F.A.T Newbie for Employed and Self-Employed Zumba Instructors

Transcription

1 F.A.T Newbie for Employed and Self-Employed Zumba Instructors By Andrew Crawford ACMA 1

2 2

3 Special Guide Are You a Employed and Self-Employed Zumba Instructor? Well This Guide Is For You. By Andrew Crawford ACMA 3

4 About the Author Andrew Crawford is a Chartered Management Accountant & Tax Adviser who has a wealth of experience and a comprehensive understanding in dealing with fitness professionals. Over 20 years experience. From class Fitness Instructor to Personal Trainer to Fitness Event Organiser. He has been an International presenter who has developed business management, tax and accounting skills to service Fitness Instructors, Presenters, Persoanl Trainers, Zumba Instructors and Health Club facilities. 4

5 Introduction Some new Fitness Instructors work full time and are taxed through the PAYE scheme whilst also enjoying some Freelance Zumba income. You should register as Self Employed with your local Inland Revenue Office or get the number of your tax office from your employer. You can also register online. You can claim expenses in the same way as though you were a full-time Sole Trader. This means that expenditure which was wholly and exclusively incurred for your business can be claimed through the Self Assessment forms. For self employed income under 70,000, you will only have to fill in 3 lines of the Self Assessment form. If, however, your freelance income exceeds 70,000, you will have to provide more detailed information of your business expenses. Bearing in mind the Inland Revenue has recently publised that it will scrutinise the fitness industry, it is best to keep good records even if you only do a few classes. Registering as Self-Employed You can register as self-employed directly online to the Inland Revenue, this is the fastest way. Click the link below to be taken directly to the registration page. 5

6 Things you MUST do when starting out Inform the Inland Revenue when starting self-employment Choose your accounting year-end. It is better to choose the tax year -end finishing on 5 th April. Make a list of fixed assets such as cars, vans and other office equipment Keep a record of all income and expenditure relating to your business Keep all receipts and invoices Keep a separate bank account for business and file each statement Keep a record of your business mileage, petrol and all running expenses if your vehicle is used solely or partly for your business Ensure you have adequate life and health insurance, pension arrangements or other investments Count expenditure incurred before you start your business as pretrading expenses Set any first year losses against other income Save money for your tax bill Do not spend the VAT income Why Keep Records? Records are important as they serve to back up your expenditure story to the Taxman. If you cannot prove what you have spent and cannot demonstrate this with your records the Taxman has the power to disallow it therefore increasing the amount of tax you pay. There will also be the fine on top of that and further penalties and interest. It s just a goldmine for the authorities. Ensure your records are up to date and in an order which can be easily accessed. 6

7 Receipts and invoices should be referenced to a summary document. This is basic bookkeeping. Records are to be kept for six to seven years. I have knowledge that they can go back 20 years if they wished!! Do You Know Your Way Around The Tax Return? It is important to have an appreciation of the Tax Return and the information that it requires from you. If you are an individual or are in a partnership you would need to study the Self Assessment Tax Return. If you run a small business this would be the Company Tax Return. Also, be aware of the additional information that is required. This forms the additional pages of the tax return, called Supplementary Pages. The supplementary pages amongst others include the employment page, the self-employment page and the capital gain pages. Spend some time looking at one and you will find that only a few sections might apply to you. I have recently used the Inland Revenue s online submission version, it is quite simple if you know the above information. Tax Avoidance This is where careful business planning and intelligent tax advice can be used to minimise your tax liability. This is common practise and careful timing of acquisitions and disposals can lead to a reduction in your tax bill. Tax Evasion This is an illegal practise, which involves the deliberate falsification of accounts. The Inland Revenue have introduce some stiff penalties for incorrect information, falsification and misinformation and accounts and records. Avoid this if you can. 7

8 Claims which can be made Expenditure forms a vital part of all businesses. Like most professions you ve probably wondered if a certain expense is allowable to offset against profits. Below is a guide as to what the Inland Revenue allows and disallows. I would claim for most things keep receipts though. Allowable Deductions Expenses incurred solely for business purposes are generally allowable deductions when calculating your tax bill. This is usually referred to as wholly and exclusively, this is a word I want you to become familiar with. Disallowable Deductions Expenditure which is not wholly and exclusively intended for trade purposes, is not allowable. Examples include the following. Capital Allowances You are able to claim Capital Allowances on equipment, machinery and vehicles which are used in your business. These are deducted from your business profits to arrive at your taxable profits. You can usually claim 20% writing down allowance on these items. For smaller businesses, there is also a first year allowance that can be claimed on plant and machinery at 40% or 100% in most cases. This first year allowance is not available on cars. It is also worth noting that the claims are for business use only. This means that if you only use your car for business only 25% of the time, any allowance has to be in the calculated in that same proportion. Example: If a car costing 8,000 is used for business only 25% of the time, the amount of capital allowance that you can claim will be : 8,000 x 20% (WDA) x 25% (Business use) = 400 8

9 Use of home as an office You can claim a proportion of your home costs as long as you can establish the extent it is used for business. To do this, calculate a percentage on the number of rooms, which will exclude the bathroom and the kitchen. You will be able to claim 100% of repairs, maintenance and decorations to the room you use for business. Example Total Bill Business Use Per annum (20%) Mortgage interest 4, Council Tax House insurance Gas Electricity Repairs Total 6,400 1,920 In this example you would be able to claim 1,920 for the use of home as an office. National Insurance As well as paying your class 1 (employed) national insurance, you will also pay class 2 (self-employed) and class 4 (self employed). Class 2 is 2.50 per week and is taken by direct debit, Class 4 is 9% on profits between 7,225 and 42,475 plus 2% on profits over $42,475. 9

10 Tax Considerations You will not be taxed twice but must send in a Self Assessment form by 30 th September (If you want the Inland Revenue to calculate your tax) or 31 st January detailing your employment earnings (usually found on your P60) and any other earnings such as self employment income or income from a partnership. If the tax from your self employment or partnership exceeds 500, you will start paying tax in advance, known as Payment on Account. If you would like us to work out what your tax payment/ refund would have been for , please forward the following details by ; P60 Details Gross pay, National Insurance & Tax paid for the year Other income From Sole Trader, Partnership etc Expenses Tax code You have a few months in which to resubmit a Self Assessment form if you think it has been assessed wrongly. adviceontax@gmail.com What Are Accountants Paid For? Apart from the vast breadth of knowledge and training attained before qualifying as an Accountant, only a small amount of this knowledge is necessary for a small owner managed business. Therefore, since some businesses have straightforward tax affairs, the fees cannot be high. However, some Accountants love it when the bookkeeping is in a mess and the owner hasn t got a clue as to what is happening with their paperwork. You must remember that Accountants will charge their time to bring the paperwork up to date, so if the bookkeeping is up to date and in good order, the fee should not be so high. 10

11 The stages involved are; Bookkeeping Preparation of the Accounts Preparation of the Tax Return Tax Computations (working out exactly what is owed in tax). Why You Should Know What You Are Paying For? Fees are also determined on the complexity of the business affairs. The more complex your business is the more the charge will be. I have come across cases where the Accountant has clearly overcharged the client. This is down to the ignorance of the client not understanding Accountancy or Tax. In my opinion the Accountant is taking advantage of this lack of knowledge. All you would need to know is how to do it yourself, how to produce your own accounts, how to do your own bookkeeping. If you could learn this in a fun environment and Accountancy and Tax became your friend there would be nothing to fear. Final Thoughts Starting a Zumba class is both exciting and finacially rewarding. You are proving an outlet for consumers to have fun and dance their way to fitness..a very important role..! Don t forget your financial duties to the Inland Revenue they won t, so it s best if I warn you FIRST because they want your blood.i want your success. Andrew Crawford 11

12 Useful Numbers Companies House VAT National Advice Service Business Link Self Assessment Helpline Newly self employed helpline Employers helpline Internet Addresses You can download a list covering allowable and disallowable expenditure and tax tips covering car expenses and a whole lot more FREE resources from our website. If you require more information please submit a question on our site. You can Andrew Crawford to ask any questions at: adviceontax@gmail.com 12