84,000 Plumbers need to complete a tax return . . . do you?
Easy Accountancy is part of the multi-award winning SJD group, which provides accountancy services to over 14,000 small businesses throughout the United Kingdom. SJD Accountancy has over 22 years’ experience and are the UK’s largest contractor accountants. SJD has won many industry awards such as The British Accountancy Awards ‘Accountant of the Year’ and the National Chamber of Commerce Award.
With the impending Self Assessment tax return deadline approaching, Heather Dore, Regional Manager of Easy Accountancy answers some crucial and commonly asked tax return questions from our clients who work in the Plumbing sector.
Many of my clients pay for plumbing jobs in cash. What is the best way to record my cash income in case I am asked for proof by HMRC?
Whether you are paid in cash, bank transfers or cheques you must record your income. It is recommended that you use a spreadsheet and record every client payment you receive. Issuing sales receipts and keeping a copy in a safe place can be used as proof of income if required by HMRC.
I’ve started to sell some of my old plumbing equipment on eBay. Do I need to declare this extra income on my tax return?
Any additional income that you receive must be noted on your tax return. So in this case the extra money that you receive on eBay should be included as part of your annual income on your tax return.
When completing my Self Assessment tax return I need to note my total income. Should I put down the total amount that I have invoiced for each client including labour and materials, or just the labour amount?
When completing plumbing jobs you will invoice your clients a total amount including labour and material costs. When completing your tax return your income is the total amount that you invoice your clients including labour and material costs. Material costs in these instances are classed as business expenses and so should be noted on your tax return so that you can receive tax relief on these costs.
As a plumber what are some of the costs that I could claim as a business expense?
Some common examples of expenses that a plumber could claim are materials, equipment, travel and protective clothing. To claim costs as expenses you need to note the amount on your tax return. Your total expenses amount will be deducted from your total income and as you are only required to pay income tax on your income you will receive tax relief on business expense costs.
When do I have to complete my tax return by?
The deadline for the upcoming 2013/14 tax year is:
- Online returns 31st January 2015
What happens if I miss the tax return deadline?
If you are planning to submit a paper return and miss the paper returns deadline (31st October 2014) then you will need to submit your return online via the HM Revenue and Customs (HMRC) website. If you miss the online returns deadline you will automatically incur a penalty of £100. If your return is three months late you will incur a further penalty of £10 for each day your return continues to be late up to a maximum of £900 or 90 days. If HMRC have not received your return six months after the deadline you will incur a further fine of either £300 or five per cent of your total tax bill, whichever is the larger amount. If your return is 12 months late you will again incur a further penalty of either £300 or five per cent of the total tax due. You may then be liable for further penalties depending on your circumstances.
What happens if I don’t pay my tax bill by the deadline?
If for whatever reason you are unable to pay your tax bill on time it is worth contacting HMRC as depending on your circumstances you may be able to negotiate a deadline extension or the option of paying your tax bill in instalments. Failure to pay your tax bill on time without first contacting HMRC will leave you liable for further penalties. Interest is usually charged on unpaid tax bills from the deadline to the date that the payment is received. If your tax bill has not been paid by February 28th then you may incur a five per cent penalty. If your tax bill has still not been received by July 31st then another five per cent charge will be made, and if the tax is more than a year late you may receive a penalty equal to the amount of unpaid tax.
Can I edit my return once it has been sent in?
It is possible to amend your return once it has been submitted. The deadline for tax return amends is 12 months following the tax return deadline. If you have submitted your return online you can make amends by logging into your online account on the HMRC website. If you have completed a paper return then the usual correction procedure is to send HMRC the correct pages of your paper return and mark them for amendment.
How long does HMRC have to investigate my return once it has been submitted?
If HMRC decide to investigate your tax return they will contact you in writing, within 12 month of receiving your return. If you have amended your return or submitted your return late, HMRC is entitled to an enquiry window of 12 months following receipt of your tax return and up until the next “quarter day”. The quarter days are January 31st, April 30th, July 31st and October 31st.
How long do I have to keep my records for?
If HMRC decide to enquire into your return they may ask to see proof of income, expense receipts and other records such as bank statements. It is recommended that self-employed individuals keep copies of these records, in particular expense receipts and proof of income for seven years in case HMRC request to view them.
To view the infographic please visit: http://www.easyaccountancy.co.uk/infographic-tax-returns-are-you-ready-31st-january-deadline.