With the impending Self Assessment tax return deadline approaching, Heather Dore, Regional Manager of Easy Accountancy - www.easyaccountancy.co.uk answers some crucial and commonly asked tax return questions from our clients that work in the hairdressing industry.
I am a hairdresser and I rent a chair in a salon, do I need to note this monthly cost on my tax return?
As a hairdresser the cost of renting a chair in a salon is eligible to be claimed as an expense, which means you can receive tax relief on this cost. To claim this cost as an expense you will need to note the total amount on your tax return. Your total yearly expenses will then be deducted from your total annual income. You are only required to pay income tax on your income and so you are not required to pay tax on expenses.
Being a hairdresser I change my haircut and colour regularly to keep up with trends and to inspire my clients, can I claim my haircare costs as an expense?
A business expense is a cost that is incurred solely and exclusively for business purposes. As a hairdresser some examples of costs that could be classed as expenses are equipment (scissors, styling tools etc.), hair products, relevant training courses and marketing. Although you may feel that maintaining your hair is important for your image as a hairdresser, it is not directly relevant to the running of your hairdressing business and so the cost of your personal haircare cannot be claimed as a business expense.
I sometimes receive tips from my clients; do I need to declare tips as part of my income on my tax return?
The short answer is yes. Tips are seen to be part of your salary and so should be declared on your tax return in the same way as the rest of your income is.
When do I have to complete my tax return by?
The deadline for the upcoming 2013/14 tax year is:
Online returns 31st January 2015
(Paper returns should have been in by the 31st October 2014)
What happens if I miss the tax return deadline?
If you are planning to submit a paper return and miss the paper returns deadline (October 31st 2014), you will need to submit your return online via the HM Revenue and Customs (HMRC) website. If you miss the online returns deadline you will automatically incur a penalty of £100.
If your return is three months late you will incur a further penalty of £10 for each day your return continues to be late up to a maximum of £900 or 90 days.
If HMRC have not received your return six months after the deadline, you will incur a further fine of either £300 or five per cent of your total tax bill, whichever is the larger amount.
If your return is 12 months late you will again incur a further penalty of either £300 or five per cent of the total tax due. You may then be liable for further penalties depending on your circumstances.
What happens if I don’t pay my tax bill by the deadline?
If for whatever reason you are unable to pay your tax bill on time it is worth contacting HMRC as depending on your circumstances you may be able to negotiate a deadline extension or the option of paying your tax bill in instalments.
Failure to pay your tax bill on time without first contacting HMRC will leave you liable for further penalties.
Interest is usually charged on unpaid tax bills from the deadline to the date that the payment is received. If your tax bill has not been paid by February 28th then you may incur a five per cent penalty.
If your tax bill has still not been received by July 31st then another five per cent charge will be made, and if the tax is more than a year late you may receive a penalty equal to the amount of unpaid tax.
Can I edit my return once it has been sent in?
It is possible to amend your return once it has been submitted. The deadline for tax return amends is 12 months following the tax return deadline. If you have submitted your return online you can make amends by logging into your online account on the HMRC website. If you have completed a paper return then the usual correction procedure is to send HMRC the correct pages of your paper return and mark them for amendment.
How long does HMRC have to investigate my return once it has been submitted?
If HMRC decide to investigate your tax return they will contact you in writing, within 12 month of receiving your return.
If you have amended your return or submitted your return late, HMRC is entitled to an enquiry window of 12 months following receipt of your tax return and up until the next “quarter day”. The quarter days are January 31st, April 30th, July 31st and October 31st.
How long do I have to keep my records for?
If HMRC decide to enquire into your return they may ask to see proof of income, expense receipts and other records such as bank statements. It is recommended that self-employed individuals keep copies of these records, in particular expense receipts and proof of income for seven years in case HMRC request to view them.