Your tax questions answered

  • Ink Well (exploded) – Jonathan Boyd, GSM&J 2009

With only a few days left until the online tax return deadline on 31 January, many of you will be busy going through receipts and invoices. Here’s some last minute help…

In our workshop on tax returns on 16 January, the audience asked a lot of good questions. If you were there, thank you for your contributions! Here are some of those questions again, with links to online resources to help you work out those crucial tax issues.

Remember, unless it’s straight from the HMRC or a professional accountant, this is only informal advice and it’s important to double-check the facts.

If you are self-employed and employed, how can you determine the amount of taxes you have to pay?
Yes, the HMRC knows very well that a lot of us combine employment and self-employment, for example working as a lecturer while doing freelance writing (that’s one of the official examples!). The tax and national insurance contributions you have to pay will be based on your combined income from all your paid jobs. Here’s more on that: http://www.hmrc.gov.uk/working/intro/employed-selfemployed.htm

What is sole trading?
Sole trading is the easiest way to set up on your own. As a sole trader, you call all the shots and have full responsibility for your business’s finances. We’ve got this and other types of business structure covered in our article on different types of business: http://fuel.rca.ac.uk/articles/starting-a-business-what-type

How do you keep your financial records? How long do you need to keep your records?
HMRC has a helpful guide to this and many other questions on keeping tax records, right here: http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm

How can you work out the percentages e.g. if you work from home how much electricity do you consume during working hours?
As this question suggests, people who work from home are entitled to tax deductions related to the cost of, say, heating and lighting a home office space. This is a tricky area as you can only deduct expenses specifically related to your business. Read more about that here: http://www.hmrc.gov.uk/manuals/bimmanual/bim47820.htm

What is the difference between being self-employed and being an employee?
The HMRC points out, rather sternly, that this is not a matter of choice. Basically it depends on your contract. The HMRC website has a list of questions you can ask to work out if you’re employed or self-employed if you’re not 100% sure: http://www.hmrc.gov.uk/employment-status/index.htm#1 And here’s one of our articles on self-employment: http://fuel.rca.ac.uk/articles/self-employment-tax

 How do you determine what you can claim back and what you can’t?
You can claim any expenses directly related to your employment, for example the tools and materials you need for your work, or research trips to exhibitions, or costumes used in a video, and so on. This is where it can be useful to get an accountant, as among other things they specialise in helping you claim as many deductions as possible – many of which you might miss when working out your own taxes. There are plently of accountants who focus on small and/or creative businesses – check out the links at the end of our article on self-employment: http://fuel.rca.ac.uk/articles/self-employment-tax