Just to make things difficult from the very beginning the tax year starts on 6 April! And it’s an important date because it determines when you have to register with HMRC and submit your first tax return.
To keep things simple let’s assume you started self employment on or after 6 April 2017.
These are the important dates:
5 October 2018
You must notify HMRC on or before this date that you are self employed. Personally, I think it’s better to notify them sooner rather than later.
31 October 2018
If you’re going to submit a paper tax return it must be with HMRC on or before 31 October 2018.
31 January 2019
If you or your accountant are going to submit your tax return online the deadline is extended until the end of January
31 January 2019
This is when you have to pay the income tax and national insurance on your profits from the date you started self employment up to 5 April 2018 and if it’s more than a £1.000 you have to make a payment on account of the following year equal to 50% of the first year’s liability.
An example may help. If your tax and national insurance bill is £1,200 up to 5 April 2018 you’ll have to pay £1,800 on 31 January 2019 and £600 on 31 July 2019 (see below). The payments on account are deducted from your tax bill for the year ended 5 April 2019.
31 July 2019
If you have to make payments on account (see above) the second payment is due on 31 July.
By now you may have realised that tax isn’t simple!
VAT is completely different to income tax.
If your turnover (income) in the previous 12 months is less than £85,000 you don’t have to register for VAT. Once it exceeds that you must register with HMRC.
(If you’re lucky enough to expect your turnover to exceed £85,000 in the next 30 days you must register straight away)
In the adult entertainment industry there are no advantages in being VAT registered. In very simple terms you will end up having to give away 20% of your income to HMRC (the government)
Finally, if your profits are high enough there are tax saving opportunities in operating as a limited company as opposed to a sole trader. It’s difficult to put a figure on how much profit you need to make because personal circumstances vary but a rough guide would be once your profits exceed £40,000 per year you should ask your accountant to calculate the savings.
A word of warning though, if you’re an escort you must not operate as a limited company. You’ll be in trouble with Companies House and HMRC. Any tax savings will be lost once the nature of the business has been discovered.