Sole Trader - Tax April - Profits?

[puffin]

Hi all,

I registered as Self Employed as a sole trader in 1st September 2010, have been in business since then, thus my year end will be 31st August 2011.

I am making good profits.

What is the score with April and Tax?

Could anyone clarify, how you sort the tax out for the first part of a not full year.

I have heard you don't pay tax until you have a full year?

Any info is appreciated.

Thanks

 

[mr. mischief]

No matter what year-end you make up your accounts to, your first taxable period runs from 1 September to 31 March 2011 / 5 April 2011 (strictly 5 April, but HMRC accept accounts to 31 March as if it was 5 April.)

Any tax on the profits will be due by 31 Jan 2012.

Note that the rules are different in future years, depending on choice of year-end.

 

[DeanCo]

HMRC work out your tax 6 April to 5 April and this is what most new business's have for their accounting period because it is simpler. So, for simplicity, if you want to do this your first set of accounts should be 1st September 2010 to 5 April 2011.

 

[MyAccountantOnline]

If you intend to deal with your own accounts and tax return I would prepare accounts each year to 5 April - the reason being that this is the tax year and the period to which profits are taxed. Their are special tax rules on how profits are taxed when a different year end is used which are quite complex for non-accountants.

If you will be using an accountant - leave it to them that's what you pay for

 

[puffin]

Thanks for the reply.

So I have until 31/Jan/2012 to pay the tax for the:
September 2010 to 5th April 2011 accounts.

Also..

I am looking to obtain a mortgage by September this year, with a year accounts (september 2010 - September 2011).

How should this be done? In regards to year end etc?

Thanks

 

[DeanCo]

If you are doing your own accounts it is just a matter of having 2 lots of account i.e. 1/09/10 to 5/04/11 and 6/04/11 to 31/08/11. You can have your accounting dates 1/09/10 to 1/09/11 if you wish but you really need an accountant. If you are doing them yourself I would recommend the latter option.

 

[puffin]

If you are doing your own accounts it is just a matter of having 2 lots of account i.e. 1/09/10 to 5/04/11 and 6/04/11 to 31/08/11. You can have your accounting dates 1/09/10 to 1/09/11 if you wish but you really need an accountant. If you are doing them yourself I would recommend the latter option.

Thanks for the reply.

I will be doing my own accounts, and do not wish to have an accountants at present, (in the not too distant future yes..)

I don't quite understand (bold).

The separate accounts make sense.

Regards

 

[MrAnchovy]

If you base your tax on accounts prepared from 1/9/10 to 31/8/11 it gets complicated in 2011/12 when you actually end up paying tax on the period 1/9/10 to 5/4/11 twice. Surprisingly, this might actually be a good idea but tax planning of this sort really needs a good accountant to optimise.

So if you don't want to pay for that advice (which could save you £'000s in January 2013), it's best to prepare accounts to 31 March or 5 April UNLESS your total earnings (including from any other job) in the first tax year are less than the personal allowance due to start-up costs/low profits at the start of your self employment.

 

[ktz84]

On the subject of tax years I've been looking at a couple of accounting programs and both of which only allow you set the month and not month and day for start. With HMRC not having a standard month end tax year start/end do I have to adjust for the 5 days each year that my accounting software refuses to allow me to set or does HMRC turn a blind eye to this? I'm assuming the later given the prevelance of some software ie Sage.

Sorry if this seems like a thread hijack. It's not intended to be so.

 

[miketombs]

The two bookkeeping software products I generally recommend are VT+ and Kashflow, both of which allow you to put in the day.

Getting back to the OP, if the first set of accounts are for the year to 31/08/2011, the 2010/11 tax return will include the pro-rata share of that based on days up to 05/04/2011 divided by 365. The 2011/12 return will be the year's results to 31/08/2011.

 

[Scalloway]

On the subject of tax years I've been looking at a couple of accounting programs and both of which only allow you set the month and not month and day for start. With HMRC not having a standard month end tax year start/end do I have to adjust for the 5 days each year that my accounting software refuses to allow me to set or does HMRC turn a blind eye to this? I'm assuming the later given the prevelance of some software ie Sage.

Sorry if this seems like a thread hijack. It's not intended to be so.

HMRC are quite happy to accept 31 March as a year end.

 

[elaine@cheapaccounting]

If you are making good profits then you might want to have a look at this ...

Why are you a sole trader?

http://www.cheapaccounting.co.uk/blog/?p=1616