Tax Rules???!!!!

[lloyd1980]

Hi all

may sound a stupid question to a lot, but im aproaching my year end ( been self employed a year) have kept set percentage back for tax
should I be paying income tax on the money I draw as wages or is the fact that I pay tax on my profit sufficient??
Im a sole trader and its pretty confusing

thanks in advance and dont crucify my for such a noddy question

 

[acat]

Keep the money to one side but I doubt you will be paying much if anything to the taxman this year. All the money you have invested from your own pocket has to come out first before you are liable for any tax. Then you get your normal allowance of tax free earnings and anything you have bought for the business since is also gaining tax rebates (providing you have all the receipts) so if you posted an invoice out the stamp, paper, envelope are all costs you dont pay tax on.

Hope that brightens you day


Chris

 

[Smugley]

You pay tax on your profits, ie: income over the tax-free threshold after your expenses and capital expenditure etc have all been deducted from gross earnings. I don't think you get 'wages' as such when you're self employed. Doesn't matter what you do with the money once it's in your bank account, whether it's a business, personal account or otherwise.

 

[rocker]

Yea I think smugley's right if you are a sole trader you don't have any 'wages' to pay tax on, it's only when you are a limited company where the business makes money and you draw a wage from that. In that case, you would have to pay tax on the wage, but if you are a sole trader paying the tax on the profits is sufficient. Like acat said though, 1st year is so bloomin' expensive, as long as you've kept all your receipts you won't pay any tax. Something else I'm looking into is I think you can 'carry over' your tax to next year when you're starting out, i.e. if you've spent so much that, not only will you not pay tax, technically the tax man will owe you money (like that's ever going to happen) you can carry over the deficit to next year and have it off next year's tax bill. Mind you, I heard this in a pub so it's probably just balls.

Does anyone know if you can deduct tax for the cost of your training, like the 17th course or whatever. I did some training within this last year before I went on my own and registered myself as a sole trader.... can I deduct tax for this amount? Maybe use it as part of my capital?

 

[acat]

Yes you can straight from the horses mouth as it were. The first course you do to become an electrician is not deductable everything after that is. Even if you decided to do a first aid course its all deductable.



Chris

PS Thanks for your PM Rocker

 

[rocker]

Whoa that's a bit weird. Ah well, I have plenty to deduct then! Feel like taking a few more courses, just to smite Mr Brown.

Don't mention it.

 

[Des 56]

Its harder to try and justify whats not deductable
Most items I buy are for work
Whether its clothing, tools equipment,office room,computor,you name it and with a bit of thought it can become esential work expenditure

Any courses definitely,100% straight off the profit
All the wonderful books we buy
Even a manual for your work vehicle
Pens paper


Claim for all these sort of things and let them un justify if they have doubts

 

[bugsy]

I take it you have not got an accountant ,
So (other posts have proberbly covered this but anyway )
from your gross turnover deduct any business related expenses, van purchase / lease / costs, fuel, materials , road tax, insurance, p/l insurance, tools, testers, memberships, stationary, postage, p.c. printer you can also claim for a home office, workware, advertising etc. etc from the balance deduct your tax free allowance , the balance will be subject to tax , if your reckon on paying 20% that youll be on the right side

 

[rocker]

But really, what the hell do we get for it?
Hospital and dole is covered by national insurance, and presumably topped up by tax on ciggies and beer.
Police and bins and cleaning and that council tax.
Roads road tax and petrol tax.
Value added tax on anything the government deem to be a luxury.
You have to pay for your basic amenities even water.
Where exactly does my 22% go, Mr Brown?

 

[Jonesy83]

But really, what the hell do we get for it?
Hospital and dole is covered by national insurance, and presumably topped up by tax on ciggies and beer.
Police and bins and cleaning and that council tax.
Roads road tax and petrol tax.
Value added tax on anything the government deem to be a luxury.
You have to pay for your basic amenities even water.
Where exactly does my 22% go, Mr Brown?

Moats, duck houses, dog food, 2nd and 3rd homes for mps

 

[Sintra]

And of course the all important toilet seat.

 

[SirKit Breaker]

As a Sole Trader, working from home this is bascially how it works.

You receive money in from customers .
Add to this any bank accounts interest.
Add any other form of income like share dividends etc etc etc.

This is Income.

You pay out for materials.
Business costs.
You can claim part of the cost of your household running costs if you work from home.

This is Expenditure

Deduct Expenditure from income = Profit, you then pay tax on this at whatever rate you fall into.

It is a complex world, and if you get it wrong it will hurt. The ins and outs of what you can and cannot claim is a minefield. I pay an accountant £300 for her to sort it all out, her fee is also tax deductable.

My turnover last year (08-09) was £39000, and i got a tax bill for £531. When i did a basic calculation myself prior to sending her all the info I worked it out at about £3400.

£300 well spent if you ask me.

Cheers..........Howard

PM me for Accountants info if interested, she is internet based.

 

[Sintra]

Totally agree that an accountant will save you money.

When I was self employed years ago I always used one as they know all the inns and outs.

 

[lloyd1980]

thanks for all the usfull advice guys, so what ive gather ed so far is this
total turnover = all money going into the business account including any cash ive 'recycled' into paying for deisel materiels etc, as cash costs the most to deposit
from this i deduct everything i can keep a receipt for, deisel, paperclips, paper, printer ink, road tax, insurance, any tools, workwear etc etc etc
the remaining is profit
im allowed a % of this as tax free and the remaining amount is liable for tax
I get this ( I think) although i will employ a good accountant
what im confused over is this., i need money to live (obviously) so ive been drawing out money from the business account on what ive made, now am I classed as an employee of the compnay and do i need to pay a % of tax on what i take or is the whole amount left after tax in the account free for me to have if I wished?
thanks again fellas uve been really helpfull

 

[acat]

You are only an employee if your business is ltd.


Chris