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#1 29-10-06 09:10:17

Janey1
Verified Member
From: Suffolk
Registered: 01-02-06
Posts: 292

Tax

Hi all

Hope someone can help please.

I qualified as an ADI in February and have been working full time in another job.

I haven't had many pupils - just 4 on my books at the mo and at the worst I had 2 for about 2/3 months.

I was up and running from 9th March and have not paid any Tax on my part-time ADI job as I have not earned enough.  I paid £6349 for my car, loads on advertising and car graphics - then of course, I had some pupil wreck my car at an additional cost of £170!  Worked out my total income from driving lessons since March is £2250, but that is no where near how much the car cost, insurance and all the advertising.

I haven't been that concerned about the Tax side as I have been paying full contributions and Tax in my current full time job.  Only until recently I'm thinking that I should do something about it. 

I have been putting petrol receipts away (monthly) and keeping a diary of bookings - what else do I need to do?  I plan to make an appointment with the local accountant, but what would they need to see? 

I was really hoping to be doing ADI full time by now so I could have me own accountant and my mind settled with any Tax issues, but the cost of an accountant at a time when I am not earning enough seems a waste of money!

Is there anyone out there in the same boat?

Cheers





Janey

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29-10-06 09:10:17

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Re: Tax



#2 29-10-06 16:54:46

driverpete
Verified Member
From: Nottingham
Registered: 06-02-06
Posts: 457

Re: Tax

Get in touch with your nearest HM Revenue and Customs (Inland Revenue as was!) Business Support team and book yourself on their free Self Employment and Self Assessment workshops. They are really helpful and full of tips.
If you were self-employed (even partly) before 5th April 2006, as I was, you should have completed a self-assessment return. I had lots of setup costs and no ADI income prior to the end of the tax year and consequently got a modest but welcome tax refund.
I haven't used an accountant because the workshops were so helpful all I needed to do was set up a spreadsheet to record all my income and expenditure; consequently completing the self assessment was straightforward.


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#3 29-10-06 20:21:55

LeanneADI
Verified Member
Registered: 20-08-05
Posts: 556

Re: Tax

Get in touch with your nearest HM Revenue and Customs (Inland Revenue as was!) Business Support team and book yourself on their free Self Employment and Self Assessment workshops. They are really helpful and full of tips.
If you were self-employed (even partly) before 5th April 2006, as I was, you should have completed a self-assessment return. I had lots of setup costs and no ADI income prior to the end of the tax year and consequently got a modest but welcome tax refund.
I haven't used an accountant because the workshops were so helpful all I needed to do was set up a spreadsheet to record all my income and expenditure; consequently completing the self assessment was straightforward.

Very good advice.  Go to the tax office they do your books for free!  They are really helpful too.  Anything your unsure about claiming - ask!  You'll be surprised.   I did and got a nice refund.  If you do it online. (once tax office has done the forms take it home and do)  You get instant calculation and refund within a few days.


Leanne

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#4 30-10-06 15:23:15

Target
Verified Member
From: Winchmore Hill North London
Registered: 17-01-05
Posts: 5,695
Website

Re: Tax

My advice would be as my accountant has just told me. ( shame no one said before, the last guy told me to put away £200 per month ).

Save 15% of your gross income. I've looked back and it seems to favour well. Whilst in the first year your pay little tax, like myself I had more costs than I had income, so the tax was very low. Now I've kicked in and got hit really hard.

Theres a myth going around that you pay less tax than PAYE. Its just that a MYTH!.

Do not make the mistake I did by not putting enough cash away. Not that I had the cash anyway to put away, but I've now got to find £4K in 2007, well over half that by the end of January.


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#5 01-11-06 13:21:54

Janey1
Verified Member
From: Suffolk
Registered: 01-02-06
Posts: 292

Re: Tax

Thanks a lot for your replies

Cheers




Janey

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#6 01-11-06 21:11:37

Janey1
Verified Member
From: Suffolk
Registered: 01-02-06
Posts: 292

Re: Tax

Hi all

Just been to see an accountant and asked him how much I should put aside each month (without mentioning what you had advised Target) and he said 20% which will give me a good leeway should I need it - he must be a good accountant.  He is charging me just £120 to sort out my tax for this financial year as, thanks to this site, I have done a simple spreadsheet which shows my in-comings and outgoings each month, which took me about 3 hours last night.  He is even going to do my Self-Assessment form.

Thanks for all the great advice - sadly, I didn't have a tax office near me, the local one is in Colchester which is an hour and a half drive away. 

I really wished I didn't need to fork out for an accountant, but he advised me that as I did not register with the Tax Office within 3 months of starting my business, I could have been fined £100 - he is confident that I won't get fined though as my earnings are so small and he will fill out a Small Earnings Certificate which means that I won't have to pay NI Class 2 contributions either.

Phew!  So glad I went to see him and sorted out my accounts - when I went through everything last night it actually showed that I lost nearly £250!

Just goes to show, and I thought I was getting somewhere!

Cheers again




Janey

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#7 07-11-06 09:30:16

Target
Verified Member
From: Winchmore Hill North London
Registered: 17-01-05
Posts: 5,695
Website

Re: Tax

20% is a good indicator. You will need something spare for days off and holidays. At the moment I do not cover for this, because personally that would leave me in debt each month and seems pointless saving in one account to be overdrawn in another.

Becareful in your first few years. One of the problems I've had is for the second year my income increased by £10k above the first year, and I also managed to reduce my costs. But if your allowing for 20% your have this covered from the start. I based my tax on the same as the previous year and its basically doubled. Should balance out thou. Hopefully :cry:


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#8 07-11-06 16:27:03

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Tax

hmm just curious about this really, do folk do a budget for the year and monthly accounts so they can see how they are doing? or do folk (like seems to have happened to TargetAdi) just wait for a bill when they do there tax returns ?
sue


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#9 07-11-06 17:17:38

Janey1
Verified Member
From: Suffolk
Registered: 01-02-06
Posts: 292

Re: Tax

I'm getting very disciplined and doing my incomings and outgoings once a month - putting all receipts together in month order for me accountant - hopefully this will keep an eye on things - although, I believe I have £100 fine coming for not notifying the tax office early enough!

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#10 07-11-06 20:27:20

driverpete
Verified Member
From: Nottingham
Registered: 06-02-06
Posts: 457

Re: Tax

I did a projection of expected income and expenditure for my first 12 months, some of it based on fact (e.g. cost of car finance) and some of it intelligent guesswork (anticipated income from pupils). Each month I compare my actuals with the budget and make any necessary adjustments to the budget (e.g actual income from pupils x% more than/less than budget will lead to a commensurate reduction/increase in projected fuel/franchise costs). I can't do much about what's happened but I do get early warning of any significant trends and also I know how much I need to put away for tax and how much I can afford to transfer to our personal account. Amazingly in the 6/7 months since I started I've been consistently on target - sheer luck or good business acumen? Answers on a postcard......................................


RoSPA Gold
Retired RoSPA Approved Tutor
Retired NDAC & NDAS trainer
Retired ADI

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#11 08-11-06 08:52:57

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Tax

I did a projection of expected income and expenditure for my first 12 months, some of it based on fact (e.g. cost of car finance) and some of it intelligent guesswork (anticipated income from pupils). Each month I compare my actuals with the budget and make any necessary adjustments to the budget (e.g actual income from pupils x% more than/less than budget will lead to a commensurate reduction/increase in projected fuel/franchise costs). I can't do much about what's happened but I do get early warning of any significant trends and also I know how much I need to put away for tax and how much I can afford to transfer to our personal account. Amazingly in the 6/7 months since I started I've been consistently on target - sheer luck or good business acumen? Answers on a postcard......................................

got my postcard ready!!....l think its more on the good business acumen..l think if you stop to think about your expenditure you are just more aware of what you spend and if you are on target with tax money you are putting aside....actually its a lot more than that as it allows you to address areas that seem to be costing you over the odds ,something that doesn't happen if you don't realize how much you are spending until a year later..

oh and fingers crossed for avoiding the fine janey....are you running a april-march year end?

Sue


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#12 08-11-06 12:14:26

Target
Verified Member
From: Winchmore Hill North London
Registered: 17-01-05
Posts: 5,695
Website

Re: Tax

Hi Sue.

Part of my problem has been I've been given the wrong information.

Originally my account told me to put away £200 per month. So I did. Now that was fine for the first full year when I did not clear £10k, clearly 22% of this figure is more than enough. However I continued to do this into 2005/06 and I nearly touched the 'Land of Gold' just under £30k.

Take off a few expenses and I'm left with a £4200 tax bill next year. I was expecting something closer to what I paid before. The first payment on account is about 65% and as you know I would have paid part of 2004/05 in July this year, so that cleared me out. I tend to start saving again from July onwards for the first payment in Jan 2007.

Its not all doom and gloom. I have some savings elsewhere and will put away £300 per month from now till Jan, but I'm still a little short.

Problem is and I'm sure most are feeling the pinch.

I was also under this illusion that self employed people pay less tax. I've tried not to believe the hype, but you cannot help but think theres some truth in the stories. Even on this forum I'm sure someone somewhere pays no tax, I cannot remember the thread but someone said they pay very little tax.

With what little I take home each week you cannot help but dip into that tax money. It does come out the current account straight into savings, but it keeps my overdraft to the max, an overdraft that I pay interest on. Not to mention the credit card.

I'll try not to bore you with my financial problems, because we all have them.


Approved Driving Instructor ADI(car)
Cardington Grade (A) Diamond Special DIA MSA IAM ROSPA (Silver)
QEF Mobility Qualified
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#13 08-11-06 12:51:11

Janey1
Verified Member
From: Suffolk
Registered: 01-02-06
Posts: 292

Re: Tax

Hi Sue

I'm hoping the Accountant can sort all this out for me - to be honest, all this Tax stuff is way over me head!!  I just want someone to do it all for me and all I have to do is collect receipts!

I did ring up the Tax Office in April but didn't fill out the forms they sent - to be honest, I didn't really look at them as I really can't get me head round all that stuff and anyway, I wasn't earning much to be worried.  I left it and left it as I was only doing about 2 to 4 lessons a week, then I thought that I will have to produce something for the Tax Man at the end of March 07 (I began business on 9th March 06) not realising that you have to register first with them within the first 3 months of business!  I automatically thought that the Tax Year was 1 April to 31 March and I would just sort it out then.  It was only when I read something somewhere when I suddenly went cold and thought 'Crikey - I need to do something now!'. 

I am very much a Law Abiding Citizen, and I honestly didn't think that I needed to register unless I was earning over the £4000ish limit, and also, I thought I was covering myself because I was paying full tax in my full time job.  Unfortunately, with my expenses etc, I cannot really afford a £100 fine so I'm hoping that the Accountant can talk to them for me - that's what I'm paying him for I suppose - they do this all day everyday don't they!

Thanks Sue - will keep me fingers crossed to

Take care





Janey

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#14 08-11-06 13:57:39

Target
Verified Member
From: Winchmore Hill North London
Registered: 17-01-05
Posts: 5,695
Website

Re: Tax

In theory my girlfriends a qualified accountant.

I say in theory because she has not been practicing and like anything if you do not keep up the standards all you have really is 5 years at Uni and a certificate.

However. I often ask her questions and I get a blank face, because unless you specialize in this field, you basically know no more than the guy on the street corner sleeping in a cardboard box.

Its all alien to me, and thats why I'm happy paying someone to do the work. They probably do it in about 1 hour and get a nice payment also, but how long would it take you or me to even begin doing it. For a start you mentioned a drive to the tax office. Thats time and money before you even begin.


Approved Driving Instructor ADI(car)
Cardington Grade (A) Diamond Special DIA MSA IAM ROSPA (Silver)
QEF Mobility Qualified
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