Q: What documentation can be requested from a self-employed individual as accurate proof of gross or net monthly/annual earnings. Is there anything similar to a P60 or salary slip that a PAYE Employee would receive?
May 06 2008
Answered by: Clive Lewis Ask a question
Self employed people are required to make annual tax returns to HM Revenue and Customs (HMRC). New self-employed businesses will need to complete a Self Employed section of their personal tax return, showing the Income, Expenses and Profits this time for your self-employed business.
To complete the Self Employed tax return you will need a set of accounts showing the income, expenses and net profit for the year (for the first period it will be from the date of commencement to the following 5th April). A balance sheet (a statement of assets, liabilities and owners capital) may also be required.
For businesses with a turnover (income) below £15,000 a more basic return is allowable. If you have a computer most of the accounting records can be in the form of spreadsheets but there are also fairly straightforward computer accounting programmes available.
These accounts can also be used to satisfy others regarding your income. Hence if you are seeking to borrow money, a bank or building society will ask for the past three years accounts.
Greater reliance can be placed on this information if it is prepared by a professionally qualified accountant, particularly if the accounts have been audited but this is not usually something they will demand. If the accounts are prepared by the business owner they may have to answer questions regarding the figures.
Frequently banks and building societies ask for the amount of taxable profit (profit after disallowed expenses and capital allowances) as well as the accounting profit. In addition if borrowing significant sums of money, finance providers will ask for forecasts of future profit and loss accounts and cashflow forecasts.
For more information on the records a business should keep go to the Businesslink.gov website at the following address where you can get more information on the HMRC requirements as well as basic advise on setting up Accounting records:
For a basic business you may be able to provide the information required but you may need the services of an accountant particularly if the business is growing or the transactions are more complex.
To find a chartered accountant go to: www.icaewfirms.co.uk/
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