Posted by: Installer Online on April 11, 2014 in Installer Blog Leave a comment Keeping on top of your taxes As a plumber, keeping on top of back office admin – particularly tax, can cause somewhat of a headache. More often than not, this is because of the various intricacies surrounding the taxes that your business is liable to pay, when they have to be paid and how to calculate them. With that in mind, here’s a few things you need to bear in mind when it comes to getting your taxes just right. Tax returns and payment deadlines As a sole trader, you need to pay income tax and one kind of National Insurance, called Class 4 National Insurance, on your business’s profits. You’ll also have to pay Class 2 National Insurance unless your profits are very low (£5,725 for the year to 5th April 2014, and £5,885 for the year to 5th April 2015). These taxes must all be paid each year by 31st January following the end of the tax year (5th April), or you’ll risk incurring penalties from HMRC. You must also file a self-assessment tax return (or tax return for short) by the same date each year, if you file it online. Beware the payments on account trap If your income tax and class 4 National Insurance amounts to more than £1,000 a year, then you’ll have to make payments on account. Briefly, what that means, is that on 31st January and 31st July each year, you have to pay half of what you think your next tax bill will be, based on the previous year. This means that in your first year you can end up paying one and a half times a year’s tax bill all in one go – gulp! Make sure you have an idea in advance of what your tax bill might be, and save towards it. Reduce your tax bill: Claim the cost of using your own car Another way to reduce your tax bill is to claim the cost of using your own car for business travel. There are two ways you can do this. If your business’s turnover is below the VAT threshold, currently £79,000 a year (rising to £81,000 a year from 1st April 2014), then you can add up your business mileage, multiply that by HMRC’s approved rates, which are the same as mileage rates for employees, and include that cost in your accounts. This is a simpler method than the other option, but if your car is a gas-guzzler, then you might find your tax relief is increased by using the second method. If your turnover is above the VAT threshold, then you need to keep a full mileage log, showing not only business mileage but private as well. Turn the business mileage into a percentage of the total, then work out how much you’ve spent on your car all together – fuel, MOT, repairs, insurance, and so forth – and multiply that by the business percentage use of the car. And finally… Of course, we know that sometimes when you’re running a small business, a little bit of help from suppliers can make all the difference, which is why we’ve launched The Plumbers’ Club. Members can enjoy many exclusive benefits, all designed to help your business thrive, such as FreeAgent accounting software, which is designed to help take the stress and hassle out of office admin, helping you to manage your taxes more efficiently. Debbie-Sue Price, Head of Customer Programmes at Graham Plumbers’ Merchant For more information take a look at www.theplumbersclub.co.uk Share ! tweet