Help Required - Self Employment Accounts

kellyriddellkellyriddell Feels At HomeRegistered Posts: 84
Hello, I hope that I have put this in the correct section and hoping you are able to help me.

I am currently training to be an accountant at intermediate level and do my partners books. He is a self employed valeter.

So far my partner has not claimed a wage nor drawings from his earnings as he has not had too (he is lucky - his job is his hobby) we are drawing towards the end of the tax year and feel that even though he has not taken a wage he should be entitled to some sort of wage to spend on him self i.e holiday. Is it correct that he would be able to pull a wage of 90 per week which would be non taxable as it is below the tax threshold? If this is correct could he back date this to when he first went self employed in August? No capital was put into the business initially so we would be unable to declare this as drawings so am hoping that I can put it through the books as a wage - again is this correct?

Finally, where do i get a tax return form from? I know it is not required until April, but i am yet to fill one of these in and have not studied this area. I keep very detailed books with full breakdowns sub catagorised so I am hoping it will be a case of transferring figures only.

Any help and guidance will be most appreciated.

Many thanks

Kelly

Comments

  • Anne BoleynAnne Boleyn Well-Known Registered Posts: 196
    Self employment accounts

    Hi Kelly

    When anyone becomes self employed they have to notify HMRC of this on form CWF1, also they are required to pay class 2 national insurance (form CA5601 for DD).

    Your partner's wage would be classed as drawings and tax is paid on profits not drawings. I believe the £90 a week scenario you mention for not paying NI but this is for employees or a director of a limited company.


    If your partner has notified HMRC that he is self employed he will receive one or a notice to file (ie online). There used to be a window of three months to notify HMRC of your self employment however I have a feeling this is not now the case. A penalty may be issued for failing to notify.

    Whilst a certain amount of a tax return is transferring figures from accounts there are also many elements that are not going to be obvious to a novice (no offence intended).

    Regards
  • kellyriddellkellyriddell Feels At Home Registered Posts: 84
    Ok that has reassured me a bit, though I find it hard to believe that my partner can draw as much money as he likes and not be taxed on this - surely he could draw all profits and pay no tax on his profits, I think everyone would be doing that.

    He has already registered as self emp and we have the national insurance sorted - i looked at the HMRC website and found the information out about the tax return - I think what I may do is attend one of their classes, hopefully this will help.

    Dont worry no offence made though everyone has to start somewhere! Im a determined person I shall succeed (Even if I cant spell it!)

    Regards
  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    Self employed people get taxed on their profits BEFORE drawings. So your partner will be taxed on all his profits regardless of whether he's drawn on them or not.
    Jodie
  • NeilHNeilH Trusted Regular Registered Posts: 544
    Hi

    Probably just repeating what has been said, but your partner will be taxed on profits of the business regardless of any money he has left in or withdrawn from the business. The business earnings of a sole trader or partner in a partnership are (putting in simply) considered earnings of the individual - at sole trader/partnership level the business and person are one and the same. The advantage of leaving any money in the business is that the business can then use this money to trade and develop further.

    If you have kept detailed records, putting together a tax return should not be too difficult in itself. But there are various allowances, expenses exceptions and the like that vary from year to year - capital allowances are the first that spring to mind - and these things can vary from year to year. Not allowing for these could result in an over or underpayment of tax.

    Also, you wont need to prepare the return until April - but you actually get until the end of January 2011 to file if you do it online!

    Neil
Sign In or Register to comment.