First time tax returns

[CraigG]

Hi all,

 

I'm currently 19 and a student at Central. Last summer (June 2014) I became registered for self assessment for the sake of a particular job which demanded a UTR, and from the April 14 - 15 period would have made a couple thousand pounds from self employed jobs only so expect for doing that return in January it should be pretty simple as just returning income for that and it should be fine.

 

However, over the last few months it seems people have started to offer me a lot more work(!) and I've started to find myself earning a lot more than I'd anticipated - I expect since April I'm already very close to if not over the lowest tax threshold and there's still some way to go for the April 15-16 period.

 

So I was just hoping people could offer some basic advice (perhaps the most simple advice would be I'll have to consider consulting an accountant?)

I've received income from pay rolls for 3 different companies totalling a couple thousand each for the period, as well as money sent to me via bank transfer sometimes following invoice and sometimes without invoice, and also some cash-in-hand payments (never above a couple hundred at a time).

 

I have invoice records and of course access to bank statements, but since this has come so unexpectedly I don't really have any receipts for tools/travel etc, other than email confirmations you get, so how does that work?

 

Which sort of things can one put against costs on a tax return - food bought on job days when on site all day, train travel, uber taxis, tools and clothes etc?

 

Does me being a student with student loan income make any difference? Do self employed invoice incomes, cash in hand, pay roll incomes all count to the same or?

 

Basically all took off a bit unexpectedly and now I'm a little caught short so any initial advice would be appreciated?

 

Thanks in advance, C

[timsabre]

In my opinion it is worth consulting an accountant because it is complicated to get right. A good one will pay their own way by saving you from paying unnecessary tax and/or penalties because you got it wrong.

 

Finding a good one is another story - I went round and "interviewed" a few local outfits - it was very obvious which ones were on the ball and which were not.

[paulears]

Good advice, and I too found you need to find one who can understand the world we work in - many who deal with the usual plumbers and painters don't. My current one unwound some quite unsuitable systems my original accountant set up - mainly because he was writing off equipment over longer periods than necessary or sensible, as much of what we buy depreciates amazingly quickly. Lots of things that were previously 'assets' no longer are on the new system and considered consumable - which has reduced the quantity of things in my accounts that add a value to the business. I don't understand it other than at the superficial level.

 

You also can find the accountant can work tax payment systems for you. For many years I had to pay tax in advance, but that doesn't happen any longer. Lots of things a general accountant tells you cannot be claimed for actually can as our circumstances are often unusual. Blanket "no - can't claim for that" statements often have HMRC exceptions that work for us or against. The notion of pd's or subsistence payments are good ones, as are travel payments. I claim for travel and get it in full, PAYE people working here at the moment who claim for their travel to here from home, rather than let the production company pay it for them get taxed and NI'd on the travel, as if it was pay. Even simple things like what to put on your invoices to avoid trouble in the future helps. One person who uses me a lot sends me an email detailing what he wants me to put on the invoice - the entry that says "wages" is a bad choice of word, and my accountant made sure I didn't use it on my invoice - "performance fee" being a better choice! They can also help you with when to buy large items - some periods in the year will work better, apparently. even if your income is lowish - most accountants will guarantee to save you more than they cost you.

[gareth]

Another vote for finding yourself a good accountant who understands the nature of the work that we do. They will be able to help you to file your tax return in what you might call the most advantageous way - making sure that you write off as many expenses and costs as possible. In my self-employed years, my accountant saved me many, many times the amount in tax than it cost me to employ his services each year.

 

A couple of things leap out from your post, though ... you talk about cash-in-hand jobs, and receiving payment without having issued an invoice. Be very careful. If you're registered for self-employment, or as a small business, it's possible that you will be selected by HMRC for a detailed audit for no other reason than you were picked at random. These in-depth investigations can be a massive pain in the hoop, to the extent that the accountant I used to use offered their clients an annual insurance to cover the extensive additional fees which would be incurred by them having to deal with such an investigation. My dad's business was once 'picked out of the hat' as the lucky recipient of one of these in-depth audits, and even for a small business with comparatively simple accounts it took them 3 solid days to get through it. Any suggestion of undeclared income might land you in hot water - it's not worth the risk.

 

You also mention that you've received payment via the pay-roll from some companies - if you're on someone's pay-roll, any deductions should be made at source as you're an employee rather than a self-employed contractor.

 

It's perfectly possible to be PAYE-employed and self-employed at the same time. As long as you have a UTR and have registered with HMRC as receiving income from self-employment in addition to your PAYE income, it's all good.

[kerry davies]

All good advice but I would also add that in my own case I found the taxman to be incredibly helpful in sorting out odd details. I was lucky in that I first did a return sitting alongside a staff member in a tax office but even the Helplines have never let me down.

 

My personal circumstances were awkward in that I was PAYE on a regular pension income, self assessed on my work income but also often paid emergency rate PAYE when I taught at FE colleges. The most complex was the FE college where I was both PAYE as a lecturer and self assessed while running their community theatre. The taxman sorted it all out over the phone while I entered my online returns.

 

Just compartmentalise it and keep it in separate "boxes". If you try to approach it all at once it will overcomplicate matters.

Cash in hand? Doesn't happen. Never, not me sir, honest.

[timsabre]

All good advice but I would also add that in my own case I found the taxman to be incredibly helpful in sorting out odd details. I was lucky in that I first did a return sitting alongside a staff member in a tax office but even the Helplines have never let me down.

 

This is the opposite of my experience... plus there are no tax offices to sit in any more.

I can never get a straight answer from the "helpline" and when I do, they contradict themselves on the next call.

[gareth]

^^^ What Tim says. ^^^

 

They're closing all the local tax offices down, and trying to get through to them on the phone is next to impossible.

[alistermorton]

Yup, my experience is when you get through they're usually pretty good, but set aside an hour (or more) for each phone call to sit waiting in a queue.

[david.elsbury]

Don't forget the accountant is another business related cost that you can claim straight back ;) :)

[timsabre]

Don't forget the accountant is another business related cost that you can claim straight back ;) :)

 

you can claim the tax on it ... not the cost...

[Bobbsy]

Good advice all round.

 

For simple PAYE you can do it yourself but, as soon as things get a bit complex with a mix of companies, some deducting tax, some not and so on, a decent accountant pays for him (or her) self.

 

Do "interview" them though and make sure the one you choose has experience with the sort of unusual tax situation you're in. Some just have a bit of software that can cope with normal employment and gets lost when you have the sort of mix you describe.

[Junior8]

By all means get an accountant if you think you need it - but I would download all the forms from the HMRC site and see if you can do it yourself. I guess from what you write you haven't been keeping any books which is why you now have a problem. Before you do anything get all the paperwork you have in one place divide into monthly piles then either buy a little accounts book make a simple spreadsheet with cells for all the income another set for all the expenditure fill it in and see what the difference is. If the total profit for this tax year is less than £10000 and you have no other income above this level there will be be no tax to pay. You could also claim a refund of any already deducted. There may be a Class 2 National Insurance Liability if your profits (the difference betwen income and expenditure) exceed £5965 and Class 4 if they are £8060. Rememember for every £1000 PROFIT/INCOME above £10000 there will be a maximum of £200 tax to pay. You need to factor in this reality as if the profit over the personal allowance is say £1500 and there is no other income and the accountant is going to charge you much more than £300 you would be, arguably, wasting your money leaving aside of course any NI liability. Incidentally even if the amount going through the business is less than £10000 I think it is a good idea to keep simple books from day one - you never know!

[chelgrian]

So I was just hoping people could offer some basic advice (perhaps the most simple advice would be I'll have to consider consulting an accountant?)

I've received income from pay rolls for 3 different companies totalling a couple thousand each for the period, as well as money sent to me via bank transfer sometimes following invoice and sometimes without invoice, and also some cash-in-hand payments (never above a couple hundred at a time).

 

For the companies I presume you were paid via PAYE therefore you should have a P60 if you are still on their books or a P45 if you have stopped working for them this is easy to transcribe on to the self assessment form for each employment along with the total amount of tax paid.

 

All the other income is income from self employment regardless of if you have invoices or not assuming you are already registered as self employed. Note that at least this tax year you'll also need to declare any savings income you have (this has a separate box on the tax return) you may or may not be paying basic rate tax at source on interest depending on if you have registered with your savings account provider as a non tax payer eligible for interest being paid gross or not.

 

I have invoice records and of course access to bank statements, but since this has come so unexpectedly I don't really have any receipts for tools/travel etc, other than email confirmations you get, so how does that work?

 

Which sort of things can one put against costs on a tax return - food bought on job days when on site all day, train travel, uber taxis, tools and clothes etc?

 

I'm afraid this is the area where you need an accountant who knows about the entertainment industry. The point being that even as self employed you are required to keep records of business incomings and outgoings. If you were audited then HMRC would want to see those records.

 

In any case if you expect this work to continue you probably should start keeping cash basis accounts

 

https://www.gov.uk/simpler-income-tax-cash-basis/income-and-expenses-under-cash-basis

 

You could try and workout what you can claim as an allowable expense from

 

https://www.gov.uk/expenses-if-youre-self-employed

 

However doing all this is going to take many hours of your life, it's probably better to ask an accountant in the first year even if you then do it yourself in subsequent years if your circumstances are similar.

 

One point to ponder is that if your income for 2015-16 isn't going to bust the threshold without any expenses taken off you could make life simpler by ignoring all the expenses in this tax year for which you don't have proper records, however you still need to prepare accounts but this can be as simple as a spreadsheet of income and allowable expenses, with boxes of receipts for expenses.

 

However as you say you are already close to the tax threshold this is certainly going to leave you paying more national insurance than you need to and perhaps more tax as well if you go over the threshold. You have to make a judgement as to if the cost of the accountant to sort out what you can deduct is more than the cost of the paying the unnecessary tax.

 

Does me being a student with student loan income make any difference? Do self employed invoice incomes, cash in hand, pay roll incomes all count to the same or?

 

The student loan is not taxable income so isn't relevant to your self assessment tax return. What might be relevant is if you manage to earn more than the threshold for repaying the student loan while you are still a student. However I think what happens in this case is that HMRC will send you a bill after you have completed the tax return if there is any repayment due.

 

For PAYE you enter multiple employments on your tax return for each employment you enter the total earnings, the amount of tax paid and I think the tax code used.

 

There is no such thing as cash in hand unless you are defrauding HMRC by not declaring it (hint don't do this), any *earned* income you have which isn't from PAYE is self employed income.

 

For completeness the other category is un-earned income this is things like income from savings accounts.

 

One point is that even if you think there is going to be no tax to pay you legally must still fill in the self assessment form. You may even be due a refund as pointed out elsewhere in the thread.

[CraigG]

Thanks for all your replies everyone - particularly chelgrian for those in depth answers - I certainly think I'll look into accountants to check for feasibility.

 

And interesting point on over earning the repayments threshold whilst still studying - that looks likely to be a 3rd year problem I hadn't thought about...

[Junior8]

Could you confirm that you are referring to income for the tax year 2014-2015? If so you have only until 31 01 2016 to file and it must be online. That's unless you recieved a notice to complete a return since 31 10 15? If so you have three months from the date of the notice.