Can anyone teach me the basics of my tax return (over a pint which will of course be on my expenses!)?

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Tuesday 29 April 2008 1.23pm
I have recently turned freelance, although most of my work is through an agency which I am PAYE for and I earn very little on top. But I have just received a tax return for last year and I can't understand most of it (I'm not a number person!)... is any kind soul out there able or willing to explain the form to me? I will of course buy you a drink or two (can that be put on my expenses? lol)
Tuesday 29 April 2008 2.47pm
I would strongly recommend getting an accountant. Yes, this costs money, but a good accountant will almost certainly be able to save you money overall.
Tuesday 29 April 2008 2.55pm
No, the drink cannot be put on expenses for tax purposes.
Tuesday 29 April 2008 3.05pm
The Mapmaker wrote:
No, the drink cannot be put on expenses for tax purposes.

I was only joking about this!
Tuesday 29 April 2008 3.16pm
I did think it might be safer to get an accountant but I only earnt about 4000 as self employed (as nearly all my work is PAYE) and didn't know if getting an accountant would be worth it for this small amount, so if the forms were easy enough I wont have a lot to put n them
Tuesday 29 April 2008 3.36pm
the basics seem to be described at the IR website but I may be wrong ...

http://www.hmrc.gov.uk/sa/complete-self-emp.htm
Tuesday 29 April 2008 4.33pm
Have you tried reading the guide that comes with your tax return? It's meant to make the tax return comprehensible to non-tax-experts. It doesn't do such a bad job, actually.

If your income is really so simple, then I'd suggest that the only thing you may need professional help with is knowing what sort of things you can claim as allowable expenses. I can't stress enough that you should NOT rely on the word of a mate down the pub on that point (unless you have a mate who's an accountant or tax inspector). If you get it wrong, it's YOU who the revenue will chase and YOU who will be more likely for investigation in subsequent years. And there's often no sense at all in what's deductible and what isn't, so your instinct may well lead you the wrong way.

I'd suggest that you do as much as poss yourself, but pay for some advice on the technical aspects. You will probably only have to take the advice once (as, if your return is simple, and unless tax rules change radically yr on yr, then it's likely that things that are deductible this yr will also be deductible next yr).

If I were you, I might:

- read the HMRC guide/notes to the tax return so you know what you're doing in broad terms
- put together a list of all your income, and things that you think might be work-related expenses
- take all this to an accountant for a pre-agreed fixed fee meeting where you can get them to tell you whether there are any legal fiddles you can pull off in the way of claiming expenses. Can't imagine this could take more than an hour.
- go home and fill it in yourself, based on the advice given.

...if you press it, they will come.
Wednesday 30 April 2008 5.27pm
OK

first - don't panic - you have ages to get this in.

second. 4k isn't alot. A half decent tax adviser will cost you 1,500.

what do you do? There are two basic rules for deduction.

1) Is it capital or Revenue? Did you buy a product or service for you to use just once or will it serve you over time. I.e. A machine that will last 5 years or a train ticket to see a client. If it is Revenue (like the train ticket - see next question)? If it is capital then you need to spread the cost using capital allowances. This is tricky so I hope you don't have any of these.

2) Revenue yes? Is it wholly and exclusively incurred for the purpose of trade? OK this can be tricky but not really. If you buy something consider if there is any personal advantage or did you really need it. For example, clothing unless health and saftey cannot be claimed.

In all cases - be clear and the tax man will understand. Yes he may come after you later but there is less likely to be penalties.

Also consider, is there an easier way to handle this? Why not try and get your tax code adjusted to account for extra income - if you have minimal expenses this may be a good way to go. No tax return (although keep proof) and you know you have paid your tax as they deduct it from your PAYE income. You will need to agree this with the Revenue.

NIC

One thing you may miss is NIC. Although at 4k a year it is unlikely that any contributions are made. I'm not very good when it comes to NIC.

Have fun
Wednesday 30 April 2008 6.13pm
Am I not right in thinking you wouldn't have to pay tax on 4,000 anyway?
Wednesday 30 April 2008 6.22pm
Tolstoy wrote:
Am I not right in thinking you wouldn't have to pay tax on 4,000 anyway?

If that was your only income in 2007/8 then no. But if it's in addition to other income that takes you over the taxable threshold then yes.
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