Tax Advice for Self Employed Pet Sitters

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Tax Advice Pet Sitter

Self Employed Pet Sitter? Here is our tax advice guide just for you. Whether you are starting out or just want to understand more about allowable expenses, here are some useful tips specifically for self employed pet sitters.

How to Become a Self Employed Pet Sitter

If you would like to become a pet sitter, then going self employed is the easiest way to get started. When you are self employed you are responsible for your own taxes and national insurance (unlike if you were employed in a job and issued with a payslip each month showing your pay and deductions).

The simplest way to register as for Self Employed is to visit the HMRC website and register online. The process can take 10 days to complete upon which HMRC will post you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.

 

Register with HMRC for Self Employment Online

What is a UTR number

From this point you must then:

  1. Keep a list and receipts of all your income and expenses;
  2. Complete a Self Assessment Tax Return by 31 January each year summarising your business income and expenses;
  3. Pay any Tax due by 31 January each year (and payments on account by 31 January and 31 July each year).

What are Payments On Account

Your tax return submitted by 31 January covers the previous tax year (a tax year runs from 6 April to 5 April). So for example, your tax return due by 31 January 2018 details your earnings between 6 April 2016 to 5 April 2017 and this will detail your income from pet sitting as well as any other earnings you may have (such as from other rental income, bank interest or dividends).

Here is a sample Tax Return and Sample Self Employment Section which would need to be included for Self Assessment.  These are samples, you will need to submit your own Tax Return online.

Tax Return Sample

Self Employment Tax Return Section Sample

It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CWF1 to notify HMRC that you have a new form of income you need to report on.  Again, you can do this online here and you will need your Unique Tax Payers Reference.

When Should You Register with HMRC as a Self Employed Pet Sitter?

You must register with HMRC as self employed as soon as possible after starting work as an Pet Sitter but HMRC rules are that you must register by 5 October in your business’ second tax year.

How Much Tax Do You Pay being Self Employed?

When you are self employed you pay tax based on your profits of your work (all your income less all your costs) and the amount of tax you pay depends on how much profit you make.  Self employed individuals are also required to pay Class 2 and Class 4 National Insurance, which is again dependant on your profits.

Your trading income, somewhat deceivingly, actually means your trading profits (all your income less all your allowable business expenses). Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties.

Your Tax Return Shows Your Profits for a Tax Year which is 6 April to 5 April

How to Work out Your Profits

You need to add up all your income from Pet Sitting, which includes all cash payments as well as bank transfers, then deduct all your expenses as a pet sitter.

Self Employment Expenses for a Pet Sitter

You are allowed to deducted expenses from your income before working out your tax – these are known as Allowable Expenses.  It is really important that you keep a note of all your expenses because you don’t want to miss out on any since they reduce your tax bill.

Here are some typical allowable expenses for Pet Sitters:

Equipment

Even though you are pet sitting at home, you may need to buy some additional equipment to cater for pets staying in your home. You may need spare crates, food bowls, leads, treats or storage units for hamster cages. This additional pet sitting equipment will more than likely be fully tax allowable or attract Annual Investment Allowance, which is another way of making tax savings. So keep all the receipts for everything you buy so you can discuss deductions with your accountant.

Make Sure You Keep Hold of All Your Receipts, No Matter How Small

Computer & Printer

You may need a computer or iPad to take bookings, research, learn or share photos and videos with pet owners missing their loved one. You may need a printer to produce flyers to win new work. Your Computer & Printer will attract tax relief either in full or as a proportion as an allowable expense or under the Annual Investment Allowance rules for business use.

Website

A website is almost like a marketing brochure now and gives you a chance to tell potential customers what services you offer, show real life photos and detail your rates. Your Pet Sitting website is an allowable expense as well as the hosting.

 

Phone & Internet

The cost of a business phone (landline or mobile) and internet is an allowable expense, however if there is personal use then only a proportion of the costs relating to your business can be claimed.

Branded clothing

If you have a ‘uniform’ with your branding that you wear while you walk dogs for example, then you should be able to claim for this cost. There are also some circumstances where you can also claim the cost of some basic outdoor clothing if you are out walking dogs such as rain coat and wellies. Normal clothing is not allowed and unfortunately the cost of washing your clothes at home is not either.

Mileage

Picking up and dropping off pets to their owners may be part of your services you offer as a pet sitter. If so, keep a note of the mileage you travel. Record your miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.

Use of Home

There are rules that will allow you to claim an amount for the running costs of being a self employed pet sitter from your home as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.

Pet Sitter Insurance

If you have taken out an insurance policy to cover loss, damage negligence etc you will be able to claim this cost as an allowable expense.

Treats, Pet Food and Toys

You need to keep your house guests fed and watered, so keep your receipts for any of these costs so you can support your claim for ta relief.

Marketing/SEO/PPC

Any marketing you do, flyers, business cards or paid ads are also fully allowable expenses so make sure you download your receipts ready for tax time.

Accounting & Bookkeeping

Keeping accurate business records will help to avoid missing any entitlements or tax relief that you may be eligible for. Using a cloud based accounting software such as Xero, Quickbooks or Sage will make life easier, so if you do choose to sign up the cost of the monthly subscription is fully tax allowable. Then, if you choose to use an accountant to complete your self assessment tax return, again their fees will be an allowable expense.It is worth noting that keeping your business records in order will help keep your accounting fees at a minimum.

Bank Charges

It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account will be treated as an allowable expense.

Allowable Expenses Petsitter
Accurate Business Records Contribute to Running a Successful Business

Recording Your Business Transactions

Pet Sitters will typically be paid in cash or via bank transfer and, like any self employed sole trader, it’s important to keep accurate business activity records and be aware of any entitlements or tax relief that you may be eligible for. Doing so will make life easier when the time comes to completing Self Assessment. Incomplete or inaccurate records will demand more time and hike up any accounting costs and don’t forget that failure to declare all forms of income could result in prosecution and a fine from HMRC. Accurate returns are important as they affect a person’s eligibility and ability to get things like mortgages and other types of credit finance.

A simple spreadsheet which records your income and expenses is a great start to keeping your business transactions logged and organised.  You read some of our tips to keeping your accounts organised here.

You must keep your records and receipts for at least 5 years after the 31 January submission deadline of the relevant tax year. For Example: If you sent your 2016 to 2017 tax return online by 31 January 2018, you must keep your records until at least the end of January 2023.

How Much Tax Will You Pay

As you now know the amount of tax you pay is based on the profit you make from (all your income less all your allowable expenses).

However the amount of tax that you actually pay is based on your circumstances and how much you earn in total during a tax year.

Income tax is calculated at different rates according to how much your profits are.  So for 2017/2018 the rates are:

2017/2018
2016/2017
Personal Allowance
0%
Up to £11,500
Up to £11,000
Basic rate
20%
£11,501 to £45,000
£11,001 to £43,000
Higher rate
40%
£45,001 to £150,000
£43,001 to £150,000
Additional rate
45%
over £150,000
over £150,000

 

Example of Working Out Tax for a Self Employed Pet Sitter 

Lewis is getting ready to submit his tax return for the tax year 2016/2017 which is due by 31 January 2018.  He has worked out that his profits from Pet Sitting was £22,000 therefore he will need to pay tax of £2,200.

Lewis will also need to pay Class 2 and Class 4 National Insurance as well as the tax above. The National Insurance rates are:

Class
Rates for tax year 2017/2018
Rates for tax year 2016/2017
Class 2
£2.85 a week
On taxable profits above £6,025
£2.80 a week
On taxable profits above £5,965
Class 4
9% on profits between £8,164 and £45,000
2% on profits over £45,000
9% on profits between £8,060 and £43,000
2% on profits over £43,000

In our example above, Lewis earned £22,000 therefore would need to pay Class 1 National Insurance of £145.60 and Class 2 National Insurance of £1,254.60.

Lewis’ total tax bill is therefore:

  • Income tax £2,200.00
  • Class 1 National Insurance £145.60
  • Class 2 National Insurance £1,254.60
  • Total for 2016/2017 £3,600.20
  • Payment on Account £1,727.30
  • Total to pay by 31 January 2018 £5,327.50

Whether you are already a sole trader or if you are considering becoming a sole trader it is important to budget for your tax and national insurance bill, one of the simplest ways is to set some money aside for HMRC as you get paid. If you are unsure how much tax you need to pay or of your tax status we definitely recommend you ask an accountant.

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