22
Feb, 2019

Self-Employed Expenses

Expenses for the self-employed an be a bit of a minefield, especially if you have recently set up our business and are dealing with lots of new and exciting things!

 

So what we need to know is what can we claim for and what can’t we claim for. Please note different rules apply to traditional accounting and cash basis accounting, there are detailed accordingly below.

 

 

Traditional Accounting

 

Any cost you incur while running your business is a business expense. Some things you will need to claim for as an allowable expense and some things you will need to claim for as capital allowance. The general rule is that if you will make use of what you are purchasing for more than two years it is claimed as capital allowance and if it will last less it is an allowable expense.

 

Examples of purchases that can be claimed as capital allowance are:

  • Office printers
  • Cars
  • Legal costs incurred when buying property or vehicles

 

Examples of purchases that can be claimed as allowable expenses are:

  • Office stationary
  • Petrol
  • Travel (excluding travel between home and work)
  • Insurance
  • Legal Fees (excluding legal fees incur when buying cars/ property)
  • Bank charges
  • Work uniforms
  • Staff wages & benefits
  • Materials

 

 

 

Cash Basis Accounting

 

Any cost you incur while running your business is a business expense. Some things you will need to claim for as an allowable expense and some things you will need to claim for as capital allowance.

 

Examples of purchases that can be claimed as capital allowance are:

  • Cars (unless you are using simplified expenses)
  • Legal costs incurred when buying property or vehicles

 

 

Examples of purchases that can be claimed as allowable expenses are:

  • All office costs
  • Petrol
  • Travel (excluding travel between home and work)
  • Insurance
  • Legal Fees (excluding legal fees incur when buying cars/ property)
  • Bank charges (only up to £500 can be claimed)
  • Work uniforms
  • Staff wages & benefits
  • Materials

 

Expenses you can’t claim as a business expense

 

You cannot claim for:

  • Non-business use of your office
  • Parking / Speeding fines
  • Clothes for work that are not required for safety reasons or are not uniforms
  • Entertaining Customers
  • Paid networking events

 

 

You can view a more detailed list on the HMRC website here.

12
Feb, 2019

April 2019 Changes to the Workplace Pension

 

Every employer in the UK should now be automatically providing a workplace pension for eligible employees.  The workplace pension provides every employee aged at least 22 but under state pension age, and that earns at least £10000 per year an opportunity to pay into a pension and to have their employer make contributions too.

 

Currently the contributions are 2% of qualifying earnings for employers, and 3% for employees.  Of the employees contributions 2.4% is taken from the wages and 0.6% is paid by the government in the form of tax relief.

 

For example for every £100 your employee earns you will give them £2 in contributions.  They will contribute £2.40 from their wages and receive £0.60 tax relief.

 

In April 2019 contributions are rising.  Employers will be required to make contributions of 3% and employees will be required to make contributions of 5%.  The employee contribution is made up of 4% from their wages and 1% in the form of tax relief.

 

For example for every £100 your employee earns you will give them £3 in contributions, and they will contribute £4 from their wages and receive £1 tax relief.

 

You will need to write to your employees to let them know about the changes to their pension scheme. Your pension provider should have a template you can customise to send out. Employees need to be made aware that their contributions will be increasing.

 

You will also need to ensure that the correct deductions are being made after April. Even if you are using a payroll software it is worth manually checking the contributions in the first week. The payroll software communicates with the pension providers’ software, and sometimes that communication needs to be refreshed when changes are applied.

 

 

Recap, what do I need to do?

 

You need to send a letter to all eligible employees explaining the rise in contributions.

 

Check with your payroll software provider, this should be updated automatically, however it is always worth double checking in the first pay period that includes the 6th April 2019.

 

If you process pensions manually make sure that contributions are updated in the first pay period that includes the 6th April 2019.

8
Feb, 2019

Registering as Self-Employed with HMRC

 

When do I need to register as self-employed?

 

You need to register as self-employed if your turnover is greater than £1000. This is what you have earned from self-employment before taking off any expenses. If your turnover is less than £1000 from self-employment you do not need to declare this to HMRC.  This is referred to as a  tax free trading allowance.

 

You need to register and complete a tax return even if you have made a loss. For example if your business had sales figures of £1200 and expenses of £1500 you will have made a loss of £300.  Your turnover is £1200 (over the £1000 trading allowance) so you need to tell HMRC.

 

The very latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. For example, if you started your business in June 2017, you would need to register with HMRC by 5 October 2018.

 

If you are starting a business and you want to keep the business finances separate from your personal finances, you may want to think about registering straight away.   Most banks require your UTR number (unique trader reference that HMRC give you when you register) to open a business bank account.

 

 

How do I register as self-employed?

 

You can register online here: https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

 

You will need to create an online account with HMRC if you haven’t already done so.

 

Its useful to use an email address that you check regularly as HMRC offer lots of helpful webinars, tips and reminders and they send emails about them. You can find lots of help and support on the HMRC website here: https://www.gov.uk/guidance/help-and-support-if-youre-self-employed

 

If you are unsure about whether or not you need to file a return or register for self-employment, you know how the saying goes… It’s better to be safe, than to be sorry.