Here’s some tax advice for self-employed gardeners to help you understand:
- What taxes you need to pay;
- How to reduce your tax bill;
- More about self-assessment tax returns.
Not yet registered as self-employed? Here’s how to do it
What Taxes Do Self-Employed Gardeners Pay
Self-employed gardeners are responsible for working out their own taxes and reporting them to HMRC.
The taxes you need to pay are:
- Income tax
- Class 2 and Class 4 National Insurance
The amount of each of these taxes you pay depends on your business profits but income tax also includes other income you have like rent, dividends or employment income.
Want to estimate your tax bill? Read my post on Self-Employment Taxes which shows you how to work out how much tax you’ll need to pay on your earnings.
Allowable Expenses for Self-Employed Gardeners
Business profit means your total income less your business expenses.
So to reduce your tax bill then you need to make sure you have included all the expenses you can to bring down your business profits.
These expenses are known as allowable expenses.
Generally speaking, all your business expenses are allowable.
Here are some typical allowable expenses for self-employed gardeners:
- Business travel & mileage
- Mobile phone
- Business vehicle and insurance
- Public Liability Insurance
- Work & safety clothing
- Accountants fees
- Gardening Tools & Equipment
- Gardening materials
- Bank charges for a business bank account
There may some expenses you pay for that you use personally and for your gardening business, like your mobile phone.
In these cases, you can only claim a portion as an allowable expense.
So if you use your mobile phone for 60% work and 40% personal, then you take 60% of the total bills to put against your taxes.
Disallowable Expenses for Self-Employed Gardeners
After years of people pushing the boundaries and claiming for some questionable expenses, HMRC has a growing list of disallowable expenses.
Here are some common examples of disallowable expenses that self-employed gardeners cannot claim against their taxes:
- Parking fines and penalties;
- Tax penalties and interest;
- Lunch, unless in special circumstances;
- Training for new gardening skills;
- Client entertainment.
Tax Reliefs and Allowances for Self-Employed Gardeners
Taking advantage of tax reliefs and allowances is another way to reduce your tax bill.
Typical tax reliefs and allowances that self-employed gardeners are entitled to include:
- Personal allowance which is the tax-free amount everyone is entitled to earn;
- First-year allowances on tools and equipment;
- Marriage allowance.
Looking for more ways to Reduce Your Tax Bill? Then read this post
Self-Assessment Tax Return
You need to declare all your earnings from your gardening business, as well as any other forms of income you have on a self-assessment tax return.
This is the official form required by HMRC and it’s due by 31 January each year. The penalties for missing this deadline start at £100.
A self-assessment tax return contains:
- Your personal details;
- A summary of all your income not just as a self-employed gardener (like bank interest, employment income and rental income);
- Details of allowable expenses you wish to claim against your taxes;
- A tax calculation;
- How much tax you need to pay.
One tax return form covers one tax year.
A tax year runs from 6 April to 5 April.
So a tax return for 2018/2019 covers earnings from 6 April 2018 to 5 April 2019 and needs to be filed by 31 January 2020.
When is Your Tax Due?
Any tax you need to pay is due by 31 January, along with your self-assessment tax return.
Payments on Account
In addition to your tax payment, you may need to make a contribution of 50% towards your next year tax bill. This is called a payment on account and can come as a shock to some self-employed people.
Bookkeeping and Record-Keeping When You’re Self-Employed
One of the keys to reducing your tax bill is to stay on top of your bookkeeping and tacking all your expenses.
You’ll also need to make sure you keep all your receipts support all the expenses you want to claim, as well as details of what you have been paid.
The simplest way to do this is to:
- Open up a separate bank account for yourself and set this to send/receive any payments. That way when tax time comes you
hasa record of everything that has happened.
- Save all your receipts and reports using a bookkeeping app.
Quickbooks is a great option for self-employed gardeners since you can photograph and store your expenses on the go, as well as using the app to automatically track your business mileage.
Finally, don’t forget to join my mail out for more tax tricks to reduce your tax bill as well as monthly reminders to help you stay on top of your HMRC responsibilities.