Tax Advice please!

[Stumpyotoole]

Having been instructing for just under a year, I have just recieved the paperwork for my first tax return in the post. ARGH! I think I may need help. infact I don't think, I know! For starters I barely understand the names of the credits/benefits/... that they are asking me to declare, let alone how much and where I fill it in. I confess to having no clue about what documentation I should have saved (with the result that I now have a drawer full of stuff which is most likely going to be no help at all!)

I know I should have been more organised and got myself help when I started earning on a self employed (ish) basis. I know it and yet somehow the joy of finally being paid for flying got in the way and now I have a mere 6 monthsor so to figure out the puzzle.

If anyone out there can offer me constructive advice, or point me in the direction of help i would be most most most appreciative!

stumpy

[polohippo]

Tax

I know exactly how you feel as I was in the same situation last year.

Get an accountant, it cost me £160 for my return last year, I just gave him a pile of papers and he sorted it out!

[Donalk]

You readily admit to not understanding your tax affairs and the tone of your post suggests you do not want to become a tax expert either. This is fine but it means you really should get an accountant to help with this problem.

The only advice I can offer is to retain every single piece of documentation which is even remotely related to your work. As a self employed person you have a certain latitude in what can be classed as a business expense but let your advisor make the decision on what is submitted as expenses. He or she will have experience of what categories are generally accepted and what are classed as taking the p***. The objective of the exercise is to reduce your taxable earnings as much as is legally possible thus leaving you with a small or non existant tax liability.

Choose your adviser carefully as some are more proactive than others. The ideal scenario is that whatever fee is paid to your adviser is returned to you in a reduced liability and/or savings in time and hassle. Good luck with it.

[Whirlybird]

And your accountant is a legitimate expense, so will save you some tax.

[DFC]

And your accountant is a legitimate expense, so will save you some tax.

No it will not save you a penny. The only thing that being an expense means is that the taxman will pay (insert your highest rate of tax here) percent of the cost. You will have to pay the rest.

Simplified Example;

You have taxable income of 1,000 and pay tax at 20%. At the end you have 800 and the tax man has 200.

You pay an accountant 100 and claim this as an expense. Now you have a taxable income of 900 so you pay 180 to the taxman and have 720 left for yourself.

Thus the accountant has cost you 80 and the taxman 20. It has saved you nothing.

Had you purchased one of the many guides plus some tax return software for a total cost of say 50. Even if you did not claim them as an expense you would be 30 better off.

The only time an expense will save you tax is when it prevents you going from the lower rate to the higher rate of tax. Not something that most flight instructors have a problem with.

Tax Calc software - there is a free version or you could spend 25 and use it to do your return.

Regards,

DFC

[Whirlybird]

Actually, DFC, that's what I meant, though I agree I didn't make it very clear.

[Duchess_Driver]

Get an.....

Accountant

Will save you more than he'll cost you!

[JonathanB]

I'm just starting out (passed my skill test for FI(R) yesterday) and currently have a VAT registered Ltd. company for my IT contracting work. Do most people run the FI activities as a non-registered self-employed type business? I'm wondering if I should do it that way, or combine it into my current company. In either case the accountants would deal with it.

Thanks for advice - all very useful! (And sorry for partially hi-jacking this thread!).

JB.

[pipertommy]

Also a new instructor

Sorry for jumping in on the thread, but do I need to inform the Tax office that I am earning as an instructor ( only part time once a week) or do I wait and then complete the paper work at the end of the tax year ?? And pay the tax due.

Thanks.

[Stumpyotoole]

well thank goodness I don't seem to be the only one whole finds this all a bit baffling! Thanks for all the replies guys, I have now bought myself a tax for dummies book and am sorting through everything in preperation for meeting up with an accountant reccomended by a colleague!