For the self-employed, completing a tax return can be a daunting experience, but the key to lightening the burden is to keep good records. This does not necessarily involve employing a professional bookkeeper or indeed asking your accountant to 'sort that lot out' which can incur a heavy charge. An accounts ledger, diary notes or a simple computer spreadsheet can be sufficient to record your income and expenditure. For those who want to use software there is a huge selection available, mostly PC based but some of the newer products are web based and operate similar to your online banking.
Basic Record Keeping
One important recommendation would be to have a separate business bank account. If a credit card is preferable, then again, separating business and personal transactions into two separate cards is recommended. Separating business and personal life will make the preparation of sole trader accounts easier and quicker, it also offers a limited amount of protection from the tax authorities should they wish to enquire into your business affairs.
The self employed need to be aware of three general forms of transaction that require recording. Bank transactions, ie payments made from the bank and deposits made into the bank; Cash payments and cash receipts and finally credit card payments. When deciding on how to record these transactions provision should be made to identify which receipts/payments are cash, bank or credit card. For cash receipts, it is important to be able to identify any cash not deposited in the bank but used for sundry cash expenses or general living expenses.
General Business Expenses
There are a whole range of business expenses that can be included within you accounts, the main items would include motor fuel, motor insurance, motor repairs, road fund licence, contract hire payments, advertising, car loan interest, parking, car cleaning, telephone, mobile, postage and stationary and home office expenses. Whilst not exhaustive the list provides a good grounding for the receipts and records that need to be maintained. There are often other less obvious and more contentious items that accountants are asked about, the two most popular questions being; can I pay my spouse/partner for helping in the business? and I have a bad back from sitting in the car all day, can I include the cost of my chiropractor? We will deal with that in the next issue.
Have you got a topic or general tax question you want us to cover in the Q & A next issue? Then email email@example.com
The Societies of Photographers Convention and Trade Show at The Novotel London West, Hammersmith ...
You have 239 days until The Societies of Photographers Convention starting on Wednesday 20th January 2021