Self Employed and Tax

lolly1963

Goodevening all,
Just a quick question. My son (just 18) started work last September 08 as sole trader and registered with an accountant and all the relevant bits. He pays class 2 NI monthly so his class 4 will be in with his tax. I received a tax form for the year ending 6 April 09 this week, so i took all the relevant docs to the accountant ie.invoices,bank statements and bus tickets, workwear and tools receipts. I understand they will do this online for January 2010. What i want to ask is, does his full allowance apply before he pays his tax. ie: his single allowance, is it 6875 or something like that, so if he has earnt say 10,500 he will only pay tax on the amount he has earnt over the 6875 or whatever the allowance is?
I should have asked the accountant but completely forgot! My husband and i have always been paye so just getting to grips with this for my son...LOL...and old age creeping up fast.
Many Thanks
Lorraine

fengirl_2

The tax free allowance for 08-09 is £6035, but if he was earning before becoming self employed, then some or all of that allowance will be used against that income. If he had no prior earnings, then the £6035 is available to set against his profit for 08-09 and he wil pay tax at 20% on the balance.

PlutoinCapricorn

And remember that self employment earnings are taxed on profit not income, so legitimate expenses can be deducted.

lolly1963

Hi,
Thanks for your replies.
No, this is his first job, and yes, all the receipts he has are work related and travel expenses, work clothes and tools etc.,
I have been saving 25% weekly from his earnings and bought a premium bond last month and he won £25, lucky so and so
Many Thanks.
Lorraine.

tyllwyd

Also, remember that when he pays his tax in January 2010, if it is over a certain amount (I think the threshold is due to increase to £1000), then he will be asked to make a payment on account as well, which goes towards his next tax bill. This is calculated as half of his previous tax billl.

So if he has a tax bill of, say, £2000, he also has to pay a first payment on account of £1000 in January 2010 (total £3000) and then a second payment on account in July 2010 (total £1000).

lolly1963

Hi,
Yes, i remember them saying about paying some on account upfront.
You say £1000 in Jan 2010 then another £1000 in Jul 2010. That only adds up to the £2000. Am i misunderstanding something? You said £3000?
I will understand in the end...hopefully! LOL!
Thanks again.

lolly1963

Hi,
Its ok, hubby understands what was said and explained it all, clear now
Thanks very much for your replies...
Lorraine,