Frequently Asked Questions
Why is my January tax bill so high?
Our taxation works on a system of self assessment. You make payments on account each year based on estimated earnings. There will then be a final payment when your actual figures are known. If you have a year end of 31 March 2012 , you will make payments on account for that year in January 2012 and July 2012. These payments on account are based on your earnings to 31 March 2011 . Therefore if you have an increase in your profits in 2012, in January 2013 H M Revenue and Customs will want the balance of what is due in relation to 2012, plus your first payment on account for 2013. If you have a big increase in profits this is known as the ‘tax bombshell’. It is therefore important if you know you have had a good year to try and get your accounts completed as soon as possible so that we can work out your tax payments in plenty of time for you to save up.
Can I claim my motoring expenses against tax?
You can claim against tax any expenses that relate to the business. Therefore if you use your car for business purposes you can claim motoring expenses. However you can only claim the business percentage of your motoring costs. We recommend that you keep a mileage log, together with a record of all your motoring expenses, so that you can work out over a period of time what your business percentage use of the car is. You can then claim this percentage of all your motoring expenses against tax. A mileage log is an ideal way to justify what you have claimed to the Inland Revenue should they make an enquiry into your tax return.
I’ve spent all my income on equipment so I won’t have any tax to pay will I?
Unfortunately, the answer is that you probably will have some tax to pay. This is because when you buy a piece of equipment you cannot put the whole of the expense against tax in that year. It is assumed that the equipment is going to be used over a number of years. Therefore the cost needs to be spread over those years. In accounting terms this is done by ‘capitalising’ the item and then ‘depreciating’ it over a number of years. For example, a desk costing £200 may be depreciated over 4 years. This means the expense shown in the accounts will be £50 a year for the next 4 years rather than £200 in year 1. For the purposes of calculating tax, the Inland Revenue apply ‘capital allowances’. At the moment these are 40% in the first year and 25% of the written down value after that. Since the full cost of the equipment is not allowable in the year in which the income has been received you will have a profit in your accounts and for tax purposes and this may mean you have tax to pay even though you have spent all your income.
How much will you charge?
Keswick Accountants work on the basis of fixed fee quotes. For example, a simple statement of income and expenditure along with the completion of a tax return will cost £150. Our initial meeting with you will be free of charge. After this meeting we will give you a quote for the work we are going to do for you. The fee we charge will be the amount quoted and no more.
Whatever you want to ask, email or call Frances at
Keswick Accountants for a quick response.