High expenses

[emile1973]

My expenses are easily, if not more than 2/3 of my gross (everything included)...should I be worried?

[Penny1959]

One of my parents in the past was a 'taxman' and told me expenses of around half to 2/3rds are normal and expected - so I would not be worried.

If you have reciepts or other evidence of the expenses they can't really argue - especially if you have invested in new resources (which as we all know are very expensive)

Penny

[rickysmiths]

One of my parents in the past was a 'taxman' and told me expenses of around half to 2/3rds are normal and expected - so I would not be worried.

If you have reciepts or other evidence of the expenses they can't really argue - especially if you have invested in new resources (which as we all know are very expensive)

Penny

Now this is interesting because I have been advised by the tax office and my trusted accountant that in a normal year your expenses would not be expected to be more than a third of income and if they are you you have to have a very good reason or you can expect an investigation.

On a personal level why do you work if your expenses are so high? I realise we all want to pay less tax but with a business hat surely we minimise our expenses in order to maximize our profit?

I am lucky over the last five years my income has been heathy and my expenses for the years has been £8000-9000pa I pay about £2000-3000 in tax but have a very healthy take home pay which is one reason I work. I have 2 expensive teenagers to support!

[MaryMary]

Now this is interesting because I have been advised by the tax office and my trusted accountant that in a normal year your expenses would not be expected to be more than a third of income and if they are you you have to have a very good reason or you can expect an investigation.

On a personal level why do you work if your expenses are so high? I realise we all want to pay less tax but with a business hat surely we minimise our expenses in order to maximize our profit?

I am lucky over the last five years my income has been heathy and my expenses for the years has been £8000-9000pa I pay about £2000-3000 in tax but have a very healthy take home pay which is one reason I work. I have 2 expensive teenagers to support!

I agree. I have had conversations with a couple of childminders who seem to make it their sole aim to put through as many expenses as possible to avoid paying tax! I personally do have a problem with paying tax - I have always done it, and see it as 'paying my way'.

I spoke to one yesterday, who was saying that her best month was £3000, but how it had gone down recently to about £1500-£1800. She doesn't pay any tax!!

I expressed concern that one day she might expect an investigation, but she seems to think she is doing nothing wrong (has receipts, documentation, etc). It just doesn't take a genius to do the maths. She has spent more on holidays alone in the past 12 months than she has told the taxman she earns!! I have said my piece, and it is up to her now. You can't help someone who doesn't want to be helped!

[mufftie]

i was always told that you can clain 2 3rds as your expenses and have done over the last 6 yrs , im a very heavy spender on toys and prams , and genuinly do spend a fortune , i also claim the cost of the loan for my car as i purely bought it as a 12 seater for childminding and have classic cars for personal use , so therefore can easily loose my 2/3 rds of income plus my mortgage is big so the percentage of that im alowed is big , the list goes on , i cant hide the money im paid as im paid by standing order most of the time . so maybe some of us who dont pay much tax have genuine reasons for it

[green puppy]

i was always told that you can clain 2 3rds as your expenses and have done over the last 6 yrs , im a very heavy spender on toys and prams , and genuinly do spend a fortune , i also claim the cost of the loan for my car as i purely bought it as a 12 seater for childminding and have classic cars for personal use , so therefore can easily loose my 2/3 rds of income plus my mortgage is big so the percentage of that im alowed is big , the list goes on , i cant hide the money im paid as im paid by standing order most of the time . so maybe some of us who dont pay much tax have genuine reasons for it

I didn't think you could claim a percentage for a mortgage?

[mufftie]

yeah , well i always was told i could as on my guidance form asks about rental payments etc , lets face it if you were a nursery then youd have to pay for the builing over heads . same as heating , electric etc ,

saying that please correct me if its changed as i havnt changed the way i do my tax return for 7 yrs

[handeme]

I have just registered and as part of my training there was buisness training. We were told in our training that if you lived in rented housin g then you could claim for your rent but not your mortgage. Is this wrong?

Claire

[jumpinjen]

My expenses are still high as I am still investing in things like fencing to separate safe toddler area in garden from the rest, wooden playframe, large amount of sand for huge sand pit, covered area for all-weather painting/play, and am still building resources up. I also claim for travel expenses and my own childcare expenses whilst I am completing a training course (including train fares to London two days in Feb to take the final exams for it) adn therefore am not making much money at present.... having said that, i only work three days a week at present as two days I'm on placement for my course and can only have two under five as my own littel one under five so income is limited. I claim probably way more than 2/3 of gross income but am expecting it to go down over the next couple of years as i finish putting the infractsructure of what will hopefully be a long term business together. if any other minder or the tax man questioned my expenses i have full evidence of them all and would tell them to take a running jump tbh as everyone has different business situations and i'm not going to compromise my environment and resources based on someone elses opinion that i should only spend X Y and Z.

I give my financial records to an accountant who deals with it all under sole trader rules and has done for the last two years and has advised on what can be claimed and what can't. I'm not expecting to be investigated.

Jenni

[tulip0803]

yeah , well i always was told i could as on my guidance form asks about rental payments etc , lets face it if you were a nursery then youd have to pay for the builing over heads . same as heating , electric etc ,

saying that please correct me if its changed as i havnt changed the way i do my tax return for 7 yrs

Many many years ago you could claim a percentage of your home mortgage against your tax - My Dad had a business from home and this is what he was able to do. This changed years before I registered in 2001 and can only be applied to rent not to mortgage payments. I did a tax course again 2 1/2 years ago to make sure I was doing it right and they said the same thing. Sorry but you should not be claiming for a home mortgage - different for a nursery that is a business premises than for a home where a business is run from.

[jumpinjen]

Read through this link:

http://www.freeagentcentral.com/cent...king-from-home

As a sole trader working from home, you are eligible to claim for a PROPORTION of mortage INTEREST payments depending on use of rooms etc... you might want to ask for advice to work it out from an accountant though,

Jen x

[Carol M]

I have always thought it unfair that you can claim % of rent but not your mortgage.
I'm sure you shouldn't be claiming this as an expense muftie, but don't ring HMRC to ask as you might trigger an investigation. Pretty sure you can find a list of allowable expenses online, going to have a look too as I'm not sure how much I can put through of my car loan. Someone told me it is only a % of the interest if you claim the depreciation bit! Bloomin confusing this tax thing is
Carol xx

[jumpinjen]

See above link that i posted for allowable expenses for sole traders..... try using sole trader as a search word when looking for business use on a car..... the problem with mortage rather than rent is that you personally profit from owning and potentially selling a home so if you have claimed through the tax for it then you could be liable for capital gains tax (but not if none of the rooms that you use are solely for childminding).... this may be true for a car too... as in you would be liable for tax if you sold it and had put a percentage through the business.... You could ask advice from an accountant, pay for it, then you know what you're doing for the next few years!

jen x

[rickysmiths]

i was always told that you can clain 2 3rds as your expenses and have done over the last 6 yrs , im a very heavy spender on toys and prams , and genuinly do spend a fortune , i also claim the cost of the loan for my car as i purely bought it as a 12 seater for childminding and have classic cars for personal use , so therefore can easily loose my 2/3 rds of income plus my mortgage is big so the percentage of that im alowed is big , the list goes on , i cant hide the money im paid as im paid by standing order most of the time . so maybe some of us who dont pay much tax have genuine reasons for it

I'm sure you can't claim for your mortgage as a home based childminder I wish you could! You can claim a percentage of rent as an expenses which I have always thought a little unfair but thats the way it is.

I wouldn't want to be in your shoes if the IR did a check on you. Or live in worry about any Capital Gains Tax That might be due to be paid if I sold my house.

[Carol M]

See above link that i posted for allowable expenses for sole traders..... try using sole trader as a search word when looking for business use on a car..... the problem with mortage rather than rent is that you personally profit from owning and potentially selling a home so if you have claimed through the tax for it then you could be liable for capital gains tax (but not if none of the rooms that you use are solely for childminding).... this may be true for a car too... as in you would be liable for tax if you sold it and had put a percentage through the business.... You could ask advice from an accountant, pay for it, then you know what you're doing for the next few years!

jen x

Thanks Jen,
Did a search and yes, can only put through the annual depreciation% and a business% of the INTEREST paid on my car loan (not the full monthly repayment)
Now to dig out paperwork to find out the interest I'm paying
Carol xx

[Penny1959]

Now this is interesting because I have been advised by the tax office and my trusted accountant that in a normal year your expenses would not be expected to be more than a third of income and if they are you you have to have a very good reason or you can expect an investigation.

On a personal level why do you work if your expenses are so high? I realise we all want to pay less tax but with a business hat surely we minimise our expenses in order to maximize our profit?

I am lucky over the last five years my income has been heathy and my expenses for the years has been £8000-9000pa I pay about £2000-3000 in tax but have a very healthy take home pay which is one reason I work. I have 2 expensive teenagers to support!

On a personal level my expenses are very high as I have just re registered and I am having to but everything from scratch. I also had to pay for nearly everything to register as missed out on start up grant and capital funding. My fees are quiet low compared to a lot of other areas as Worcestershire rates are generally low. However the prices I pay for things are the same as every where else, so % wise a new car seat costs me more than CMs in areas where fees are generally higher.

Also each of us will have different levels of expenses depending on service we provide - personally I provide all meals, all outings and a reusable nappy service as part of my fees.

In the 20 years that I was registered last time my expenses were always around half my gross and maybe I was lucky but I was never investigated - but I would not be worried if I was investigated as all my expenses were above board - and yes I did pay tax because my business was profitable.

I expect to either make a loss or a very small profit this year due to start up costs but in the coming years I expect to make a profit - but I probably will not be maximising my profits because if I need something for my setting, I tend to buy it before checking if it will effect my profit margin- but that is just the way I am - maybe not a good business woman but I didn't become a childminder to make my fortune - just enough to have a reasonable wage and to be lucky enough to do a job I love.

Penny

[Louise0208]

On a personal level my expenses are very high as I have just re registered and I am having to but everything from scratch. I also had to pay for nearly everything to register as missed out on start up grant and capital funding. My fees are quiet low compared to a lot of other areas as Worcestershire rates are generally low. However the prices I pay for things are the same as every where else, so % wise a new car seat costs me more than CMs in areas where fees are generally higher.

Also each of us will have different levels of expenses depending on service we provide - personally I provide all meals, all outings and a reusable nappy service as part of my fees.

In the 20 years that I was registered last time my expenses were always around half my gross and maybe I was lucky but I was never investigated - but I would not be worried if I was investigated as all my expenses were above board - and yes I did pay tax because my business was profitable.

I expect to either make a loss or a very small profit this year due to start up costs but in the coming years I expect to make a profit - but I probably will not be maximising my profits because if I need something for my setting, I tend to buy it before checking if it will effect my profit margin- but that is just the way I am - maybe not a good business woman but I didn't become a childminder to make my fortune - just enough to have a reasonable wage and to be lucky enough to do a job I love.

Penny

exactly the same here

[emile1973]

This is my first full year!
I do earn good money but spend on alot on food/equipment/outings!

I know it wont be as high next year as I have bought most of the equipment/ toys this year! I have accounts that can justify it all though.
Thankyou for all the advice!

[rickysmiths]

On a personal level my expenses are very high as I have just re registered and I am having to but everything from scratch. I also had to pay for nearly everything to register as missed out on start up grant and capital funding. My fees are quiet low compared to a lot of other areas as Worcestershire rates are generally low. However the prices I pay for things are the same as every where else, so % wise a new car seat costs me more than CMs in areas where fees are generally higher.

Also each of us will have different levels of expenses depending on service we provide - personally I provide all meals, all outings and a reusable nappy service as part of my fees.

In the 20 years that I was registered last time my expenses were always around half my gross and maybe I was lucky but I was never investigated - but I would not be worried if I was investigated as all my expenses were above board - and yes I did pay tax because my business was profitable.

I expect to either make a loss or a very small profit this year due to start up costs but in the coming years I expect to make a profit - but I probably will not be maximising my profits because if I need something for my setting, I tend to buy it before checking if it will effect my profit margin- but that is just the way I am - maybe not a good business woman but I didn't become a childminder to make my fortune - just enough to have a reasonable wage and to be lucky enough to do a job I love.

Penny

I can see set up costs may make expenses higher. I never had a start up grant or Capital Grant and I still made a profit the first year I worked. I provide fresh cooked meals and all snacks, I pay for all outings, toddler group fees etc. The only thing the parents provide are nappies and formular milk. I have built up a large number of resourses over the years and am adding to them all the time, this week infact, much to my dh dismay

This year even though I will be including Porta Cabin and Storage Bin Hire and the purchase of new storage shelving for my new playroom, I will go over 1/3 but won't get anywhere near 2/3 expenses to income. I spend £4-5000 a year on food alone as well. I do earn a healthy but not excessive income which I work over 50hrs a week for. I could not do the job if I didn't enjoy it. But I am under no illusions, I do it to earn money.

If I did not need the money I would give up tomorrow, there are many things I could do with my time in the community if I didn't have to actually earn a living.

[FussyElmo]

I always had the idea wrongly probably that if you were an high earner in cm'ing your expenses would be lower than a low earner.

Im a low earner because of personal circumstances last yeard and the fact my own children take up 2 of my under 5's spaces.

Im from a low earning part of the city so have to keep my prices competitive or I would have no work.

So for example I had to buy a new storage shed for outside as I got some resources from the capital grant and that wiped out my income for the week once I added on all the day to day running. Now if you are on the high end of earning that would not have made a dent in your earning for that week so the percentage is lower.

Ignore that if you think its a load of rubbish