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8 time-and-money-saving tax tips for self-employed people

8 time-and-money-saving tax tips for self-employed people

January 14, 2013 by Robyn Milstead

8 time and money-saving tax tips for self-employed people/tax cut1 Keep clear records

If your records are clear (and complete), there is more chance your tax return will be accurate and include full claims for all legitimate expenses. Furthermore, knowing you have been keeping clear records means you can worry less about how difficult a tax enquiry can be.

2 Write down every expense

Self-employed people are often surprised at the types of expenses they can claim for. Generally speaking, anything that is ‘wholly and exclusively’ incurred for your trade can be claimed, but if you incur expenses and you’re not sure if you can claim for them, write them down and ask your adviser, because you may find that a claim is possible.

3 Finish your tax return promptly after the tax year ends

This not only means you avoid penalties payable for late filing, but will also mean that you have more time to prepare for any January bill or be able to reclaim any tax due to you sooner.

4 Don’t forget your bank interest

Self-assessment is designed to collect information on all of a taxpayer’s income, not just from business sources. Bank interest from all accounts (but not ISAs) must be shown on the tax return. Banks send HMRC your bank interest details each year and if there is a discrepancy, HMRC may raise an enquiry.

5 Be generous

Tell your adviser about any charitable donations during the year. Higher rate tax payers can get up to 30% gross tax relief if they have donated money to a registered charity. A gift aid declaration should be made when donating money and a copy kept in your file.

6 Don’t forget tax credits

HMRC provides an easy to use tax credit calculator that takes only a couple of minutes to complete, asks no difficult questions and gives you an instant result as to whether or not you are entitled to make a claim.

7 Avoid paying a lump sum in January

Anyone receiving income from a PAYE source and completing their tax return by the 30 December is eligible to have any tax they owe ‘coded out’ provided that certain limits are fulfilled. This means that instead of demanding a lump sum payment at the end of January, HMRC will include the tax due in your next PAYE coding notice and collect it gradually via your pay in the next tax year.

8 Don’t panic if you receive an enquiry letter

HMRC can raise an enquiry where they believe information on your tax return is incorrect. They can also raise an enquiry randomly, so don’t just assume they know something you don’t. Enquiries are best managed using with the help of an adviser.

Always seek advice from a reliable professional source.

Blog provided by Robyn Milstead of Ward Williams Chartered Accountants.      

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