Entries from March 2007 ↓

New guidance has been issued by the Taxman on what expenses can be claimed by the self employed when they work from home.

Allowable costs:
- pro-rated mortgage interest;
- phone line & broadband rental;
- insurance;
- repairs & maintenance

Pro-rating costs involves calculating the % of your home used for the business and the % of time per day each room is used for business purposes.

The Taxman is now sending out information requests to householders who have had extensions or other building work done. As this is not part of an official tax investigation you do not have to respond, indeed we think you should file it in the bin.

The Taxman is really trying to find out if the builder you used has declared the income on his tax return, however, he could turn his attentions to you by asking where you got the money from to pay for the extension.

Conclusion - its a lot safer to say nothing.

Here is our summary of the initial announcements in today’s Budget:

2p cut in the basic rate of income tax - from 22p to 20p effective 2008. This looks good news on the face of it but is mostly offset by:
10p increase in the starting rate of income tax - from 10p to 20p effective 2008.
2p cut in the company tax rate for large businesses - from 30p to 28p effective 2008.
3p increase in the small company tax rate - from 19p to 22p. This is phased in between 2007 and 2009 and reduces the tax savings when compared to being self employed but savings should still exist due to the self employed national insurance cost.
Assets purchased by small businesses - immediate tax relief on cost rather than it being spread over a number of years, effective 2008.
Road tax - increased for gas guzzling cars (to £400) and decreased for green cars (to £35).
Cigarettes up 11p - per packet of 20.
Beer up 1p - per pint.
Petrol up 2p - per litre, from 1 October 2007.
VAT registration limit - increased to £64,000.
ISA allowance - increased to £7,200 ( upto £3,600 can be in cash) effective 2008.
Inheritance tax threshold - increased to £300,000.

5 April 2007 - last day of the 2006/07 tax year and the last day for using annual reliefs and exemptions for this tax year
19 April 2007 - due date for PAYE tax and NI including deemed IR35 payments for the 2006/07 tax year
19 May 2007 - deadline for submission of payroll forms P35 and P14 regarding 2006/07
19 May 2007 - deadline for the first monthly return (April) for the new CIS scheme being launched on 6 April 2007

Follow this link for details of what records (and for how long) a self employed individual should keep.

Here is a link to a CIS page with various articles explaining aspects of the new construction industry scheme due to come in force from 6 April 2007.