Taxi drivers in the UK must fill in a self assessment tax
return if they have worked as a self employed taxi driver
at anytime during the financial tax year. Self assessment
tax returns should be filed by 30th September each year
although the final deadline is the following 31st January.
Failing to file the taxi accounts by 31st January attracts
a 100 pounds late filing penalty with interest being
charged on any tax not paid by this date.
The simplest solution to preparing the taxi driver accounts
is to collect all the taxi receipts and expenses together,
hand them over to an accountant who will prepare your self
assessment tax return and might charge between 150 to 450
pounds for the privilege. That is taxing. Taxi driver
accounts does not have to be that taxing. You can prepare
your taxi driver accounts and self assessment tax return
yourself but do something.
These taxi driver notes in preparing the taxi driver
accounts and completing the self assessment tax return are
to assist that process.
Mileage Allowances
Taxi drivers can claim as an alternative to vehicle running
costs mileage allowances of 40p for the first 10,000 miles
and 25p per mile thereafter. You may not claim mileage
allowance and vehicle running costs. Should you choose to
claim the mileage allowance then keep good records of
mileage covered, purpose of journey.
Taxi Capital Allowances
If you bought a vehicle in the financial year 2007-08 and
used the vehicle as a taxi you can claim a first year
writing down tax allowance of 25% of the cost of the taxi,
restricted to 3,000 pounds for vehicles costing over 12,000
pounds. On vehicles purchased in previous tax years you can
claim 25% writing down allowance on the balance not yet
claimed. If you have bought and sold a vehicle used as a
taxi during the financial year the tax allowance is
restricted to any loss made on resale and any profit made
over the written down value is taxable as a balancing
charge. First year allowance on non vehicle assets in the
current tax year 2007-08 is 50% for small businesses.
Taxis bought on Hire Purchase
Claim capital allowances on the original cost of the
vehicle, interest and other charges count as business
expenses and go in the self assessment tax return box 3.61
Other Finance Charges
Taxi Running Costs
When completing the self assessment tax return taxi drivers
should enter fuel costs in box 3.46 cost of sales not
motoring expenses. Do not claim fuel expenses in the taxi
accounts when you are on holiday, the revenue will check
should they inquire into your self assessment tax return.
Taxi running costs also include repairs, servicing and
parts including tyres, road tax, taxi insurance and AA/RAC
membership. Include radio hire and taxi office costs in
general administrative expenses.
Household expenses
If you run your taxi business from home you can claim a
proportion of household expenses as business expenses in
the taxi accounts. Household expenses are likely to be
disallowed unless they are either specific to the business
or a specific area of your home is devoted entirely to your
taxi business. Using part of a room part time would not be
sufficient to include the household expenses in the taxi
driver accounts.
Spouse Costs
You can claim expenses for partners who work for your taxi
business and payments up to 100 pounds per week would not
attract income tax or national insurance however any
payments claimed in the taxi driver accounts must be real
payments for real work done. The Revenue naturally adopt a
strict view on taxi expenses claimed for partner work as it
is an area some people might use to reduce the tax
liability. Care is required to justify the partner as an
expense.
Other Expenses
Enter all business expenses in a named expense box on the
self assessment tax return. Avoid entries in box 3.63 Other
Expenses if possible as any significant amounts in this box
may give rise to an Revenue enquiry into the self
assessment tax return.
The best method of ensuring the taxi drivers tax bill is as
low as possible in the future is undoubtedly to
meticulously maintain good records of all taxi receipts and
expenses and mileage covered which offers the opportunity
for taxi drivers to compare the taxi running costs against
mileage allowances and choose the most tax efficient
option. General if the taxi cab capital allowances are high
vehicle running costs will be the best option and if taxi
cab capital allowances are low then mileage allowances may
well legally increase the costs you can claim and save you
money. The best taxi accounting software will automate the
comparison of taxi mileage allowances with taxi running
costs doing the taxi accountants work for you.
----------------------------------------------------
Terry Cartwright, a qualified accountant in the UK, designs
Taxi Driver Accounting Software at:
http://www.diyaccounting.co.uk/taxi.htm written on excel
spreadsheets for Taxi Drivers wishing to save money and
produce the self assessment tax return
http://www.diyaccounting.co.uk/taxi.htm
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