I will shortly be registering as self-employed and wondered if you good people could offer any advice on registering, self-assessment, any pitfalls I need to avoid etc. If so it would be much appreciated.
1: Time your year end in line with everybody else on April 6th.
2:Keep your accounts up to date on a regular basis and good neat records.
3:Claim mileage instead of all the fiddly petrol receipts etc (if you do enough mileage for it to be more economical that way).
4:Remember your deadlines! October for a paper return and January 31st for an online return, don't get fined! 2011-April 6th 2012 april 5th is due on paper now! and online by the end of January so get a move on if you did any work before april.
5:Lots of people swear by an accountant (I'm lucky, I live with one) but most small traders like ourselves should easily be able to do a simple sole trader return at the level we are working at without paying hundreds of pounds out unnecessarily.
6:Your personal allowance changes from year to year so keep your eye on it. Your total earning from a year include everything from PAYE to self employed work it all needs to be added up and then your personal allowance comes off that. If you have done PAYE work then your personal allowance will probably have already been used up.
7: Make sure are registered with the inland revenue within three months of starting self employment or you could get fined.
8: make sure you register for class two national insurance contributions.
Mileage is by far the most cost effective and easiest to calculate and prove for me, the current rate for mileage is 40p per mile up to 10,000 miles and 25p after for cars and vans.
So if you do 12,000 miles you can claim
£4,000 pounds in mileage for the first 10 and £500 for the last 2 thousand.
A total tax deductable allowance of £4,500 off your annual income, this is considerably more than the cost of just fuel but it's not that much of a bargain as you cannot claim your insurance and road tax and upkeep costs as well. So do your maths if you don't do a lot of miles, it might be more economical to claim all those, but remember each one of those must be given a certain element of personal use! This element changes from person to person.
So for example you use your car for visiting your mum in Aberdeen every week shopping in Manchester etc etc and that consumes 1/2 of your total annual mileage, then you can only claim 1/2 of your insurance, upkeep, road tax costs etc etc as business use against your income tax on the other half of your annual mileage.
But just claiming business mileage is simple, and easy to prove if investigated e.g. you worked in Colchester: distance from Home to colchester is X miles: so claim 2X Miles as the return mileage at 45p per mile. Whereas if you filled your tank up and kept the receipt the Tax man might start asking how much was left in the tank during an investigation.
The VAT is a totally different thing, You'll still need to keep your receipts to claim back the VAT on the Fuel.
That is something else for VAT and not income tax.
Very few actors on here will be earning above the VAT threshold of 77,000 pounds per annum. Forgive me if I'm wrong. :-)
In which case at that level of income you would be best to employ an accountant. :-)
Yup...no I understand the vat thing and needing receipts...but as yet I dont put milage against my tax claim....just the amount spent on each recipt. So was wondering if I should?
MK
Register and pay your NI in instalments, then every year check what the threshold for paying NI is. if your profits are under that figure, apply for an exemption you'll get a nice little rebate.
Additionally if you work as an actor for a company that pay NI, when filling our your tax return, enter income from that company as employed income or you'll pay NI twice (I'm sure there are other ways to do this, but that's what the tax office told me to do).
Keep a diary of all work related to acting, including classes, meetings, etc, to keep with your accounts (I found this really helped when I was randomly investigated by the Inland Revenue.)
I can only stress the simplicity of the system.
Journeys are so easy to prove, and the mileage/allowance so easy calculate. There's no question of arguments with the taxman over the levels of personal use claimed against insurance policies, depreciation in vehicle cost etc etc.
But it might not be economical in every case, I run a cheap car, an expensive car will have a larger depreciation which you can claim against tax, so it's horses for courses. But most people on here will be like me grafting away to earn a basic living for themselves, however as you employ people and run a wide variety of businesses with the acting as only a small part of what you do I think you do need a wiley accountant and specialist advice Mark :-)
Should I bother registering self employed this year if I all i have done (paid) is couple of days of extra work and possibly a profit share production?
And does profit share mean I can get full equity?
I suppose it depends on whether admitting to considering income tax fraud (albeit on a small scale) on a public forum would draw attention to yourself Angela :-)
As above if you do not register for self employment within three months of starting it you can get fined.
Well its been declared of sorts as im claiming jobseekers and had to send invoices up cos its taken off my benefit? I guess I should consider registering myself then
I have never paid class 2 NI contributions as I have always paid NI at source when acting, and then when not acting, I pay through my PAYE jobs. I have always assumed that I have paid enough, as I work full time. But I sometimes wonder if I am doing something wrong, as I am sure I am supposed to fill out a small earnings form to exempt me from the regular self employed contributions, but I haven't done that since the first year I registered, and have never been sent another.
Hi Stephanie,
Any income above and beyond your standard paye income which is taxed at source is still taxable income and should be declared, NI is a different matter, class 2 is nowhere near as expensive as class 1 and registering deregistering would be a nightmare and not worth the hassle.
For example for the first time last year I had to pay NI on my panto earnings. This was a substantial sum of money with no tax deducted. It was declared as part of my annual income from which I could deduct my expenses and was therefore part of my total tax liability.
You should have nothing to fear from registering as self employed, especially if you don't earn much as you can claim so many business expenses back, in your first year or two you can almost be expected to make a loss on your self employment and offset that against your PAYE earnings that have been taxed and maybe even get a rebate.
You can't keep making losses for ever or it is not self employment.
Don't treat this matter lightly, ignorance of the law is no defence and you can get yourself into quite a bit of trouble as the taxman can investigate up to six years back. You can be fined for non disclosure.
It's not difficult if you keep you records, and because we are a profession who are largely low paid, frequently unemployed, with high expenses on publicity, subsistence, travel etc etc, our tax liabilities are relatively low.
Reading that again Stephanie if it's just NI you're asking about and you presumably do your self assessment each year to sort out your tax. If every job has NI deducted then your are in theory covered by NI. But it's unusual for every job in acting to have NI deducted in my experience.
Yup I've been registered self employed for 6 years, I'm talking purely National Insurance. So far all my paid acting work has been theatre therefore I have paid NI at source and inbetween I've alway had a PAYE job so I assume I'm covered. I've done a few 'fully self enployed' one off jobs such as children's parties etc, but not enough to take me to the next NI threshold.
I'm assuming if I hadn't paid enough then this would be calculated when doing my tax return? I guess my main query is should I be filling out a Class 2 small earnings exemption form every year or does the one I filled out stand until
I inform them otherwise...?
LOL....Nigel - I think you just became the CCP tax adviser!! Don't forget the Tax Office website is very helpful, as are the people that work there...well usually they are.
Not for long Mark, new job starts abroad on thursday so it's a limited offer :-) I've lived with an accountant for over 20 years so I've picked up a little bit.
My understanding is that you need to fill out a class 2 exemption form for each year you are self employed but do not earn enough to pay additional NI. If you speak to NI they should be able to help you with this. They allowed me to do this retrospectively (I had also mistakenly thought that providing I paid NI when doing a job this covered things). I now pay NI by direct debit every month, and don't even notice it going out. I had originally thought when you registered for tax, you automatically registered for NI, but this isn't the case, and you need to do it separately Otherwise you risk not having paid enough in contributions to qualify for higher levels of suck pay, etc.
Hope this helps. Equity can also help with info on this.
Ha Mark, hmmm I've always found the tax office always seem a bit bewildered by actors and our unusual self employed (but not quite) status, and don't always get what I am asking. Or perhaps I am just confusing ;)
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