INDIVIDUALS

INTRODUCTION:

The UK tax year for individuals runs from 6th April until 5th April the following year. Individuals failing to submit their self-assessment tax returns on time (by 31 January each year), will incur an automatic penalty of £100.00. Individuals falling into any one of the following categories are required to submit a self-assessment tax return:

Directors of all companies
The self-employed
All partners in a partnership
Higher rate taxpayers (those in the 40% band).
Landlords involved in the letting of property
If you fall under the Construction Industry Scheme
If you have any other untaxed income (Dividends, Interest, Trust Payments, Pensions etc)

The PAYE scheme is the least beneficial route of earning income in the UK from an after tax point of view. Thus, where legally possible, we will encourage clients to make use of other avenues such as Limited Companies and Limited Liability Partnerships. We would also encourage people who can qualify as 'self-employed', to do so, as you are then able to offset some of the costs incurred incurred in carrying out your trade against your taxable income.

The requirements to act as self-employed are as follows :

1. The right to substitute someone else in your place to carry out the work
2. Placing your own funds at risk
3. Using your own tools
4. Paid a fixed cost for the job (not hourly, weekly, monthly)
5. Deciding when and how to do the work
6. Do you regularily work for a number of different people
7. Will you have to make good any unsatisfactory work in your own time, at your own expense

Answering yes to most of these would indicate self-employment. For further information, read Inland Revenue booklet IR56.

FAQ's

How do I register for self employment?
You will need to register your details with Inland Revenue within 3 months of starting self-employment, using form CWF1. Failure so will attract an automatic penalty of £100.00. You will also be required to register for VAT in your turnover approaces £64,000 in any rolling 12 month period. Tax Etc can also assist you with any of these requirements.

What happens about my tax and NI payments?
Once registerd with Inland Revenue, you will be required to pay a weekly amount of £2.15 for National Insurance. They will provide you with details. Income tax and further National Insurance are due on your profits, and the onus is on you to submit a set of accounts and self assessment tax return. Tax and NI payments will need to be paid on account, by the end of January and July each year, based on your previous year's income. Thus you will need to put funds aside for this. A final topping up payment may be required by the end of the following January.

What expenses can I claim?
Claimable expenses are those that you have incurred in the running of your business. The most common ones are: Travel (some) and communication costs, clothing, laundry, stationery, and depreciation on the tools of your trade. Subscriptions and professional fees are also claimable.