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Paying tax in UK

by Andy B
12 replies
Hi everyone,

I've recently done quite well and it's caused me to hit the tax boundary in the UK (I'm 17 - so never been taxed before so all new to me!)

However, I've been putting together a income/expense chart but come across a problem.

1) I got paid in USD, converted it to GBP on paypal and withdrew to bank. I then used that money to buy myself a new computer and other business expenseses.

The problem is, when I'm putting it as an expense... I obviously can't mix up the two currency's so do I use the exchange rate at the time of doing the account or do I have to trawl the Internet to find the exchange rate at the time of purchase?

Thanks,

Andy
#paying #tax
  • Profile picture of the author Maraun
    You should ask a tax professional, not an internet forum. Seriously.
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    • Profile picture of the author Alexa Smith
      Banned
      You do need either to ask an accountant or to ask the Inland Revenue, Andy. (You can call them for informal advice and they're very helpful.)

      The computer purchase may be slightly complicated as there might be two different ways you claim that as deductible, as you prefer: either the whole thing in one go as "set-up cost" or you can "amortise" it over a period of time. But which will work out better for you is something you'll need to work out carefully, and it'll depend on your own circumstances.

      Good luck and congratulations (I think) on becoming a taxpayer!
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      • Profile picture of the author Andy B
        Originally Posted by Alexa Smith View Post

        You do need either to ask an accountant or to ask the Inland Revenue, Andy. (You can call them for informal advice and they're very helpful.)

        The computer purchase may be slightly complicated as there might be two different ways you claim that as deductible, as you prefer: either the whole thing in one go as "set-up cost" or you can "amortise" it over a period of time. But which will work out better for you is something you'll need to work out carefully, and it'll depend on your own circumstances.

        Good luck and congratulations (I think) on becoming a taxpayer!
        Thanks for the help Alexa!

        I just wanted to get some initial advice so I knew what questions to ask and such... Didn't want to call up and have to explain Internet marketing to them.

        Thanks for the information also about the computer, I thought there was just one way to go with that so will definatly look into that one.

        And congratulations? This is confusing as hell lol! Naa, in all seriousness I'm sure I'll get used to it. I'm not the most organised of people so getting my receipts and everything is proving stressful.
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        • Profile picture of the author Alexa Smith
          Banned
          Originally Posted by Andy B View Post

          I'm not the most organised of people so getting my receipts and everything is proving stressful.
          Don't worry about it too much. As long as you keep reasonably good records and have all the receipts and bank statements and print-outs of online things, even if you don't have them all beautifully set out and in exact chronological order, it can always be produced/assembled, and a tax return completed when it's needed.
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          • Profile picture of the author Andy B
            Originally Posted by ConnorMRR View Post

            Hi Andy,

            HMRC actually have information on acceptable currency exchanges for the particular year. The currency exchange page and the information you probably need can be found here.
            Thanks Connor - Had a quick look and can't see anything to do with USD rates for the year 2012... will have a more detailed look tomorrow when i'm not sure tired so thanks a lot for that.

            Originally Posted by Alexa Smith View Post

            Don't worry about it too much. As long as you keep reasonably good records and have all the receipts and bank statements and print-outs of online things, even if you don't have them all beautifully set out and in exact chronological order, it can always be produced/assembled, and a tax return completed when it's needed.
            Yeah, I just think it's time for me to start doing everything rather then panicking come april every year
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        • Profile picture of the author TCwarrior
          Hi,
          A decent accountant will be worth it in the long run but at the same time you don't need a super expensive one. He/She will also be able to set you up in the best way (best for you) as an LTD or Sole Trader, etc...
          Also rememebr you can add most things to your set up costs even if some of these expenses were purchased long time before you started trading. you may be able to add a computer you bought one year before you started trading and IM courses you may have purchased for training... Ask the accountant he/she will sort you out.

          Probably a decent accountant will cost you about £500 per year, surely you don't need a super over priced one trying to charge you between £1000 and £3000 per year. Not yet anyway
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  • Profile picture of the author ConnorMRR
    Hi Andy,

    HMRC actually have information on acceptable currency exchanges for the particular year. The currency exchange page and the information you probably need can be found here.
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  • Profile picture of the author Martin Avis
    You really must engage the services of a qualified accountant. I shouldn't cost you a fortune, but ask for a quote first!

    Also, before you agree to work with an accountant, make sure to ask if they are comfortable (and familiar) with the ways of Internet marketing. Many are not.


    Having said all that, to give you a steer on your question, my own accounts are prepared using the exchange rate that PayPal uses on the date when I transfer funds to my bank account. My accountant is an ex tax inspector and so would be very quick to tell me if I was doing anything that wasn't acceptable.

    As Alexa said though, purchase of computers is usually classed as a capital expense and so the entire cost cannot be claimed in the first year. I believe that 25% per year for 4 years is normal, but you'll need an accountant to check that.

    It is easier for sole traders to submit tax returns without an accountant than it used to be, but don't fall into that trap. Internet marketing is a bit more complex than most businesses and should be treated seriously. The penalties for getting things wrong, even if your intentions are good, can be very high.
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    • Profile picture of the author Andy B
      Originally Posted by Martin.Avis View Post

      You really must engage the services of a qualified accountant. I shouldn't cost you a fortune, but ask for a quote first!

      Also, before you agree to work with an accountant, make sure to ask if they are comfortable (and familiar) with the ways of Internet marketing. Many are not.


      Having said all that, to give you a steer on your question, my own accounts are prepared using the exchange rate that PayPal uses on the date when I transfer funds to my bank account. My accountant is an ex tax inspector and so would be very quick to tell me if I was doing anything that wasn't acceptable.

      As Alexa said though, purchase of computers is usually classed as a capital expense and so the entire cost cannot be claimed in the first year. I believe that 25% per year for 4 years is normal, but you'll need an accountant to check that.

      It is easier for sole traders to submit tax returns without an accountant than it used to be, but don't fall into that trap. Internet marketing is a bit more complex than most businesses and should be treated seriously. The penalties for getting things wrong, even if your intentions are good, can be very high.
      Hi Martin,

      That's the thing - I wanted to get a list of questions all sorted out before I contact anyone, so if they don't know what Internet Marketing is I don't have to spend hours explaining exactly what I do to them. (I've tried explaining to my friends - It's not worth the hassle)

      In terms of sole traders and such - I'm looking into the different options there and would be something to ask the account also.

      Thanks again for your time,

      Andy
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      • Profile picture of the author Alexa Smith
        Banned
        Originally Posted by Andy B View Post

        I wanted to get a list of questions all sorted out before I contact anyone, so if they don't know what Internet Marketing is I don't have to spend hours explaining exactly what I do to them.
        You really need an accountant who does understand what IM is, Andy. That won't be so difficult, these days.

        I was thinking that if you do all the routine bookkeeping yourself, in a way they'll advise/show you to do it, when you meet, you might get away with £300 - £400 per year. And they'll save you that much. And their fees are also tax-deductible anyway.
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  • Profile picture of the author JimMichael
    Do call HMRC or Inland Revenue.

    Don't make guesses - these guys can come down on you like a ton of bricks if you make a deliberate mistake, even if you're not from/in the UK.
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  • Profile picture of the author massiveray
    From experience!

    Give the taxman a call, tell them you want to give them some money but you dont know how much (tell them your age too) and they will send someone round to sort it for you, it's WAAAAY less expensive than an accountant.

    Wait until you're taking in the really big money before hiring a pro.
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