It’s mid week so here at MyCake we are offering a little advice on one of the most pressing demands on creative entrepreneurs at this time of year that of tackling your tax and expenses.
Once you have registered with HMRC in the UK for tax self-assessment and you are getting round to either completing the self-assessment forms yourself or you are gathering figures together for your accountant there are a few things in this article that may be useful to your preparation.
In its simplest form your tax return is based on your profit from income. It includes all of your income for the period in one tax year from 6 April to 5 April, and all of your allowable business expenses and capital allowances. Deduct the latter from the former and you get your taxable income. The online system automatically tells you exactly what you owe and then you pay it. What could be simpler especially if you have kept good records in an online bookkeeping system.
Some notes on income
HMRC advises that anyone buying and selling on a regular basis through online auctions, classified adverts or car boot sales declares this income as taxable on the self-assessment form. There is a guide to income from selling on the HMRC website.
If you receive a payment that is a reimbursement of expenses, it will be exempt from tax and not counted as income but as an expense.
Pay attention to your dividends and tax on savings seek additional advice if you are unsure from HMRC or an accountant.
A word on expenses
Make sure you know all your tax allowances and reliefs for reporting expenses.
There are some tax tips for sole traders over on The Startup Magazine that could be of interest.
Tackle your self-assessment tax figures once the tax year ends in April and be super prepared for filing your retun at the end of the year.
Write notes on the back of receipts to remind you of the expense context especially good for taxi receipts if you write the A to B destinations on.
Pay on card and online where possible so that the expense is captured electronically on a bank statement or downloadable receipt. This will help you avoid piles of paper receipts and notes that can be easily mislaid. Sarah has a great tip in this short video for how to keep a tab on paper receipts:
HMRC Self-Assessment information pages: http://www.hmrc.gov.uk/sa/
Self-Assessment forms: http://search2.hmrc.gov.uk/kb5/hmrc/forms/selfassessmentforms.page
Tax return deadline for Self-Assessment online is Friday 31st January 2014.
HMRC Self-Assessment Online Demonstrator: http://www.hmrc.gov.uk/demo/individual/self-assessment/
MyCake’s finance toolkit offers a Self Assessment report that can provide you with some of the figures for your Self Assessment tax return. From within your MyCake account, go to the Settings menu then select Tools & Reports > General Reports > Self Assessment. For the other figures required by self-employed tax returns, not to mention ensuring that things like bank accounts all reconcile nicely, we suggest employing the services of an accountant!
MyCake is free for two months if you want a simple and easy to use bookkeeping system register here.