Call me John ‘Geek’ Robbins, but I love doing my tax returns.
Stand-up comedy’s small profit can be accountancy’s big loss. It appeals to the part of my brain that likes cleanliness and order.
I love connecting everything, I love the rules and quirks of it all.
In a job where success or failure hangs in the balance, I am safe in the knowledge that I can claim 45p a mile for petrol, whether the audience laughs or not.
But I also understand that many people find taxes confusing.
The good news is that there is a lot of help available. All you need is the right tool for the job, and your neighborhood tax enthusiast John Robbins to translate troublesome tax terms into plain English.
Here’s what I’m covering in this article:
Making Tax Digital (MTD)
It used to take me weeks to sort out my VAT returns. I had spreadsheets and notebooks everywhere.
Backtracking on a mistake, or figuring out why two numbers didn’t add up, was a nightmare. If I had lost the receipt, I could have said goodbye to sleep that night.
Making Tax Digital is a government initiative to make the process of maintaining and submitting your tax information easier and significantly faster.
From 1st April 2022, all VAT registered business It is essential to maintain a digital record that updates and stores all your financial data in one place.
And if the idea of a ‘digital record’ sounds vague and complicated, that’s what accounting software is: just enter your transactions and let technology do the rest for you.
Tax Digitization for Income Tax Self Assessment (MTD for ITSA)
What on earth is ITSA?
Well, ITS-A is not as confusing as it may seem (great humor).
The best way to take that tax stress out is to stay up to date with your records and stay connected to how your business is doing in real time.
if you a self employed business owner Or landlord With total income of more than £50,000 per year from April 2026, you will need to submit quarterly updates about your business income and expenses MTD for ITSA,
The same goes for those earning more than £30,000 from April 2027.
“What?” I hear you cry, “Four returns in a year?”
when you’re set with the right accounting softwareThat whole process comes down to just a few clicks of a button every quarter instead of a heavy, stressful lift at the end of the year.
It can also mean a quick email to your accountant every quarter, as opposed to one big email and a bag full of receipts at the end of the year.
My accountant is well used to getting daily emails from me about the latest trends in taxation – it’s his cross, and he bears it with quiet dignity.
For the ITSA part of the MTD, you can authorize another person, such as an accountant, friend or relative, to deal with HMRC for you.
It’s quick and easy to do—just send them a link through the HMRC website and once they’ve completed the authorization steps, they can act on your behalf.
Think of it as an online handshake, a bit of digital delegation.
Could it be a Yorkshireman greeting you in the morning? Maybe, but not on this occasion.
EOS stands for End of Period Statement, and it is the document that finalizes the profit and loss of your business, or businesses, during your accounting period. If you are a landlord, you will also need to give a statement for rental income from any property.
And, you guessed it, EOPS is another MTD for the ITSA process.
Within EOS, you or your accountant can make adjustments to allowances or expense claims before adding the final cherry on top of the cake.
And that cherry is one final announcement.
What’s a gift without a fancy bow? Well, it wouldn’t be a satisfying year of online accounting without being able to sign off perfectly, punching air.
And that’s what you can do when you submit your final declaration, which is also part of the MTD for ITSA.
It brings together all the information about your income, expenditure and reliefs in one last hurrah. If this sounds a little intimidating, don’t worry.
The accounting software we talked about earlier does all of that.
So if you’re already set up, it’s just the click of a button and well done. All you have to do is party like it’s April 6th.
Some tax terms and what they mean (in plain English)
Value Added Tax (VAT)
VAT is a tax added to most products and services sold by VAT registered businesses.
It is actually a tax on value. But its applicable rates and items vary, so there is no VAT on your lunchtime transaction, but there is (20%) on your tank of petrol.
There is no VAT on your train ticket, but the gas you use to heat your home does (5%). Believe it or not, the pasty you buy from your local deli has been put through five tests to see if it meets VAT criteria, so it will depend on how it was cooked. is accessed, stored, advertised and served.
There’s no need to know the intimate history of every pasty you buy, but the receipt will tell you how much VAT has been charged.
Once that information is in your accounting software, it will help you do the rest.
Pay As You Earn (PAYE)
This is the part of your monthly pay slip that brings a smile to your face.
Six months into being self-employed, I yearn for calculations that would be done by some accounting whiz.
PAYE is basically an automatic deduction that is made from your pay before you get paid. This is in the form of pay as you earn, and means the money you earn is owed towards income tax, National Insurance and student loan repayments.
In other words, money that doesn’t make it into your pocket before you move on.
And while it may sound annoying, it saves you from having to do a tax return every year and, just as importantly, saves you from that awful feeling that you spent all that money when the bill comes – a lesson in my case. Learned.
People who do not deduct tax through PAYE are self-employed and are responsible for calculating what they owe themselves.
But with good software and the help of a trusted accountant by your side, it doesn’t have to be stressful.
Why does the UK tax year run from 6 April?
It’s actually quite interesting – if you find tax years interesting. For that, I am guilty as charged.
In the Middle Ages, our tax year was governed by Lady Day, a religious festival on 25 March. In 1752, it moved to April 5th when we switched from the Julian to the Gregorian calendar. but had to move it to 6th in 1800 because leap years didn’t quite add up.
That said, the UK is an exception as the tax year starts on 6 April. In fact, we are the only country in the world that uses these dates.
So, if you find this frustrating or unusual, you are not alone.
Most countries’ tax years follow the calendar year, which sounds simple. But I’m not sure a ‘New Years Eve tax return party’ would really catch on here.
gross and net income
Let’s say you’re making some delicious jam tarts for your family because, if you’re being honest, they’re easy and you don’t have the recipes. But not every grain of dough and raspberry will end up on their dessert plates.
When you came back from the supermarket with all your shopping, you had gross material. But when you made jam tarts, some flour may have spilled out of the bowl.
You didn’t use up all the jam. And there was some leftover flour. What comes out of the oven is the net profit from those gross ingredients.
It is the same with your earnings and income.
Your business can have multiple income streams, invoices paid, products sold, interest, capital gains, even tips. These are the components. When you add all these up, this is your gross income or turnover.
But if you are taxed only on that, it would not be fair, because it costs you money to provide those products and services. Things like subscriptions to gasoline, packaging, utilities, and your accounting software.
An accountant can help you. When you remove all costs from your gross income, the amount left over is your net income, and that’s the number you pay taxes on.
Your taxes don’t need to be taxed. By using a few expert tips and some clever accounting software, you can save time and, more importantly, take some of the stress out of your life.
And that’s my kind of punchline.
Editor’s note: This article was first published in December 2022 and has been updated for relevance Delay in making tax digital for income tax,
#Lets #Digital #Technology #Simplify #Taxes