muddle through self assessment or accountant?

[stilllovingmysleep]

Hi just wondered if most of you freelancers (who don't earn enough to hire an accountant) manage to do the self assessment on your own or is it really hard? Where can I find some tips?

I have always found self-assessment easy enough until now. I am now earning enough that I need to register for VAT so I have decided to get advice from a professional accountant.

An accountant might not cost as much as you think, and should SAVE YOU MONEY!

Also i think some bookkeepers will do SA returns.

The problem with doing your own tax return is that it has to be exact.

If you put wrong figures in the boxes you can be in deep shit with hmrc.

I learnt this the hard way

CountingThePennies: when you say exact figures I'm assuming you mean in terms of income & expenses?

Here's what I've been doing so far in terms of record keeping. I have a 12 month filing system, add invoices & copy of relevant bank statement page (when I have it as sometimes I deal in cash) to each month as I get paid. I also add any documentation for relevant expenses to each month. As this is the first year I'm doing it, I'm planning to just add up the income (according to month? to tax year???). I don't really have any significant expenses this year to be honest as I have worked from home. I wonder what pitfalls might occur in terms of 'correct figures', what should I look out for?

Oh and another question: when you have some cash earnings (that don't go through bank but are spent in cash) how do you record them? What I've been doing is just a plain WH Smith invoice for each, is that OK? My earnings are very low (way below tax threshold atm) so I'm presuming there won't be any issue with HMRC about these cash invoices without bank documentation? But even if my earnings go up just above tax threshold, I imagine I'll still have some cash dealings, is that acceptable do you think?

My dh does his own and has done for over 10 years with no problems so far -he just keeps a spreadsheet of income and outgoings each month, with receipts for outgoings. He is earning little enough to not be Vat registered and to do the simpler tax return.

He also has lots of cash payments, abd just puts them on the spreadsheet -don't think he has ever thought about proving them, and no one has checked so far! To be fair, I think the main problem with self employed people is not declaring cash payments, so I doubt hmrc are going to query if you are claiming them. Someone who understands these things more than me may disagree though!

I dont take cash so i ve no idea about recording cash.

What caught me out was....

Claiming work clothing. You can only claim work clothing that has your company logo on and work clothing that you wouldnt wear on a non working day. For example visability jackets, helmets, steel toe capped boots etc.

You cannot claim work uniform for clarks shoes, high street clothing etc.

You cannot claim a work vehicle if you do not use a mileage book.

If you work from home and claim for a room then its something ridiculous like £10 a month i could claim.

As i said upthread i used to do my own tax returns and then got a random tax inspection. I owed thousands back once they pulled my books apart and they went back from the start of self employment and every single tax year was wrong.

I now have an accountant.

what's a mileage book?

I have only claimed some tiny amounts (for my employed work rather than my self-employed) for pay & display parking here & there, something ridiculous like 10£ over a year, at times when I had to use my car during work hours & couldn't find free parking & had to use pay & display. I sent the parking invoices to support my claims. Hope that's ok?! I've no idea what a 'mileage book' is hence asking.

A mileage book is just a record of how many business miles you do vs personal miles. so every time you go out in the car, you log the start and finish milage and put personal or which job it was for business. You can then claim some expenses for the business mileage.
If it is reviewed/checked, then you can link the job in the book to the receipt from the job.

I have an accountant because I can earn more than her fee in the time it would take me to do it, and she saves me money, and doing it myself would turn me into Bernard Black in the first episode of Black Books.

If you work from home and claim for a room then its something ridiculous like £10 a month i could claim.

There's a set weekly, not monthly, amount. Or you can add up your bills and divide by rooms excluding bathrooms but it doesn't make much difference and the set amount won't be questioned by HMRC so it's simpler.

If you work from home and claim for a room then its something ridiculous like £10 a month i could claim.

There's a set weekly amount that won't be questioned, or you can work it out manually within set parameters.

Sorry thought my post had been lost, didn't mean to post twice.

Cash payments - you just need to ensure you raise an invoice for these.

Another problem i had was i had a car on finance that i was using for full business use not personal.

I was wrongly advised that i could claim the full amount each month that i pay to the finance company. It turns out i could only claim for the interest on the finance not the capital on the car!

Many people have a business car on lease. This is because when it on hire you can claim the full amount as a business expense.

When i became self employed, my husband had been self employed for 15 years. He had always done his own tax return. So he advised me on everything and did my tax return for me.

When i got the inspection it became apparent that listening to dh had got me in serious shit!!

Once they found out dh had done my tax return and it was wrong they decided to check his books and surprise surprise they were all wrong too!

We both now have an accountant.

Also when you owe the hmrc money they want it back in full not instalments.

www.gov.uk/simpler-income-tax-simplified-expenses

If you have few expenses, it's perfectly doable on your own. The issue is claiming expenses that aren't allowable for tax.

Also Google the cash basis for preparing returns, should keep things simpler.

I would add that if your income grows, it is really worth seeing an accountant - but for earnings under the threshold, I wouldn't bother.

I would point out that you have to include all your income - so any employment income etc and certain benefits (not tax credits) - any taxable income, basically.

Can I ask: In my case, where I have both 2 employed positions (one full time and one occasional) and some limited self-employed work, I was assuming my self assessment only should include my self employed work. No? If not, and it needs to include also my employed work, then I'll definitely hire an accountant as I have no idea how to do that. If it's just for my self-employed work, I should be able I think.

Yes you do need to put in your figures from employed work.

OK if I also have to put in the figures for my employed work I will definitely need an accountant I think...

Yes, and in that case you will have some tax to pay on your self employed income, assuming your employment income is higher than your personal allowance.

The employment income is just a separate sheet added to the self assessment return and details should all be on your P60 so should not be difficult. Use standard household expenses and hmrc mileage rates for business mileage and it's all pretty simple. I would get an accountant if you were near vat threshold but sounds unlikely. Make sure you are paying your NI too

I'm not near VAT threshold but I will employ an accountant as it all sounds quite complicated.

If you are s-e and paye employed then it is easier to get an accountant to do it. Mine costs something like £250.
Also, the accountant will know instinctively which method to use in your circumstances for car mileage and home office costs, phone and broadband - all these have more than one way of calculating/recording. Usually there's a flat fee option and a calculated option.

Also, you will be over the tax threshold if your paye salary is as your personal allowance will be set against your paye job.

Yes I am definitely over the tax threshold.

Accountants here in London though seem to cost 400£ plus (and adding VAT to that)....

But if your accountant saves you over £400 then its well worth with it.

I have also made a rather expensive mistake on a tax return in the past :-)

if you have a mix of employed and self employed income, the employed bit should be straightforward. You just need the figures that are on your P60.

Re the car, you can claim either the cost of the car (interest on repayments, depreciation) and fuel costs (the % used on business mileage) OR mileage costs (45p/mile).

i recently incorporated my business and it's been a learning curve as I am now an employee whereas before I was the business. Before, my business owned my car, now I do and I charge my business for mileage.

If you're earning enough as a sole trader to be able to afford £3 -500 for an accountant to do your accounts and tax return, it saves a lot of time and probably the amount it costs you in things you didn't know you could claim for.

Just make sure you keep your books (income and expenditure) in good order and the acct shouldn't be too expensive.