My college experience was amazing, but there was very little tax and finance education there. Therefore, I trusted the people around me like my friends, colleagues and my mum to be in the know on what’s what. However, since starting SansDrama, and actually having to researching and understand what’s right and wrong, I can confirm that we are all full of it! Hands up, this was 100% me too, but now that the information is available, it’s time to set things straight. Here’s a few very common misconceptions doing the rounds.
You have to pay for an accountant to do your tax return for you
Unless you have a particularly complicated tax situation (like if you’ve paid tax in multiple countries), your tax return is probably pretty simple and you needn’t pay for an accountant. Just as an example, in the last tax year, I had a cruise contract, employed income and self-employed incomem but my tax return took me 36 minutes to complete. If you do want to pay an accountant, you still need to have your income and expenses information anyway which is 99% of your return – the remainder being scrolling down and clicking ‘save and continue’ and at the end ‘submit’.
If you’ve worked abroad, you don’t pay tax on your foreign income
Here is our foreign income post which goes into more detail, but ultimately it comes down to whether you are seen to resident in the UK for tax purposes during the tax year. If you are, then you have to declare your worldwide income and if you’re not UK resident, you only declare your UK income in your tax return.
If you’ve worked on a cruise ship, you’ll get seafarers earnings deduction and therefore don’t have to pay tax or do a tax return
Oh how I wish this were true! Coming from someone who has done a cruise ship and did not qualify for the deduction, believe me not everyone qualifies, and I checked and checked again! We have a post on cruise ship income and seafarers earnings deduction but essentially, the answer to this is a resounding “sadly not!”. Even if you do qualify for the exemption, you still have to input the income into your tax return and then apply for the exemption.
You need to categorise your receipts and keep hold of the paper copies
If you like feeling all ‘business, business’ and doing this, then go for it but you don’t need to categorise your receipts. You also don’t have to submit them with your tax return. You just need to have them available, digitally or in paper form, for at least 5 years after each tax return you do. I know, that’s a lot of receipts right? That’s why a digital option is great. You can take a photo of your receipts and upload them to be stored for you on the SansDrama App, then access these and send them on to HMRC if you need to. Other digital storage apps like Dropbox would work too. I can’t recommend electronical storage enough.
January time is tax time
Despite the surge in tax panic in January, it is not the only month to do your taxes. The trick is to just get into a habit of recording your income and expenses as you go, which is easy to get into the swing of – especially if you’re using the SansDrama App. You have 10 months to do each tax return, from April 6th to the following January 31st and with the information already there, it needn’t be a stressful situation (particularly if you come to one of our free tax return parties!).
Gym memberships are an allowable business expense
It makes sense that if are jobs require us to keep fit, then our gym memberships must be an allowable business expense right? Sadly HMRC actually use gym memberships as an example as something that is NOT an allowable business expense because of its ‘duality of purpose’. In other words, we are personally benefitting from it so it isn’t ‘wholly and exclusively’ related to the running of our self-employed business.
You can’t work until you’ve registered as self-employed
We always suggest that as soon as you graduate theatre school, register as self-employed. Use our free screenshot guide if you like. However, if you haven’t yet registered and/or got your UTR (Unique Taxpayers Reference number/ self-employed I.D) through, don’t turn down work! You can still work and then register as self-employed.
Tax is scary and I can’t do it
The prospect of managing yourself as a business can feel really daunting, but there’s so much help here and in other places that it really isn’t as intimidating as it might seem at first. It’s actually pretty simple and it’s pretty cool being your own boss right? I’m always warmed when we receive emails and messages about how much people are actually enjoying (yes enjoying!) doing their accounts! The word ‘fun’ has even been heard! We’re all more than capable of being absolute tax bosses and it’s surprising how satisfying it is when you know you’re nailing it. Besides, you can always just ask for help/direction if you need to.