Nothing is certain in life except for death and taxes. It’s now the end of May. The current fiscal year is about 7 weeks old. No one likes tax reporting although it can be argued that the UK has one of the simplest tax reporting methods in the world. Here are some top tips for a fluid and painless tax report.
Ensure That You Account for All Deductibles
Sometimes, even seasoned student HMO landlords don’t realise how much is claimable. If you use anything for the sole purpose of the business, you may claim it as an expense. Confusion lies in where you buy something partly for personal use too (for example, a mobile phone). You may claim the estimated percentage of business use. For most, this may be 50% business and 50% personal.
Consider Simplified Expenses
This is where the justification for the “simplest tax reporting” claim comes from. If you work from home a lot rather than from an office (and many owners of student HMOs do) you may claim simplified expenses. This is a flat rate based on how many hours per month you typically work from home and not subject to calculations. Full time? Claim the full rate. Careful though because the flat rate for utilities is based on an average. Depending on where you live, your actual costs may be higher. Simplified reporting is not available for incorporations.
Start Collating Now
Did you know that about 1 million people miss the January deadline every year? That incurred both fees and interest for every day over the deadline. Another 700,000 do it on the day of the deadline while a reported 26,000 people submitted within the last hour. If you start getting your documents together now it will save potential headaches later.
Alternatively, keep all your records and hire a bookkeeper. They are trained to know exactly what to do. You don’t have to hire one full-time either. There are plenty of freelancers who will do this for you at fraction of the cost of a full-timer.
Too Complex? Consider Incorporating and Hiring an Accountant
There comes a point in your career where incorporating is the better choice for you. Essentially, you are setting up a business with all the financial benefits and risks that go with it. Currently, the corporate tax rate is 19% for everyone. By 2023, those with revenue under £50,000 from 2023 will stay on that rate while those over £250,000 will pay a new higher rate of 23%. These remain lower than personal tax rates. You can pay yourself a small salary. In the long run, it’s a smaller tax burden.
Mortgage interest is (currently) permissible but this will be phased out soon.