Barrister: To what date do I prepare accounts?
Your self-employment will generally commence, for income tax purposes, when you are on your feet and therefore able to accept briefs. It may, however, commence earlier if you have any devilling income. Your year-end will determine the tax year in which your income falls to be taxed. You are taxed on what is termed the current year basis of assessment. This means income is assessed to tax in the tax year in which your accounts year-end falls.
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You will see, although there is only one month between them, that the two accounting periods are taxed in different tax years. This may well be a factor in determining your choice of year-end. Yes, the choice of year-end is entirely down to you. Typically the choice falls down to either 31 March or 30 April. With a 31 March year-end, because it closely shadows the tax year, you pay tax very much on a “pay as you go” basis. With a 30 April year-end, income is effectively pushed into the next tax year with the result that you pay less tax as you go along, as income rises. It is important to note that whatever year-end you choose, you are still taxed on all your earnings in full over the whole of the period that you are in practice. Your year-end affects only the timing of earnings being taxed. We have prepared a worked example, which demonstrates the effect on taxable profits of choosing either 31 March or 30 April as your year-end. Click on the link below to download this example. Further information is also available in the guide "Choosing your accounting date".
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Although choosing a 30 April year-end results in paying less tax year by year, as income rises, the drawback is that you can possibly store up a large liability to tax. If you adopt a disciplined approach to saving for your tax, however, this should not present a problem.
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Where next?
Within Pupil barrister…
- Registering for tax & NIC
- Registering for VAT
- Opening a bank account
- Setting up your accounting records
- Will my pupillage awards be taxed?
- How can I borrow tax efficiently?
- When do I pay my tax?
- How much should I put aside for taxes?
- My first VAT return is due. Can you help?
- Which expenses can I claim against tax?
- Do I need to maintain a mileage log?
- Do I get full tax relief for my car and computer?
- Can I claim tax relief on my court clothing?
- Am I taxed on my receipts or my earnings?
- I have no history of earnings: how can I get a mortgage?
Within Barrister…
- Established barrister section
- Read about our Bar Department
- Meet Andrew Hood, Bar Department Manager
General…
