BUSINESS IN FOCUS
bEcomIng a locUm pharmacISt
thErE arE manY DIffErEnt rEaSonS for bEcomIng a SElf-EmploYED locUm, for ExamplE, bEIng YoUr oWn maStEr - chooSIng WhEn, WhErE anD for hoW long YoU WorK. In thIS artIclE WE proVIDE an oVErVIEW of What SUbmISSIonS arE rEQUIrED to hm rEVEnUE & cUStomS (hmrc) WhEn YoU DEcIDE to bEcomE a locUm.
rEgIStErIng aS SElf- EmploYED WIth hmrc register as soon as possible with hmrc. If you commence during the tax year 6 april 2017 to 5 april 2018, you should register no later than 5 october 2018 to avoid notification penalties being imposed by hmrc. You can register your new ‘business’ via hmrc’s website for self- assessment tax returns and national insurance contributions.
prEparIng accoUntS for InclUSIon YoUr tax rEtUrn Income and expenditure accounts are to be completed for each twelve- month accounting period in accordance with generally accepted accounting practices. the first accounting period starts on the date your business started. the profits per these accounts are then adjusted to conform to tax laws.
the following are a list of expenses which should be claimable as a deduction: • office costs: eg, stationery, phone bills, broadband (business element only); • travel costs: eg, fuel, parking, train or bus fares, business mileage; • clothing expenses: eg, uniforms but not suits; • financial costs: eg, insurance or bank charges; • professional indemnity insurance; • advertising or marketing: eg, website costs; • Subscriptions (professional bodies; journals) etc.; • Use of home: a proportion of rates, house insurance, electricity, mortgage interest, heating; • capital expenditure: eg, car (business element), printers, furniture used in home office.
46 - pharmacY In focUS
In the first year you can choose whatever date you like for your accounts date and generally this date is a month end, eg, 31 march.
choosing what date to compile your accounts to should be planned carefully to ensure it is as tax advantageous as possible.
accounts can be prepared under traditional accounting (accruals basis), ie, you record income when you invoice your customers and expenses when you receive the bill.
or, alternatively, subject to income levels, cash basis accounting, etc, you record income when you receive and expenses when you pay them. Which option is best will be dependent upon each individual’s circumstances.
prEparIng YoUr tax rEtUrn Subject to early years of self- employment or a change of accounting date, you will pay tax on the profits for your accounting period ending in the tax year. the tax year commences on 6 april and end on 5 april each year. a tax return is due for submission to hmrc by the 31 January after the end of each tax year.
the accounts will be included on your tax return and the profits will be subject to tax at 20 per cent, 40 per cent or 45 per cent depending on the level of profits.
for the 17/18 tax year, class 2 national Insurance of £148.20 per annum will be payable with your tax liability. this is payable unless your profits are below £6,025 and the decision is made to opt out. however, class 2 national Insurance entitles a person to state benefits like the State
pension and careful consideration should be given before opting out. class 4 national Insurance will also be payable on profits above £8,164 at rates of nine per cent and two per cent depending on the level of profits.
Self-employed people normally pay tax in three instalments as follows: • 1 January - 1) balance of any tax due for the tax year (balancing payment); and 2) first payment on account for the following tax year • 31 July - 50 per cent of prior year liability (payment on account towards the following tax year)
the first payment of tax you will pay will be one and a half times your total tax bill and is due 31 January following the end of the tax year.
pEnaltIES hmrc will impose penalties for late submission of tax returns, inaccurate tax returns and for the late payment of tax. these penalties can soon add up and it is best to ensure compliance with hmrc is adhered to. penalties can be waived by hmrc in cases where the taxpayer is found to have a reasonable excuse.
KEEpIng rEcorDS records must be kept detailing all income from self-employment relating to the relevant accounting period for at least five years after the annual tax return submission deadline of 31 January. records must also be
kept detailing all of the business expenses (which must be wholly and exclusively for the purpose of the business) for the same length of time as detailed above.
fInal notE becoming self-employed can be a great opportunity and ensuring you do not fall foul of hmrc will allow you to focus on growing your business.
If there is anything in this article that affects you or somebody you know, please speak to Steven mcVitty for independent professional advice.
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