HMRC are currently promoting their new “simpler” accounting scheme for the self employed.
This scheme is available from 6th April 2013 to any self employed business with a turnover below £79,000. It may not be used by limited companies.
Income and expenses may be reported based on cash received/paid – this is called cash accounting and was banned for business income tax purposes 10 years ago, but has now been reintroduced as an option for small businesses.
Flat rate expenses may be claimed instead of standard record keeping for:
- Vehicle costs – 45p per business mile for first 10,000 miles and 25p per mile thereafter
- Use of home at £10, £18 or £26 per month depending on hours used
This basis may not work if:
- You are claiming losses against other income
- You want to deduct interest in excess of £500
- You are VAT registered
- You hold stock
Plus these accounts may not be accepted by third parties i.e. mortgage lenders
We therefore do not recommend this scheme for anyone but the simplest and smallest part-time businesses that may never need to produce accounts to third parties.