Tax made easy for counsellors

Welcome to the last blog in my series tax made easy for counsellors. Today we will look at some myths about tax returns and clear some of them up.

I didn’t earn over the £11,800 tax allowance amount (2018-2019)so I don’t need to a tax return do I?

Sadly you do. If you earn money you need to complete a tax return to show the tax office how much you’ve earned and to show you are under the tax allowance

Don’t forget the class 2 National insurance threshold is lower than the £11,800

The only exception if you remember from blog 1 to not having to complete a return was the £1000 trading allowance option. https://www.counsellinginnotts.co.uk/tax-made-easy-for-counsellors

I have a paid job as well as self-employment do I need my p60?

Yes. So you need to wait for you p60 from you paid job, then you can complete your tax return.

I have to do my tax return in January each year by the 31st.

So the deadline for annual online tax returns is 31st January but you don’t have to wait until then. You have all year from when the new tax year starts and the tax office notify you you can now complete a tax return.

Consider completing your tax return early so you know what your tax bill is (tax liability.) then you have until the 31st January to pay the bill. (Or to quickly save the money if you got your math/budgeting a bit wrong)

I always try to do mine early ish so that I can forget about it and concentrate on record keeping for the current year.

I’ve heard I need to pay tax on account in advance for next year.

So yes sometimes you may need to. If the amount of tax you owe is £1000 or over ( so you would have earned £5000 or more profit) then the tax office asks you to pay the tax due by 31st January and then half again to put on account in advance for next year. Why – it seems they’re helping you budget so you don’t get an unexpected bill next year. 

This demonstrates the need to make sure you know your figures. If you’ll just be over £5000 profit it may be worth before the end of the tax year to book some cpd, buy some new chairs et to lower your profit below £5000 so you don’t have to pay extra tax in advance.

I’ve heard I can claim for my original counselling training

Sadly no. HMRC says “You can’t claim for training that puts you in a position to carry out your trade or business”

However…..once qualified you can claim CPD continued professional development which maintains  skills http://www.hmrc.gov.uk/courses/SYOB3/syob_3_exps/html/syob_3_exps_604.html#Para5

I’ve heard I can claim costs from a few years ago before I actually set up

So potentially yes. These are called pre trading expenses/costs. As above this can’t be your original training. http://www.hmrc.gov.uk/courses/SYOB3/syob_3_exps/html/syob_3_exps_203.html

HMRC says “You can claim back pre-trade expenses up to seven years before the start of trading, as long as they are normal business expenses that would have been tax deductible if you incurred them during current trading”

So what exactly does this mean? Let me give you my example I’m off to investigate with HMRC.

In writing these blogs it’s occurred to me after qualifying I studied for a post graduate certificate in Trauma studies at Nottingham Uni. This was 7years ago this tax year so is easily within the 7 years before I set up in private practice. So does it maintain my skills and count as cpd YES.  If I did it now would it count as an allowable expense Yes. Do I have a receipt or proof of payment erm maybe not  ..... trust me I’m off to find something. The uni may still have financial records potentially.

I always make sure I check out things I think are a maybe with hmrc as it’s my tax return and I’m liable for it if it’s wrong. So if HMRC says yes it’s a pre trading expense and I can find some form of receipt then I may be able to claim £1500 off my tax bill. So that’s £1500 I get to keep from my profit. Amazing…   I will keep you updated on my progress to find proof, my sudden realisation may have come too late to find evidence.

I’m not an accountant, I’m a counsellor with a sensible approach whose read and understood the HMRC information. This blog doesn’t constitute financial advice.

HMRC says:  Even if you ask someone else (your accountant or tax adviser or perhaps a friend or relation) to complete your return for you, you remain responsible for the entries on the form