For those who have recently become self-employed, you can expect to find a brown envelope from HMRC sitting on your doorstep, sometime this month: your tax return. If you’ve been worried about the prospect of hours of paperwork and mind-bending calculations then you can relax. Under most circumstances, your tax return can be completed in minutes (especially if you submit it online) using only a basic calculator (or even a pen and paper).
Are You Registered?
You may be wondering if you need to register as self-employed at all. The simple answer is yes.
All Street Fit Instructors work on a freelance/independent contractor basis, which means they run their own street dance fitness business. Regardless of whether you are employed elsewhere, you still need to pay income tax on your Street Fit earnings. To avoid potential trouble with HMRC, you need to register for self-assessment immediately, which can be done quickly and easily via the HMRC website. At the same time, you will be registered for HMRC Online Services which, among other things, enables you to fill out your tax return online (recommended).
Once you’re registered for self-assessment, HMRC will send you your log in details, including a ten digit tax reference number (your UTR). They should also send you a tax return reminder every April, and you should contact them if you don’t receive this.
Keeping clear and accurate records of your income, expenditure and bank accounts is a legal requirement of being self-employed; it also saves huge amounts of time when filling in your tax return. You will need to keep, or record electronically, all invoices for sales and purchases, cash books, mileage records, receipts and (if otherwise employed) your P60s. If you are scanning or otherwise storing documents electronically, these must be legible and contain both sides of the document.
Filling in the Form
Although you can opt to fill your tax return in manually, there are a number of reasons why completing it online is better: you have an extra three months to submit it (Jan 31st), the relevant pages are automatically brought up, your tax calculations are done for you and you receive confirmation of receipt immediately.
On the form, you will need to enter your income from Street Fit® classes, expenses incurred for your business, any purchases or sales of assets and any other income (e.g. investments, bank interest, other employment). If your records are well-organised this is a simple case of adding up a few figures.
About expenses and assets
Here is where things can get a little tricky in some circumstances, but for most Street Fit Instructors it will be just a case, again, of adding up some figures. Expenses are anything you buy and use up as part of your business. This might include stationary, postage, bank charges, cleaning, gym rental, Street Fit course and membership fees and advertising costs. As a rule, if the expense is incurred solely for business use, you can claim it. Drivers are also allowed to claim 45p mileage allowance. Although most small business owners will claim this allowance as a business expense, it may be worth considering treating your car as a business asset instead (you can’t do both!) Business assets are purchases that are not used up as part of your business and will last at least 2 years (e.g. machinery, vehicles, equipment). HMRC allow you to deduct a percentage of the purchase cost each year as an allowance against tax. If you have bought a new car, particularly an environmentally friendly one, it is worth getting advice from an accountant, particularly since the government are currently offering up to 100 per cent allowance on low emission cars.
Paying the Bill
After submitting your tax return, you will be advised if you have any income tax to pay. If you do, this will need to be paid by Jan 31st. As with most bills, you can choose a preferred method of payment, including Direct Debit, although sending cheques by post is not advised. For those who prefer to spread their payments, a budget plan is available for taxpayers who are up to date with their payments.
Disclaimer: This information is for guidance only and does not constitute professional advice. For any queries consult HMRC and/or a qualified accountant.