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  • R Stride & Co

    Driving Instructor Manual

    VAT and the driving Instructor ii

    National Insurance Matters iii

    Tax (How, when, where, how much?) v

    Tax Investigations viii

    Profit Improvement xi

    R Stride & Co xviii

    Other Items xxii

    Business bank accounts

    Talking to the parents

    Cutting overheads

    Reducing tax liabilities

    Definition of business and private mileage

    Broadband and Home phone costs

    Missing Receipts

    Claiming for Use of Home

    Claiming for home computers

    What cant be claimed for xxvii

    List of common claimable and non claimable items xxviii

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - ii - ii

    General information relating to VAT, Tax and National Insurance

    VAT

    Under current law the vat threshold for businesses registering for vat is 83,000 (5th

    April 2016 to 6th

    April 2017) per annum of income. This means that 99% of all

    individuals who commence in the driving instructing industry are under this threshold

    and therefore do not need to be vat registered.

    If you have other businesses as well as driving instruction or plan to take on a second

    driver to help out your business, please contact us direct.

    The only impact is that when you collect fuel invoices from the petrol station please

    ask for a VAT invoice. The card payment slip you are given does not need to be kept.

    In fact we advise that this is not kept as having two receipts sometimes confuses the

    issue.

    Important

    When at the petrol station collect a vat invoice. We do not need the credit card slip

    keeping

    The reason we ask for a VAT receipt is that the voucher identifies what goods and

    services you have purchased. The Inland Revenue will question non VAT receipts in

    the event of an investigation if the fuel consumption does not relate to their

    standards

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - iii - iii

    National Insurance

    There are currently four classes of National Insurance

    1. Class 1 NIC (National Insurance Contributions)

    This is national insurance that employees pay when receiving their pay

    from their job. Most individuals coming from jobs to self employment

    will have paid this in the past. The rate is currently 12% of your gross

    salary.

    2. Class 2 NIC

    Commonly known as The Stamp. This is currently 2.85 per week

    (2.80 up to 5th

    April 2017)

    Class 2 NIC historically has been collected via Direct Debit, but this has

    changed. The whole years Class 2 NIC will be added to your year end tax

    liability when I produce your tax return (52 x 2.80 = 145.60 for 2016-

    2017 or 148.20 for 2017-2018)

    3. Class 3 NIC

    This is a voluntary national insurance for people who do not pay NIC and

    wish to pay. If you feel you are in this category, please contact us. Most

    driving instructors will not be required to pay this.

    4. Class 4 NIC

    This national insurance relates to the self employed (you !)

    As you can imagine with most of the employed world paying 12% of their

    income with you paying 2.85 per week the Inland Revenue are not going

    to let you get away with so little National Insurance !

    Therefore there is a top up national insurance to pay depending on your

    business profits.

    The rate is currently 9% of profits. I will refer to what defines profits later.

    It is paid at the same time as your tax bill (see next section for dates) and

    when discussing tax payable with our clients we always include this

    figure but do not refer to it.

    Therefore as far as you are concerned I will not refer to this tax charge

    again.

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - iv - iv

    Other important National Insurance Facts

    Duplicated national Insurance numbers

    There have been a number of cases where duplicated national insurance

    numbers have been identified. In order that your state pension is protected

    and worked out correctly, I suggest that you contact the National Insurance

    Department State pensions on 0845 3000 168. This will determine if

    your state pension is on forecast. We will talk later about retirement

    planning.

    Important

    Make sure that you are up to date for class 2 NIC. By not doing so you

    could negate any benefits

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - v - v

    Tax

    The current tax rate is 20% of net profits after allowances for personal allowance for

    2017/2018 at 11,500 per annum.

    If you have other income e.g. pension income or other jobs in addition to driving

    instruction your affairs are more complicated and therefore please contact me direct

    for direct for specific advice relating to you. The rest of this section relates to a

    driving instructor with no other income.

    Example of what is taxable income :-

    Per annum

    Turnover (driving instruction income) 25,000

    Franchise Fees 8,000

    Petrol and Derv 3,000

    Other expenses (mobile etc etc) 1,000 12,000

    Profit 13,000

    Wages (Drawings) transferred to private account 12,000

    Cash left in bank at end of year 1,000

    In the above example the Profit (13,000) is the figure that you are going to be taxed

    at 20% plus 9% (Class 4 NIC). A total of 29% subject to annual personal allowance.

    How much do I save for tax ?

    Most of our instructors always ask us what should they be saving towards their tax

    bill. As the calculation to work this out is extremely complicated, we have come up

    with a simple formula.

    Takings multiplied by 15% = tax needed to save.

    For example If you go out on Monday and Tuesday and have 6 lessons at 20 and also

    collect 2 lots of 56, you should have 232 in cash/cheque. Bank this money as

    normal in your business bank account an then with cleared funds transfer 15% 34.80

    to a savings account

    Hint

    Save 15% of your daily takings and tax will never be a problem again !

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - vi - vi

    Any Savings Account ?

    I suggest that if you have not used your ISA allowance then ask your bank or building

    society to open an ISA for your tax saving. There are some good ISA accounts

    around at the moment and with the low interest rates not having to pay 20% tax on

    any interest received makes them more attractive.

    When will I pay my first tax bill ?

    If you have commenced business after 6th

    April 2017 and before 5th

    April 2018 your

    first tax bill will become payable on 31st January 2019.

    However please be warned that the second year of your business to 5th

    April 2019 will

    not become payable on 31st January 2020, but in two instalments on 31

    st January 2019

    and 31st July 2019.

    See below

    Tax Year Goes on Tax To be with Tax Payable Tax

    Ended Return issued Revenue Paid

    5th

    April 2018 5th

    April 2018 31st January 2019 31

    st January 2019 Full

    5th

    April 2019 5th

    April 2019 31st January 2020 31

    st January 2019 Half

    31st July 2019 Half

    31st January 2020 Bal

    5th

    April 2020 5th

    April 2020 31st January 2021 31

    st January 2020 Half

    31st July 2020 Half

    31st January 2021 Bal

    The Half payments are based upon the previous year with the balance (assuming

    profits go up) the following January.

    As you can see the tax payable for year 2 and 3 is paid before the year end of 5th

    April

    and is therefore estimated based upon the previous year. The system is quite complex

    and therefore we recommend that accounts are provided to us as soon as the year end

    passes so we can work out and forecast your tax. In the meantime keep saving 15%.

    If you have been in self employed prior to 6th

    April 2017 I shall be contacting and

    talking with you about your prior tax affairs and discuss with you this separately.

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - vii - vii

    Summary

    We provide at least a years warning with accurate tax payment for all our clients. In

    some cases we are now providing accurate tax figures for January and July 2019 for

    some clients !!! This would certainly be informative for you !

  • R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist.

    - viii - viii

    Tax Investigation Issues

    There are various ways that the Inland Revenue could start a tax investigation.

    Some ways are outside your control, for example a random enquiry.

    However most enquiries are started for a specific r

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