work.

Also, log all the time you are working at home and if you use your phone for private calls too, you will need itemised billing.

You will want to NOT claim the cost of any equipment this year so you can use it to offset (hopefully higher) profits next year, so again just keep a record of what you have spent (with receipts).

You can't claim the cost of childcare against tax, but as oldteacher says if you work at least 16 hours a week you can claim Working Tax Credit including the Childcare element which could pay 80% of the costs!

Talkinpeace2....

Thanks so much that link to the page you wrote is SO helpful! Clarified lots of small points for me.

:-)
I update it every now and then.
Printing it out, coffee and highlighter pens are often recommended

Actually I'd very much value mranchovy taking a red biro to it
as the ebay boards are very quiet now and it has not been critiqued much lately

regarding your home office costs the 'normal' thing to do as far as I know is work out the proportion of your house that is used for he business, i.e if you have 2000 sq foot house and you use a large room at 200 sq foot you can charge 10% of heat light power insurance and any other houseing costs as a taxable expense.

I understand that to stop Capital Gains tax being an issue it is a good idea to keep a sofa bed in there and use it as an occasional spare room so it is not entirely dedicated to the business.

Might be easier getting a seperate mobile just for business use to keep things simple depending on volume of calls or again work out a fair proportion on a typical month and apply this % to the years phone costs.

Any IT eqipment I believe is expensed in the year you buy it - i.e you no longet depreciate it over a number of years.

Cars - dunno what car you have or need but if you have bought a dedicated car for the business I think this cost is depreciated over maybe 3 or 4 years. However if your car was a van this would be expensed in the year you bought it. Handy if you want to wipe out a large chunk of profit in one year. DH has a big pick up, 4 doors - really handy for family, chucking dirty bikes in back etc and is classed by Inland Revenu as a commercial vehicle rather than a car. But if the use is mixed between private and business again you should either log all miles and apportion or take a typical month, keep evidence of mileage logs and appy this proportion to depreciation, fuel, repairs, insurance all vehicle costs

My understanding is that your first tax return will be for all income and expenses incurred in the part year to April 2012.

Hope this helps - all just my own non professional understanding based on what we do

regarding your home office costs the 'normal' thing to do as far as I know is work out the proportion of your house that is used for he business, i.e if you have 2000 sq foot house and you use a large room at 200 sq foot you can charge 10% of heat light power insurance and any other houseing costs as a taxable expense.
You also have to work out how many hours you use the room for your business and how many hours for a non-business purpose. So if you use an office 4 hours a day in the week but do your domestic paperwork in there too for an hour each weekend that means you can claim 20/21 of 10% of the costs.

I understand that to stop Capital Gains tax being an issue it is a good idea to keep a sofa bed in there and use it as an occasional spare room so it is not entirely dedicated to the business.
Yes, see above: the fact that you are only claiming 20/21 of your total costs or whatever (but it has to be sensible, 1 hour of private use vs 1,500 hours of business use is not going to cut it ) helps establish the fact that the whole of the home remains in residential use and is your Principal Private Residence.

Any IT eqipment I believe is expensed in the year you buy it - i.e you no longet depreciate it over a number of years.
Not exactly. There is an Annual Investment Allowance which applies to purchases of plant and equipment, but sometimes it is worth NOT claiming this in your first year of business. See an accountant.

Cars - dunno what car you have or need but if you have bought a dedicated car for the business I think this cost is depreciated over maybe 3 or 4 years.
No. Most cars you only get to claim 10% Writing Down Allowance. It is often better to claim mileage at 45p per mile for the first 10,000 miles

However if your car was a van this would be expensed in the year you bought it.
Again it can be, but it might be better not doing that in your first year.

My understanding is that your first tax return will be for all income and expenses incurred in the part year to April 2012.
That is the default position, but it might be better to extend it further. See an accountant.