basic accounting

[Charlieh]

I screwed myself this year on my tax return and am now going to go all out to reduce how much i have to pay next year,

 

Is anyone aware of a good basic course to go on as i do all my own bookwork (going to buy the quickbooks software recommended in the other thead) I have just gone purely selfemployed and suddenly being hit with a tax bill that was about 6 times more than i was expecting was quite a shock

 

i am keen to become a bit more clued up on how to reduce my tax, any tips or techniques that others are useing would be greatly appreciated,

 

i spoke to HMRC on friday about the possibility of spreading the payments, and they said i cant as i have money in longterm government savings account (!) so rather than help me starting out, they would rather hammer me, they mentioned about taking legal action if they didnt have the money buy then end of the month, which i cant understand as i only got the invoice on friday morning! (although i should have received it at the start of January! so im being penilised for their balls up

 

I wonder if some of this is due to having a paid job with (get this!) a government agency, and being self employed so i seem to be in an abnormally high tax band for my income?

 

I am going to pay it (but this wont happen again!)

 

i am currenly thinking in need to set up my business better with an account specifically for the tax i know im going to have to pay so i dont get complacent about how much is in the main account!

 

part of the reason of posting this is for anyone else about to go it alone, not getting in the same mess as me!

 

how does everyone else deal with this?

[Dean Lofthouse]

Paying an accountant can save you loads of money.

 

I would have had a huge bill this year because I wouldn't have known to claim for such as depreciation on new machinery. Having old machines doesn't get you tax relief.

 

You are allowed 50% depreciation in the first year ie, My new chipper cost £18,000, so i didn't have to pay tax on £9000 of my profit saving me £1800 which paid most of the finance on the chipper.

 

It pays to renew your chipper every two to three years.

 

Just one tip

[Charlieh]

trouble is my first year was pratting about doing some ag work in 04/05 so i missed out on all the startup benefits!

 

i havent used an accountant in the past due to it not being purely self employed, and it wasnt cost effective, does anyone else do their own tax?

[Chris Harris]

IMO you should get an accountant to do your books there well worth the money. It will only cost you around the £250 mark (give or take) to get one & they will save you money (in theory). I used to do my own books but i got into such a mess with them that i just had to go down the accountant route & wished i'd done it way before. Its worth doing because they know all the different ways to make your profit not look so good so you end up paying less tax.

[Charlieh]

ok so i think i need to sort my filing out (quickbooks, free version of their website) and sort my bank accounts, i currently have some way overcomplicated thing that has 3 sub accounts,

 

then sort myself out with a decent accountant (i figure using the quickbooks software will make it easier for the accountant and me, shame it cant make people pay on time! )

[treediver]

HMRC seem to pick more on people who do their own books. The few people I know who have been investigated did their own..and in one case had a knock on effect for all those who employed (the idiot) in question, by being summoned down the tax office for "interview", after finding out that he wasnt declaring much.

Tax investigations are horrid and go through your (and possibly others) entire finances digging up everything they can.

Thats why I use an account.

[Quickthorn]

I do all mine on my own. I think that my affairs are simple enough for me to handle on my own. If you do go for an accountant, I'd ask around and go for one that someone else recommends. I had one for one year, and he was hopeless..he didn't save me anything, just wasted my time calling me in for meetings when I needed to be out working,so that he could do something I could have done myself anyway.

 

I do my self assessment on line. Once you submit it, you can get a copy of what you've just sent in pdf format. Added to this is a full breakdown of what tax you owe. If you do your self assessment well before the payment deadline of 31st Jan, you should have plenty of warning of what tax you owe and when. If you do it online, never leave it to the last week in January - that's what everyone else does, and it crashes their system every year.

 

I've also chosen to take my accounting period as July-June, so I can do all of this stuff when I'm less busy. That means that the figures I need for this coming assessment, in April 08, are actually my figures for July 06-June 07, which I know already.

 

On the subject of capital allowances, I notice they're scrapping that from April 08. You don't get your 50% allowance any more, but what you do get is an annual investment allowance. With this, you can get 100% of the value of a purchase, with a limit of £50,000. If you're investing in enough kit in a given year, it could wipe out your tax bill completely. The bad news (and there always is some hidden away whenever Gordon Brown is concerned) is that the annual writing down allowance on your existing equipment pool drops from 25% to 20% p.a.

 

the other tip I heard is to never use your own money to buy kit. Even if you've got the cash in the bank to buy that new machine, it's still worth getting finance for it, so you can claim the interest against your profits. How that will work now, post-credit crunch, is another matter

[Dean Lofthouse]

 

On the subject of capital allowances, I notice they're scrapping that from April 08. You don't get your 50% allowance any more, but what you do get is an annual investment allowance. With this, you can get 100% of the value of a purchase, with a limit of £50,000. If you're investing in enough kit in a given year, it could wipe out your tax bill completely. The bad news (and there always is some hidden away whenever Gordon Brown is concerned) is that the annual writing down allowance on your existing equipment pool drops from 25% to 20% p.a.

 

 

Correct me if I'm wrong but that would mean it would be to your advantage to chop in your chipper every year for a new one provided the depreciation was no more than 20% ??

[Quickthorn]

Correct me if I'm wrong but that would mean it would be to your advantage to chop in your chipper every year for a new one provided the depreciation was no more than 20% ??

 

I can see what you're saying, but I'm not sure how much of an advantage yearly changes are. You still have to account for disposal - anything you get for the old chipper adds to your profits.

[benhudson treeworks]

HMRC seem to pick more on people who do their own books. The few people I know who have been investigated did their own..and in one case had a knock on effect for all those who employed (the idiot) in question, by being summoned down the tax office for "interview", after finding out that he wasnt declaring much.

Tax investigations are horrid and go through your (and possibly others) entire finances digging up everything they can.

Thats why I use an account.

 

I used to do my own books....then one day I got a bill for 57K...with 28 days to pay....I got a top accountant on it...he saved me 50K for a bill of 340 quid ! Nuff said.