Self assessment - profit

rookums

Hi

When you fill in your self assessment form - what goes in the profit section.
eg. £20,000 income
less £11,000 outgoings
less £ 4,000 drawings ( wages and personal)
Profit £ 5,000

is it the £5,000 that goes as profit or is it the £9000 ( drawings plus profit).
I got someone who is meant to be an accountant to do it and he put in the £5,000 as the profit. Sorry to be dense but I am confused, I have never done this before. if this is correct, what happens to the "drawings". ??

Auntie-Dolly

It should be the £9000 otherwise you would not be paying any tax on the money you have already taken from the business.

PlutoinCapricorn

I am assuming that you are registered as a Sole Trader and that this is your first self-assessment return. I am also assuming that you have no PAYE employees.

The income should be the total amount that you invoiced your clients for or charged people. The expenses should be the total of your receipts for items that you needed for your business and perhaps include some running costs.

Income minus expenses is the profit, which you will be taxed on.

You cannot count money taken from the business as expenses as all self employed people would do this and as another poster says no one would pay any tax.

'Drawings' is a rather old fashioned term I think. Personal spending money comes out of what if left over after tax has been paid on the profit.

CIS

is it the £5,000 that goes as profit or is it the £9000 ( drawings plus profit).
I got someone who is meant to be an accountant to do it and he put in the £5,000 as the profit. Sorry to be dense but I am confused, I have never done this before. if this is correct, what happens to the "drawings". ??

I would be tempted to get someone else to do the books for you. Have they made any other errors ? (what sort of business do you do ?)

nsabournemouth

Doees it not work out like this:

£20k minus expenses = £9k From the £9k take your tax free allowence and you are then taxed on what remains?

CIS

[QUOTE
£20k minus expenses = £9k From the £9k take your tax free allowence and you are then taxed on what remains?][/QUOTE]

On a basic level it does for tax purposes but it's not always as simple as looking at the sales and deducting the expenses when working out gross profit.

Debt_Free_Chick

In simple terms, your drawings are taken out of profit. Your drawings are not a legitimate "business expense" in the same way as (e.g.) rent, power, heat etc ....

So ... to concur with others, your profit on which tax is payable is £9k

HTH