Common Tax return questions
Far from being the mysterious entities that are completely impossible to understand by mere mortals, they are quite simply really! There are so many questions that people consistently ask about their tax returns. So let’s take a look at these, and give a clear precise answer!
Your tax return troubles are over!
1) How long do we have to keep business records?
Good that you are asking this question firstly! Most people don’t even consider keeping their records when it comes to their business. However, there is an obligation on your part to keep your records for 5 years if you are self employed.
This is so HMRC can review any data that you may have over the past 5 years as they might have questions.
If you are a limited company, they you should keep them for at least 6 years. There are some exceptions, for instance, if you have some data that spans more than one tax year, then you should keep that for longer. In general, keep them all for 6, and the very important ones keep a hold on indefinitely.
2) How much does it cost to get an accountant to do your tax return?
This all depends on where you live, and what type of accountant you choose. The nationwide average (not including London) is around £200 -300 for a tax return. However, remember that you can reduce this from the tax you pay.
If you go to a large accounting firm, then the price could be even higher, and in London, often accountants can charge a lot more. The best practice in this case would be to look for a reputable local accountant. You want quality and not just a cheap price, it could save you more money!
3 ) How much does it cost to get an accountant?
So this question refers to hiring an accountant in general to assist with all manner of financial dealings in your business. This rate is generally applied by the hour, and the rate can be anywhere from £70 per hour up. However, again, talking with local accountants, and negotiating some sort of deal is possible. Remember, when approaching an accountant you should have a good idea as to how much you will use them over the course of a year, this can then be budgeted into you business.
4) How long do you have to keep receipts for tax purposes?
The receipts that you have from your day to day business activities should be kept with the rest of the accounting information. This would then fall under the rules stated in question 1. So keep a neat file with the receipts in, and then dispose of them after you are no longer legally required to have them.
5) What is meant by self assessment tax?
The term is fairly self explanatory when you understand it. Essentially, unlike when you are an employee, your tax is not automatically calculated for you by the government. You are in charge of your own calculation, therefore, you “assess” the level of tax that you pay. This obviously doesn’t mean you can pay as little as you want, what it means is that the calculation process falls on your shoulders.
6) Who has to fill out a tax return?
If you are self employed or own a business, you have to fill one out. This means if you do a little work on the side, it all needs to be declared and answered for! So if you are not an employee of a company, and make money another way, then you have to fill one out. Simple.
7) What is the annual return?
The annual return is something that is submitted to companies house, and it is solely for the purpose of taxing limited companies. Many self employed people do run a limited company, and this means that they are required to do exactly this.
8) What is a short tax return?
A short tax return is something that only specific types of people have to fill in. One such person would be someone who started trading in July, something happens, and they cease trading in September. HMRC will then usually ask that person to fill in a short tax return. It is a condensed version of the regular tax return. However, don’t worry excessively about these, since if you need to fill one out, HMRC will ask you directly.
Hopefully this has answered some