Business Setup and PAYE
Discussion
Hi all,
Last year I left my old employer to work at another company, however the old company offered to take me up as a consultant, which I do some evenings and weekends. I've always been PAYE, so I'm not really sure how the tax malarky works. I've got some figures below, and I THINK I know what I need to do.
PAYE job.
45k (OT / Car allowance / Basic)
Now I think this takes me into the high tax bracket.
Self Employed
I registered with HMRC back August 2007, and the only communication I have had with them is some Quartely NIC forms they send through and I pay. The client pays me £15,000 a year for support, and this is a mixture of onsite and remote support. I invoice the client every month and they BACS the money to my business account. (£1250 a month)
I've bought some computer kit for the business, and I have kept all the reciepts for this. I assume I can claim all this back as a business expense and write it off my tax bill? (I assume the HMRC are going to take 50% of that 15k I earned
) I also think I can claim back the milage on site visits. (40p a mile)
I'm also developing CarPC installs to sell. Can I claim the prototype bits back as R&D costs?
I'm waffling! The one accountant I rang wasn't that helpful, and wanted £400 for his work, long story short, can anyone here offer their services/advise me, and help me claim back the tax/costs etc? Please don't be patronising, its a sodding minefield doing this, my setup isn't too complex, and I've just had a tax return come through the letterbox!
Cheers!
Last year I left my old employer to work at another company, however the old company offered to take me up as a consultant, which I do some evenings and weekends. I've always been PAYE, so I'm not really sure how the tax malarky works. I've got some figures below, and I THINK I know what I need to do.
PAYE job.
45k (OT / Car allowance / Basic)
Now I think this takes me into the high tax bracket.
Self Employed
I registered with HMRC back August 2007, and the only communication I have had with them is some Quartely NIC forms they send through and I pay. The client pays me £15,000 a year for support, and this is a mixture of onsite and remote support. I invoice the client every month and they BACS the money to my business account. (£1250 a month)
I've bought some computer kit for the business, and I have kept all the reciepts for this. I assume I can claim all this back as a business expense and write it off my tax bill? (I assume the HMRC are going to take 50% of that 15k I earned
) I also think I can claim back the milage on site visits. (40p a mile)I'm also developing CarPC installs to sell. Can I claim the prototype bits back as R&D costs?
I'm waffling! The one accountant I rang wasn't that helpful, and wanted £400 for his work, long story short, can anyone here offer their services/advise me, and help me claim back the tax/costs etc? Please don't be patronising, its a sodding minefield doing this, my setup isn't too complex, and I've just had a tax return come through the letterbox!
Cheers!
EricMcHi 
I presume you have been sent a blank Self Assessment tax return for 2007/08 for completion or at least a formal notification that you must submit a tax return for 07/08.
If you are submitting the return by post, it needs to be in by 31 October 2008.
If you are submitting the return on line, the filing deadline is 31 Januaruy 2009.
Miss either of those dates and you will receive the standard £100 penalty.
You need to draft some figures showing your income and expenditure as a sole trader in the period from commencement to 5 April 2008.
Your business income will be the total of invoices issued to your customers in that period. Note, the total is based on the invoices raised NOT cash actually paid to you by your customers.
You can offset against this income legitimate business costs -
i.e. telephone, stationery, subsistence, travel costs, motoring etc. As you are using the 40p per mile basis for motoring costs, that is what you need to offset against your income. Do not be tempted to make any additional claims for car tax, petrol, repairs,insurance etc.
You should also be able to make a claim for "Business use of Residence". This should be arrived at by adding together your domestic utility and light and heat bills and dividing the total by the number of habitable rooms in the house (i.e. excluding the loos, garage, halls, utility rooms etc).
For 2007/08, you CANNOT offset capital costs in full against your income. The most you can claim is 50% of the initial cost of the asset and then 25% for each year thereafter. "Capital" includes computers, office equipment, furniture etc. Smaller items can be written off as repairs or stationery or as whatever you think is an appropriate description.
For tax year 2008/09, you WILL be able to claim 100% on Capital Costs provided that the costs for the year do not exceed £50,000.
50% of the remaining profit would be a reasonable provision for the tax due. This is payable on 31 January 2009. However, be aware of the fact that you may need to make a Payment on Account for 2008/09 on 31 January 2009 on top of the actual 2007/08 liability - so budget for that too.
I presume you have been sent a blank Self Assessment tax return for 2007/08 for completion or at least a formal notification that you must submit a tax return for 07/08.
If you are submitting the return by post, it needs to be in by 31 October 2008.
If you are submitting the return on line, the filing deadline is 31 Januaruy 2009.
Miss either of those dates and you will receive the standard £100 penalty.
You need to draft some figures showing your income and expenditure as a sole trader in the period from commencement to 5 April 2008.
Your business income will be the total of invoices issued to your customers in that period. Note, the total is based on the invoices raised NOT cash actually paid to you by your customers.
You can offset against this income legitimate business costs -
i.e. telephone, stationery, subsistence, travel costs, motoring etc. As you are using the 40p per mile basis for motoring costs, that is what you need to offset against your income. Do not be tempted to make any additional claims for car tax, petrol, repairs,insurance etc.
You should also be able to make a claim for "Business use of Residence". This should be arrived at by adding together your domestic utility and light and heat bills and dividing the total by the number of habitable rooms in the house (i.e. excluding the loos, garage, halls, utility rooms etc).
For 2007/08, you CANNOT offset capital costs in full against your income. The most you can claim is 50% of the initial cost of the asset and then 25% for each year thereafter. "Capital" includes computers, office equipment, furniture etc. Smaller items can be written off as repairs or stationery or as whatever you think is an appropriate description.
For tax year 2008/09, you WILL be able to claim 100% on Capital Costs provided that the costs for the year do not exceed £50,000.
50% of the remaining profit would be a reasonable provision for the tax due. This is payable on 31 January 2009. However, be aware of the fact that you may need to make a Payment on Account for 2008/09 on 31 January 2009 on top of the actual 2007/08 liability - so budget for that too.
Thanks for the info, you are quite knowledgable! Would I be able to PM you if I had any other questions? (I don't pay paying the appropriate fee for accountancy work!)
Grrr, thought I could claim back the capital costs 100% Shouldn't have gone for the 40" monitor now!
Grrr, thought I could claim back the capital costs 100% Shouldn't have gone for the 40" monitor now!
Edited by Badgerboy on Tuesday 13th May 15:39
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