1. SELF ASSESSMENT

2. ORDER OF PRESENTATION: 1.WHAT IS SELF ASSESSMENT (SA). 2.WHO ARE REQUIRED TO FILL OUT SA FORM. 3.FILING & PAYMENT DATES. 4.PENALTIES. 5.OVERLAP PROFITS. 6.AVAILABLE LOSS RELIEF

3. SELF ASSESSMENT SYSTEM! SYSTEM INTRODUCED IN TAX YR 1996/97. SYSTEM WHEREBY THE TAX PAYER ACCOUNTS FOR INCOME EITHER PARTIALLY TAX/NOT TAXED AT SOURCE. TAX PAYER LEGALLY RESPONSIBLE FOR SA RETURN.

4. WHO ARE REQUIRED TO FILL OUT SA FORM? INDIVUDUAL RECEIVING INCOME NOT TAXED AT SOURCE. FOR E.G.  BUSINESS INCOME – SOLE TRADER/PARTNERSHIP.  HIGHER RATE TAXPAYER.  ALL DIRECTORS OF COMPANIES.

5. IMPORTANT DATES - SA TAX YEAR – 6 TH APRIL TO 5 TH APRIL E.G. TAX YR 2010/11 – STARTS 6 TH APRIL 10 – 5 TH APRIL 11. ISSUE OF SA RETURNS BY HMRC: END OF APRIL FOLLOWING TAX YR.

6. SELF EMPLOYED – START UP: REGISTER ONLINE PHONE POST: CWF1 FORM REGRISTRATION: 3 MTHS AFTER 1 ST MTH START UP

7. Filing Dates: REGISTERED FILE RETURN ONLINE FILE RETURN PAPER BASED 31 ST JAN FOLLOWING TAX YR 31 ST OCT FOLLOWING TAX YR

8. TIME LINE FOR RETURN. 6 TH APRIL 2010 5 TH APRIL 2011 TAX YR 10/11 31 ST OCT 2011 31 ST JAN 2012

9. FILE PENALTIES: FIXED PENALTIES: THE INITIAL PENALTY IS £100 IF THE RETURN IS NOT FILED BY THE DUE DATE. A DAILY PENALTY CAN BE IMPOSED OF £60 PER DAY. TAX GEARED PENALTIES: IF THE RETURN HAS NOT BEEN FILED OVER 12 MONTHS OF ITS DUE DATE THEN A TAX GEARED PENALTY MAY BE IMPOSED.

10. PAYMENT DATES: DEAD LINE 31 ST JAN FOLLOWING TAX YEAR. E.G. TAX YR 2010/11 – 31 ST JAN 2012 Due – Income Tax on income earned in 2010/11 Capital Gains Tax on Gains made in 2010/11

11. Payments on Account (POA) Required by Revenue – if previous tax years’ tax liability over £1000. 1 st POA – 31 st January in the Relevant tax year. 2 nd POA – 31 st July After the Relevant tax year. Each POA = Half of tax due for previous tax year. Balancing Payment – due 31 st Jan after Tax year.

12. POA TIME LINE: 6 TH APRIL 2010 5 TH APRIL 2011 TAX YR 2010/11 31 ST JAN 2011: 1 ST POA - £750 31 ST JULY 2011: 2 ND POA - £750 31 ST JAN 2012: BALANCING PAYMENT TAX YR 2009/10 TAX LIABILITY- £1500

13. PAYMENT PENALTIES: INTEREST – FROM DUE DATE TO PAYMENT DATE. SURCHARGE: 5% CHARGE ON BALANCING PAYMENT NOT PAID BY 28 TH FEB SURCHARGE: TAX DUE ON 31 ST JAN STILL NOT PAID BY 31 ST JULY – 2 ND SURCHARGE OF 5%

14. 1 st years of Trading Profits Earned - Assessment of profits - Overlap Profits - Selection of Accounting yr end Losses Incurred – Loss Relief Available

15. Assessment Rules: Year of Assessment Basis of Assessment First tax year – tax year when trade starts Date of Business start to following 5 th April Second tax year (a) Is there an accounting period ending in the tax year? Yes! (1)Is it a 12 month period (2)Is it less than 12 months (3)More than 12 months (b) No accounting year end in the 2 nd year of trading Third tax year 4 th tax year onwards That period of account. The first 12 months of trading. 12 months from the accounting date ending in the 2 nd tax year. Actual profits in the 2 nd tax year: from 6 th April to 5 th April 12 months from accounting date ending in 3 rd tax year Normal Current year basis

16. Assessment of profits: E.G. Eric started to trade on 1 st July 2008 His tax adjusted trading profits are as follows, 1 st July 2008 to 30 th April 2009£20000 Year ended 30 th April 2010£38400

17. Choice of Accounting Date & Overlap Profits: E.G. A trader starts to trade on 1 st January 2009 and is considering preparing his first accounts to 31 st March 2010or 30 th April 2010. His estimated tax adjusted trading profits are: £2000 per month for the first 12 months £3000 per month for the second 12 months £4000 thereafter per month

18. Available Loss Relief – Opening yrs Trading Loss relief in opening years S83 – Carry Forward S72 – Against total Income S64 – Against total income Trading loss must occur within 1 st four yrs of trading. Carried back 3 tax yrs only! Loss relief set off against future trade profits of same business. S261B – Relief against Capital Gains.

19. INCOME SOURCES: EMPLOYMENT INCOME RENTAL INCOME TRADING INCOME SAVINGS INCOME DIVIDEND INCOME

20. CLASSIFICATION OF INCOME : OTHER INCOME EMPLOYMENT INCOME RENTAL INCOME TRADING INCOME SAVINGS INCOME INTEREST INCOME – BANK/BUILDING SOCIETY DIVIDEND INCOME DIVIDEND INCOME – EQUITY SHARES PERSONAL ALLOWANCE – TAX YR 2010/11 £6475

21. BASIC TAX INFORMATION –TAX ORDER: DIVIDENDS – 3RD SAVINGS – 2 ND. E.G. 1. BANK INTEREST. 2. BUILDING SOCIETY INTEREST. OTHER INCOME - 1 ST. E.G. 1.EMPLOYMENT INCOME 2.RENTAL INCOME 3.TRADE INCOME

22. BASIC INFORMATION – INCOME TAX RATES. INCOME TAX RATES & TAXABLE BANDS - 2010/11 BR: 20% £0 - £37400 HR: 40% £37401 - £150000 AR:50% £150001 & ABOVE ( APPLIES TO OTHER INCOME & SAVINGS INCOME) DIVIDENDS - BASIC RATE 10% DIVIDENDS - HIGHER RATE 32.5% DIVIDENDS - ADDITIONAL RATE 42.5%

23. NATIONAL INSURANCE CONTRIBUTIONS – SELF EMPLOYED: 2010/11 CLASS 2 AND CLASS 4: CLASS 2 - £2.30 PER WEEK. CLASS 4 – BASED ON TRADE PROFITS. LOWER PROFIT LIMIT £5,715 UPPER PROFIT LIMIT £43,875 ABOVE UPPER PROFIT LIMIT 8% 1%

24. USEFUL INFORMATION FOR THE PREPARATION OF ACCOUNTS YOUR BASIC RECORDS WILL NORMALLY INCLUDE: A RECORD OF ALL YOUR SALES, WITH COPIES OF ANY INVOICES YOU'VE ISSUED A RECORD OF ALL YOUR BUSINESS PURCHASES AND EXPENSES DETAILS OF ANY AMOUNTS YOU PERSONALLY PAY INTO OR TAKE FROM THE BUSINESS COPIES OF BUSINESS BANK STATEMENTS

25. CASE STUDY – TOM JONES. FACTS:  EMPLOYED  HIGHER RATE TAXPAYER  INCOME NOT TAXED AT SOURCE – RENTAL.  WIFE VOLUNTARILY UNEMPLOYED.

26. TOM JONES – RENTAL INCOME TAX YR 2010/11 ££ RENT RECEIVABLE9750 LESS: RELATED EXPENSES INSURANCE 480 UTILITY COST (WATER £500) 1500 INT ON LOAN (IMPROVEMENTS) 500 AGENTS FEES500 REPAIRS 300 WEAR & TEAR ALLOWANCE (9750 – 500) * 10% 925 (4205) ASSESSABLE INCOME 5545

27. TOM JONES:INCOME STREAMS GROSS EMPLOYMENT INCOME - £45000 (PAYE £6750) PROPERTY INCOME - £5545 BANK INT £650 *100/80 - £813

28. TOM JONES – TAX COMPUTATION 2010/11 TOTALOTHERSAVING EMPLOYMENT INCOME4500045000 PROPERTY INCOME55455545 BANK INT – 650 *100/80813 813 TOTAL INCOME5135850545 813 LESS: PA(6475) (6475) TAXABLE INCOME4488344070 813

29. TOM JONES – TAX COMPUTATION 2010/11 TAX CALCULATION: INCOME TYPERATE £ OTHER INCOME £37400BASIC @20% 7480 OTHER INCOME £ 6670 HIGHER @40% 2668 £44070 SAVINGS INCOME £813 HIGHER @40% 325 £44883 INCOME TAX LIABILITY10473 LESS TAX DEDUCTED AT SOURCE: PAYE(6750) BANK INTEREST £813 *20%(163) INCOME TAX PAYABLE£3560

30. TOM JONES – TAX TIPS SAVINGS INCOME: CASH ISA: £5100 PER YR STOCKS & SHARES ISA: (£5100 PER YR) INTEREST : NO INCOME TAX DIVIDENDS: NO INCOME TAX

31. TOM JONES – TAX TIPS PERSONAL ALLOWANCE OF WIFE TRANSFER OF RENTAL PROPERTY TO WIFE (NO INHERITANCE TAX, CAPITAL GAINS TAX, STAMP DUTY CONSEQUENCES) WIFE’S TAX COMPUTATION: TAX YR 2010/11 £ PROPERTY INCOME 5545 LESS PERSONAL ALLOWANCE (6475) TAX PAYABLE£NIL Income Tax saved by Family: Original Tax Calculation (Tom owns property) - £5545 @ 40% = £2218 Transferring property to Wife - £Nil * 20% £nil IT Saved £ 2218

32. CASE STUDY 2- JONES HARDWARE. FACTS:  SELF EMPLOYED.  BUSINESS 3 YRS OLD.  LOSSES MADE IN YR 1 AND YR 2.  LOSS RELIEF IN OPENING YEARS.

33. JONES HARDWARE. £ ACCOUNTING PROFIT69500 ADJUSTMENTS TAX PURPOSES: ADD BACK – DEPRECIATION ON CAR1500 NON TRADE SUBSCRIPTION500 2000 ADJUSTED PROFITS BEFORE CAPITAL ALLOWANCES 71500 LESS CAPITAL ALLOWANCES(4200) ADJUSTED TAXABLE PROFITS67300

34. JONES HARDWARE – PROFIT HISTORY YR1YR2YR3 TRADING PROFITS£NIL£NIL£67300 LOSSES SUMMARY: YR 1 - £20000 YR 2 - £10000 S83 – TRADE LOSSES CAN BE CARRIED FORWARD TO FIRST AVAILABLE TRADE PROFITS.

35. MR. JONES -TAX COMPUTATION £ TRADE PROFITS 67300 LESS: BROUGHT FORWARD LOSSESS S83(30000) TOTAL TRADE PROFITS 37300 LESS PERSONAL ALLOWANCE (6475) TAXABLE TRADE PROFITS 30825 INCOME TAX: BASIC RATE BAND - £30825 * 20% = 6165

36. JONES HARDWARE - NIC CLASS 2 NIC: FLAT RATE £2.40 PER WEEK - £2.40 *52 = £125 CLASS 4 NIC: PERCENTAGE BASED ON PROFITS ABOVE £5715 TOTAL TRADE PROFITS £37300 - £5715 = £31585 * 8% CLASS 4 NIC - £2527

37. THE END.