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Tax and stuff is a nightmare for example are you using the simplified tax system at HMRC or the full? As such things as depreciation are not considered in simplified tax as you can claim full value at time of purchase it gets complicated.
Please don't take my word for word it all as I'm no expert!!! Get advice, I'm sure someone on LJ will be better informed.
Any doubt remember that the HMRC people are very helpful in making sure you are doing it all properly. My advice is phone them and ask.
You have a student loan so that's the only difference.
So it's sounding just about right!
Ok thanks,
Andy I understand what you mean about the gross profit net profit thing and i'll look into it. Potentially that could help a bit. Otherwise it sounds like I'm not far off calculating it right.
Getting drunk in student bars for 3 years has come back to haunt me
Whilst you're right, you're losing 38% on any jobs above a certain figure however using that system, you're not therefore paying any tax on jobs below that figure if you see what I mean (they're all in your "tax free"allowances). It looks better if you imagine your allowances over your total jobs for the year so that you're losing something like 20-25% on all your jobs rather than the 38% once you've used up your allowances.... somehow, it's not so discouraging!!:)
Just remember the advice I was given way back. A good accountant should save you HIS cost AND more. The only thing I could add to that would be to choose an accountant that has been recommended, and second, get a quote from him. You may be surprised at how many little things there are that you use and are tax deductible. Also, don't bother him every day about this and that, just write down any queries and have one meeting a year with him and ask them then. Hope this helps.
I can only endorse that recommendation. I started off with my Accountant as he was a Small Business Specialist. He has been a Mentor to me as well, durthing the growth of my business from Sole Trader to Ltd.
His advice has saved the business and myself considerable money over the years as well as providing business confidence. His costs are just part of my business costs.
Our Accountants now looks after my personal tax affairs, the business, our payroll and pensions on a negotiated fixed fee basis. We hold quarterly meetings to review and, importantly, I know they are there for anything I consider urgent/key.
As much as it grates, their advice is often key when starting out so accepting it's a costs is often hard to do, but do it.
Good point Graham.
Whilst looking into weather you take the student loan repayment from the net or gross profit I came across information about applying for mortgages and it appears that sole traders mortgages are based on your income after your tax has been taken out compared to employed people who's mortgage is based on their total annual salary. Jeez it doesn't get any better eh.
Sorry to be bearer of bad news for anyone in this situation.
On the same subject of tax, wet day yesterday so did my online tax return for last year. HMRC seem to have changed something (unless I've just noticed the payments in the past) and I now had to pay half this years payment ( they estimate it from a previous return) as well........ a sort of advanced payment..... had till January to make this new payment. Guess it's fair enough really as still paying in arrears....... just not nearly 12 months any more.
That's Payment On Account - HMRC want their slice earlier. You just have to watch that your business circumstances do not fundamentally change during that year without updating HMRC