Need advice about the Construction Industry Scheme (CIS) in the Havant, Emsworth and Petersfield area? – look no further Simply Balanced Solutions can help.
As a small business owner chances are you work at least part of the time from home, for example catching up on paperwork. HMRC allows you to claim tax relief for some of your home expenses. This guide applies to sole traders.
The expenses you can claim a portion of include:
There are 2 ways to calculate what you can claim – the simplified expenses (lazy) method or the apportionment (splitting/sharing) method. It is worth doing a calculation to check which suits your business best. If you do more than a few hours per week at home it usually works out more advantageous to use the apportionment method.
This is based on the number of hours you work from home each month; a flat rate applies depending on the number of hours. Each month you record the number of hours and apply the relevant flat rate. It means you don’t have to work out the percentage of bills that apply to your business. The flat rate covers heat, light, power, telephone and broadband/internet costs. For other costs such as mortgage interest and council tax you will still need to work out the business proportion.
The current rates are:
£10 per month for 25-50 hours working from home
£18 per month for 50 – 100 hours
£26 per month for over 100 hours working from home.
Remember: Simplified expenses can only be used if you work for 25 hours or more a month from home and it includes broadband and telephone costs
This takes a bit more effort but can give you a figure which may be more realistic and therefore beneficial when working out your profit at the end of the year. Basically all you are doing is working out what share of your expenses can be allocated to running your business.
You can either base the apportionment (split/share) on the number of rooms used for business or on the percentage floor area used. Whichever you choose the principle is the same.
Broadband and Telephone costs are worked out seperately as they may be exclusively for business or if shared out the percentage of business use.
It is important you keep records that can back up your claim – e.g a diary logging hours worked at home . Your apportionment should be reasonable, documented and stand up to scrutiny by HMRC. We recommend that you do not to over-claim because this could trigger an HMRC aspect or full enquiry.
For help working out which method suits your business request a free consultation Find out more about our best selling packages .
Simply Balanced Solutions takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Simply Balanced Solutions. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.
Do make or buy goods to sell? Whether or not you need to do a stock take will depend on whether you are using the more traditional accrual accounting methods or the new cash basis introduced by HMRC for the 2013/24 tax year. If you are using accrual accounting then the answer to the question is "Yes".
When it gets to your financial year end chances are you will have:
These all count as stock and if you are using the accruals basis for accounting then you need to do a stock take. The process will give you your Cost of Sales figure used when working out your taxable profits.
To calculate the Cost of Sales:
Opening stock (zero for new business or value at end of last year for existing businesses)
PLUS stock you have bought during the financial year
LESS stock left at the end of the year
EQUALS Cost of Sales
There are rules for valuing stock and work in progress. More detailed information can be found here http://www.hmrc.gov.uk/manuals/bimmanual/BIM33000.htm
Don’t forget you also have to take into account any stock that you have used, given as presents etc. There is a box on the tax return called “Goods and Services for your own use”.
Whichever method of accounting you are using it is useful for your business to understand how much you have bought and sold throughout the year. Therefore even if you don't need to do a stock take for your year end accounts it is recommended that you periodically undertake one as it provides useful information on the operation of your business. You may be surprised at what materials you have bought and what you have actually been using.
This is just a very brief explanation of whether you need to do a stock take and how to work out your cost of sales. For more detailed guidance and assistance get in touch now .
If you are using the new Cash Basis there will be more information in my next blog post but if you want more information before then contact us.
You have a hobby which you love and people start to ask if they can buy what you make – fantastic! The question is when does your hobby become a business and you need to notify HMRC that you are self-employed and register for self-assessment.
The answer is there is no precise definition of what a business is and the line between hobby and business can be blurred.
The main things to think about when deciding if your hobby has become a business are known as “badges of trade”. These include:
If any of the above apply it is possible your hobby has become a business and you need to inform HMRC. This must be done by 5 October after the end of the tax year in which you started trading.
If you are trading you will be liable for tax and national insurance contributions if you earn over certain thresholds. Whether or not you make any profit you will still need to register and keep records of all your sales and expenses. Any profit you make will be taxable if your total earnings (including any other employment) exceed the personal allowance (£9,440 for 2013 -14, £10,000 for 2014-15). You will then be required to complete a Self-Assessment return each year, the deadline is 31st January. This can be done on line or Simply Balanced Solutions file it for you.
Remember if you don’t inform HMRC you could incur a failure to notify penalty which may cost you up to 100% of the tax due plus the tax you owe. It’s easy to do and can be done online, if you are not sure what to do get in touch and we can advise you.
Simply Balanced Solutions can help with self-assessment and setting up record keeping systems for you, or you can give all your receipts and paperwork to us and we will turn it into useful financial information! Whatever you need we can help so give us a call on 02392006466 or email for a quote.
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