What happens if we make a loss??

[stardust]

Hello,
Ive only been minding 2 months so will be making a lose in my first tax year.

I was just wondering how it works with Tax and NI.
clearly you would pay no tax but do you pay NI?

Also what happens with Tax credits?
As they go by your earnings so would they back date the difference in payment?

Anything else you feel like adding could be helpful x
Thank you x

[stardust]

Anyone????

[Zoomie]

Hiya,

you wouldn't pay tax.

not sure about NI - you could apply for a low earnings certificate (or something on those lines)

you would tell tax credits your income was 0

I also made a loss in my first year. I used the loss from my cm to offset the tax i had paid in my paye 'job', and got a bit of money back from the tax man ;)

[MrAnchovy]

Do you mean a loss or do you just mean that you will earn less than your tax-free allowance?

Before you consider opting out of Class 2 National Insurance, read this (http://www.mranchovy.com/information/class-2-national-insurance-small-earnings-exemption).

[Chatterbox Childcare]

If you don't have an exemption certificate then you need to pay Class 2 NI but you wouldn't be charged Class 4. If you make a loss then no tax would be payable but you do need to lodge the return so the loss shows and you can claim it against the next years profit.

For tax credits I would call them as you need to start a claim and then estimate your earnings. Without a claim started you cannot amend it next year and it will only be classed as started from the date you supply the information

[stardust]

Mr Anchovy /Debbies26

Um basically from may 11-sept 11 i was on Maternity leave. Now i am signed off mat leave and have a tax credit claim open going on what i am roughly earning now £1100 which is not alot in tax credits.
I currently have 2 mindees and an average of £1100 pm coming in so i added up the £1100 up until the tax year so £6600 then added the £800 from April 11 and £2600 form my mat leave for the 5 months i took a total of £10,000 but once i have taken out all my expense's from Oct/Nov inc start up costs and my estimated costs for Dec-March is £8,000 so in total for the tax year i would have earned £2000! My expenses include 1992 miles at 40p per mile totaling £796.80 plus start up costs of resources, ink, food, toddler groups, outings, necessities like loo roll, Safety equipment, Memberships, Business car insurance, car seats ect.

[MrAnchovy]

Mr Anchovy /Debbies26

Um basically from may 11-sept 11 i was on Maternity leave. Now i am signed off mat leave and have a tax credit claim open going on what i am roughly earning now £1100 which is not alot in tax credits.
I currently have 2 mindees and an average of £1100 pm coming in so i added up the £1100 up until the tax year so £6600 then added the £800 from April 11 and £2600 form my mat leave for the 5 months i took a total of £10,000 but once i have taken out all my expense's from Oct/Nov inc start up costs and my estimated costs for Dec-March is £8,000 so in total for the tax year i would have earned £2000! My expenses include 1992 miles at 40p per mile totaling £796.80 plus start up costs of resources, ink, food, toddler groups, outings, necessities like loo roll, Safety equipment, Memberships, Business car insurance, car seats ect.

A quick point: you can't claim car insurance if you are claiming mileage, but mileage is now 45p not 40p.

You need to work out your childminding income and expenses separately from your employment income. So if you have income of £6,600 and expenses of £8,000 (seems like a lot, you must have had lots of start-up costs - are you sure they are all allowable?) you have made a loss from childminding of £1,400. You could use this to offset against your earnings from employment, but as these are only £3,400 you shouldn't pay any tax anyway so there is no point - carry the loss forward to next year and you will pay less tax for 2012/13. You won't actually have to hand over any money to the taxman (apart from Class 2 NI) until January 2014!

Tax credits are based on your current NET income so if you have £1,100 income per month, you need to take off 10% for wear and tear, mileage, food, an allowance for memberships and toys etc. to be renewed over the year etc.

[MrAnchovy]

Oh, congratulations on starting up a business and your (relatively) new baby too, I wish you all the best :D

[stardust]

Oh, congratulations on starting up a business and your (relatively) new baby too, I wish you all the best :D

Thank you very much.
Thanks for the help with the tax question.
It has cleared things up massively.
would you claim mileage or petrol, car insurance ect?? I only use my car for childminding so how would this work?

[MrAnchovy]

would you claim mileage or petrol, car insurance ect?? I only use my car for childminding so how would this work?

That has to be the most often asked, and most difficult to answer, question in this section of the forum!

If I were you I would work everything out on the basis of 45p per mile for now. In May you can work out your tax return on that basis but don't submit it. About this time next year you will have an idea of how many miles you do and how much your car costs to run and you can work out if the Actual Cost method would work out better for you - once you have decided, you have to stick with the same method for as long as you keep the car.

[Chatterbox Childcare]

Thank you very much.
Thanks for the help with the tax question.
It has cleared things up massively.
would you claim mileage or petrol, car insurance ect?? I only use my car for childminding so how would this work?

It is a difficult question to answer and like Mr A says keep the mileage record and compare at the end of the financial year which way is best

[stardust]

That has to be the most often asked, and most difficult to answer, question in this section of the forum!

If I were you I would work everything out on the basis of 45p per mile for now. In May you can work out your tax return on that basis but don't submit it. About this time next year you will have an idea of how many miles you do and how much your car costs to run and you can work out if the Actual Cost method would work out better for you - once you have decided, you have to stick with the same method for as long as you keep the car.

Thank you x