accounts help

Hi All,

I am newly registered and want to do my own accounts and tax etc, but having a few teething problems

Obviously I can only claim back expenses against tax that I would be due to pay, but as I am unlikely to earn over the 10k new tax allowance, does this mean any expenses I have would mean I would be losing out?

So would I charge parents for additional costs, i.e. visits to a soft play?

and am I better charging parents for meals and drinks, rather than putting through as an expense?

Regards to National Insurance, I have registered as self employed and now have been setup for payments to pay NI, but the amount you pay reflects on the amount you earn right? I have been told I need to pay £142.40 a year, according to the salary calculator this appears to be based on me earning £9,150 a year?

Sorry if this is basic stuff, just all new to me

Any help would be great

Last things first: National Insurance.

Self-employed people are liable to pay 2 types of NI contributions: Class 2 and Class 4. Class 2 is payable at a fixed rate, irrespective of earnings, profit, and even if you make no money at all or even make a loss. There is an exception, which I'll address. If your profits are low, you can request HMRC to make a "small earnings exemption for (IIRC) up to the first 3 years of trading. BUT many benefits/pensions/entitlements depend on sufficient NI contributions, so you need to bear this in mind when deciding whether to apply for an exemption.

Class 4 only kicks in if you make profits of around £8,000-£42,000 and is calculated at about 9% of the profit figure.

Please note: all figures are approximate. I am not giving advice here as I am not trained/qualified/competent to do so. Please refer to HMRC for exact information and a proper financial advisor for advice.

To continue.............

Avoid getting into the habit of thinking that every penny you spend on expenses comes straight off your tax bill.......... it doesn't.

First, as you realise, you have a £10k tax-free allowance. Then you pay 20% on profits above that £10k. So £100 spent on a slide doesn't reduce your tax bill by £100. (This probably sounds obvious, but not everybody gets it, and I prefer not to assume. I've known self-employed people who quite genuinely believe that because "...it's tax-deductible..." it isn't costing them anything, and they end up getting quite a shock. :p )

In the same way, don't think of "losing out" on expenses just cos you're not "claiming back" because you aren't paying income tax yet. Buy the things you need to run your business, and deduct the expenses from you income to arrive at your profit figure. The only really critical time to consider this is when you're about to enter the first tax year in which you expect to exceed £10k profits and therefore start paying income tax. When you hit that point, you can start thinking, "do I need really that slide now, or can it wait until the 2nd week in April, when I can offset the cost against my profits?" :thumbsup:

Your question about the food is a valid one, but I wouldn't make the decision based on tax/expenses. If you don't charge for food, then they are an 'expense' when you buy them. If you do charge for food then, like any other food business, they are both an 'expense' when you buy them and an item of 'income' when you sell them (ie. when you charge them to the parents) so it's as broad as it's long.

You should make the food charge decision based on other factors. Personally, I offer an all-inclusive fee. Sadly, this makes me 'look' more expensive than CMs who advertise a lower basic fee, then charge for every other little thing. If you do charge for food and other 'extras', then you will initially look more economical and therefore attractive to prospective clients. BUT they soon get miffed as the true cost of the 'low' headline fee begins to mount as the extra charges rack up. They also start looking at how to save money. Do you really want lots of parents filling you fridge with packed lunches (plus all the arguments when Child A's lunchbox contains something Child B wants :eek:) and nobody can go on a trip cos 1 parent refuses to pay, etc, etc.

2 other things to avoid. Don't believe that an accountant will always save you money. They do for some, but you can do your own accounts very well, particularly whilst earning below the income tax threshold. I'm amazed at how many cold-calls I get from accountancy firms since I registered. And don't begrudge having to pay tax when the time comes. It's better than being charged the first time you need to go to hospital, etc. etc. :thumbsup:

This is only my view. Other CMs do differently and find it works, so don't just follow me. Make your decisions, but don't just follow the crowd. Make sure they're informed decisions and you're ready for the consequences. All part of the fun of being your own boss. :)

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Originally Posted by lindsay.butler

Hi All,

I am newly registered and want to do my own accounts and tax etc, but having a few teething problems

Obviously I can only claim back expenses against tax that I would be due to pay, but as I am unlikely to earn over the 10k new tax allowance, does this mean any expenses I have would mean I would be losing out?

So would I charge parents for additional costs, i.e. visits to a soft play?

and am I better charging parents for meals and drinks, rather than putting through as an expense?

Regards to National Insurance, I have registered as self employed and now have been setup for payments to pay NI, but the amount you pay reflects on the amount you earn right? I have been told I need to pay £142.40 a year, according to the salary calculator this appears to be based on me earning £9,150 a year?

Sorry if this is basic stuff, just all new to me

Any help would be great

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thank you bunyip, i will have a read through this again and again, and hopefully make some sense to me

I want to do my own accounts etc, but just a daunting thought as don't want to get it wrong