It is but natural to have plenty of questions flooding your mind upon hearing the word taxes; it is for any self-employed person. The key is to unfold the answer to the important questions step by step.
Here is all you need to know for filing a self-assessment tax return if you are a self-employed taxi driver.
Getting started – Registration and Form
You need to inform the HMRC when you need to file a tax return.
If this is your first time being self-employed, then you will use form CWF1. You will use form SA1 for any other reason. Registration is fairly simple requiring your basic information and can be done online on the HMRC website. You will be required to provide details of your self-employment and your national insurance number. You can also complete the registration process on paper that you can post to the mentioned address on the form.
Then you will receive a confirmation of registration from the HMRC and a unique taxpayer’s reference (UTR). All you tax affairs will be logged under this. It is significant as you will need to quote it on any payments you make to HMRC or need to make a telephonic inquiry to them.
Filing the tax return
A tax year starts on 6 April and ends on the next year’s 5 April. In your tax return form, you must declare your taxable income and gains for a single tax year. All your taxable income, even the one that was taxed at source, needs to be mentioned in the tax return. The tax paid at the source will be deducted before the final tax bill is issued.
It is always advisable to align the accounting period of your business to the tax year to avoid complications. Otherwise, you will have to take care of rules about tax return for different accounting periods. You will receive the tax return at early start of the tax year which is a six page document.
At the end of the tax year, you need to submit the tax return to the HMRC. It is imperative for you to know the various deadlines associated with self-assessment tax return filing. If you are filing paper tax return, the end date is 31 October. If you are filing the tax return online then the end date is 31 January of the following year. For example, for the tax year 6 April 2017 to 5 April 2018, for paper tax return filing, the deadline was 31 October 2018 and for online tax return filing it is 31 January 2019.
Failure in filing the tax return on or before deadline will result in a fixed fine of £100 for up to 3 months. It will increase depending upon the additional time duration.
You can pay the tax you owe to the HMRC via online banking or debit and so on. If your tax liability is more than £1000 or most of your income is not taxed at source then you might be required to make an instalment for the next year’s tax also on the 31 of January.
Record-Keeping for Taxi Drivers
Depending upon the various tax areas, the length of duration that a taxi driver will need to keep the documents will vary. Six years is the longest term and an ideal practice will be to stick to this time period. The format of record is not so specific. You can either keep a cashbook or maintain bookkeeping on a software programme. A simple spreadsheet should do for you with a basic log of income and expenses.
In case of other earning sources, you might need some things handy like:
- Certificates of bank interest
- Relevant forms and paperwork from pension providers or employers
- Paperwork related to any pension schemes
- Receipts of income and/or expenses in case of any land or property (both UK and overseas)
- Proof of any aid from the state or job seeker’s allowance
A fair amount of proofs will go into filing your tax returns. Those will be essential for you to complete the process successfully and aptly.
What are the expenses you can claim? Most common ones include:
- Diesel/ Petrol costs
- Taxi servicing cost like repair, washing, cleaning
- Annual road tax cost and MOT test
- License and registration fees
- Insurance of vehicle
- Bank loan interest (taken to purchase the taxi)
- Telephone bills (for business)
- Toll tax and parking fees
- AA/RAC membership fees
- Accountancy fees
You can also claim the capital allowance which is 18% per year. The Hackney Carriages/Black cabs can receive 100% annual investment allowance. Another claim you can make is that of fixed mileage rate, which is at present 45p per mile for first 10,000 and then 25p. It will include the capital allowance but not any bank loan interest incurred to purchase the vehicle.
Before you even begin to fetch the information, you must fit it in your brain that filing your tax return without delay and with accuracy is crucial in order to avoid any penalties. You can also seek expert’s assistance to get your tax return scenario fixed and up to date. Contact us on 02035002646 or email us at