Doing my first tax return, brain melting, need help

TomHolmes

TomHolmes

Junior Member
I've got a free afternoon, so thought I'd get my tax return filled out (doing a rough on the paper form first, I'll do the final thing online).

I've been keeping accounts of all my incoming and outgoing money, but trying to fill the form is proving to be really confusing what with all the jargon and vague accompanying notes.

I'm a Sole Trader working from home and my turnover is below £70,000 (unsurprisingly).

I've filled in form SA100, the general bit, that's straightforward enough. I'm stuck on form SA103S Self Employment (Short).

Firstly there's the 'Business Expenses' section. It mentions wages, but am I right in thinking that only wages paid to someone else are counted here? If so, do I not need to tell them how much I paid myself, or does that not matter?

I can't see anywhere to put my NI contributions either - I don't think these count as expenses either.

The other confusing bit is the Capital Allowances section. I bought a desk, chair and power extension totaling £175. I already owned my laptop, so I don't need to list that. I've also bought software and fonts, but I can't work out if those come under expenses or capital allowances? Or are all these things of such little value that they could just be bundled under expenses?

I can't even understand what capital allowances are. Are they just things I own that I don't have to pay tax on? I've read stuff talking about 'claiming back the AIA' - does that mean claiming back tax or literally claiming back the full cost of these items?

I'm going round in circles reading explanations and articles, but the language used is completely baffling and just leaves me even more confused. If anyone can shed some light on these please help!
 
Try doing it online from the start; there's plenty of help and prompts along the way. My record is about 60 minutes start to finish, but you can take your time and do it in multiple sittings with plenty of chin-rubbing in between.

Capital allowances are confusing and they seem to expect you to have pre-calculated the figures based on ever changing rules that are poorly explained. Thankfully, recent changes should simplify this in future.
 
I'd be interested to hear about this as this year will be my first tax return and if there's any help from the more experienced freelancers (or Berry LOL) then that would be cool :)
 
I thought it'd be simple for a small operation like mine, but it gets more confusing the deeper you get. The obvious solution is just to phone the helpline and ask my specific questions, but I feel likee that's admitting defeat!

At least I'm thinking about it now and not next January!
 
I think once we get some specific information I might make this a sticky thread (with Gregs permission) to help all freelancers with their Tax Returns :)
 
chrismitchell said:
I'd be interested to hear about this as this year will be my first tax return and if there's any help from the more experienced freelancers (or Berry LOL) then that would be cool :)
Click to expand...


Just employ a full time Finance Manager!!!:D
 
Capital Allowances have been changing year in year out for the last couple of years so get the most up to date info online. However, the basic jist (there's percentage per year stuff to consider too) is that a capital allowance includes long term ownership items, think computers, software, furniture etc. Personally I don't include stationary and fonts etc, they're a one time purchase which just go in with 'normal' expenditure.

Clothes don't count but food etc can be included in expenses as can a percentage of your household expenses, think electric, phone, heating etc and the same goes for the car although there's several options on how to claim back when it comes to cars.

IF you claim/charge vat then your tax return works on the prices prior to vat being added.
 
I did my first few tax returns, and remember it being more than a bit confusing. There are plenty of resources online, and of course filling it out online is easiest, as suggested above.

I do agree with Berry though (even though he was jesting a little). If this sort of thing worries you too much throw a bit of money at the problem.
Employ a book-keeper or accountant. Keep all your records as you would normally all year then hand the problem over to someone with all the answers.
It's the same principle as outsourcing work you can't handle yourself. For example I feel as though I can design websites, but I wouldn't dream of coding, so I pay someone else to handle it and get a professional job done.

A good accountant should trim your tax bill by (almost) as much as you pay them. Plus it's another useful deductible expense.

I don't think there's any issue of admitting defeat if you feel uncomfortable with these sort of things. As long as you know enough to keep your own records then hand it all over at the end of the year to someone in the know.

I'm pretty paranoid about taxes etc. So for me, doing it this way helps me sleep better at night!

If you can't afford a the full services of an accountant it might be worth booking a one off sit down appointment with one to find out all the things you want to know. A one off expense to ease you mind?

Maybe someone else can confirm this for me? HMRC used to do free courses on taxes etc? Not sure if they are still ongoing?
 
I went on a few courses a while back from HMRC but I think they have stopped them or at least cut back the number of venues and how often they do them.

I did my own for the first two years as freelance without major problems, didn't correctly mark some expenses as Capital Allowance that I should have but didn't get any come back on it. Best advice though as Ken said is to hire an accountant or get an advise session if you are freelancing long term. Business Link website has lots of useful advise if you're not doing enough freelance to justify the cost.
 
Sorry, I've not been around for a while so I'm a bit late replying. You might have sorted it out by now but if not, here are a few pointers. Bear in mind that I'm not a tax expert and it's over 20 years since I did any tax exams.

It may well pay to you employ a good tax advisor. Even though I'm an accountant, I still did when I set up my last business and he saved me more than his fee. I did all the basics, like listing out all the income and expenses but he found lots more costs that I could claim.

Basically think of all the costs involved in running your business. First your direct expenses, like stationery, postage, telephone, broadband etc. Then add in a proportion of the costs of running your home. Your accountant will advise on how to calculate this.

Capital allowances relate to large items, such as computers, that will last for a number of years. Instead of claiming them against your tax in one hit, you spread the cost over a number of years. As it's a deduction from your tax, you want to claim them if you can. You can still claim them on things like computers, even if you already owned them when you started the business. Again, an accountant can advise.

A good accountant will give you an hour's consultation for free before you agree to sign up. It's a chance for you to get to know each other, for them to assess the work load and for you to make sure you understand them. If they talk a language that you don't understand, then look for another one.

Zoe
 
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