Keeping the taxman sweet

Keeping detailed records is essential

If you are self-employed you will need to familiarise yourself with the self- assessment tax system.

It is markedly different from the way tax was previously paid.

The self assessment system is based on the current year and provides one set of payment dates for tax not paid at source.

You only have one point of contact for your tax affairs, a requirement to keep records and there are now fixed penalties for late payments.

The starting date for your current year basis of assessment is when you started your business (it used to be based upon your trading profits for the 12-month period ending in the tax year before the year covered by the return). Now your tax bill is calculated on the profits arising in the tax year itself.

Keeping records Sales and business receipts Bank statements Invoices and paying-in slips Expenses Money borrowed for personal use

You must keep all appropriate records including a note of all sales and other business receipts, records of all purchases and other expenses as they arise, all amounts taken out of the business bank account for you or your family's personal use and all amounts paid into the business from funds.

Deadlines

You will have to retain your records for five years - from the latest date by which your tax return is to be filed.

Under self assessment there is a deadline for getting the tax return back to the Inland Revenue (normally 31 January after the end of the tax year). If you don't meet the deadline, a fixed penalty will be applied. If it hasn't been returned by 1 February you will be given an automatic £100 penalty.

There is a second fixed penalty of another £100 if your return is still outstanding six months later on 31 July. You can appeal but must have to show just cause as to why you missed the deadline.