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Where Taxpayers and Advisers Meet

question about solo trader self assessment

starrynight
Posts:2
Joined:Sun Apr 11, 2021 3:47 pm
question about solo trader self assessment

Postby starrynight » Sun Apr 11, 2021 5:09 pm

Hi

I am a new solo trader and I'd be thankful if you can help me understand what is the correct way of doing self assessment as a sole trader using traditional accounting (not cash basis) in the following scenario.

Scenario: In March 2021 (previous tax year), I bill a client 10k for a project that is going to be delivered this tax year (2021-2022). To deliver the project, I have to spend a significant amount of this money (roughly 80-90%) to buy services from other businesses, i.e. translation, research, graphic design, etc. I don't employ people but simply use the services of other freelancers. So, in the end my actual income from this project is going to be more or less around 1-2k.

Now, do I understand correctly that when doing my self-assessment for 2020-2021 (previous tax year) I declare the 10k as my income as the invoice is for March? but all the costs of the project that will incur in the coming months, will be filed for the tax year 2021-2022? Is it ok to separate the income and costs like this over two different tax years?

The other question is about the money out of this 10k that I use to buy services from other freelancers to finish the project, do I declare that as part of the allowable expenses or is there a different section on self assessment that I have to fill for this type of expenses?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: question about solo trader self assessment

Postby pawncob » Tue Apr 13, 2021 4:58 pm

If you haven't commenced work on the project, treat the monies as a creditor, so it falls in the next tax year.
With a pinch of salt take what I say, but don't exceed your RDA


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