Tax Advice Please

CLAPTON

sorry

should say the example assumes the sole trader had no other income

if they had, e.g. a PAYE job as well the there would be no personal allowance against profit and rate of tax may be partly at 40% depending upon their total income.

Ste_C

Rolo_Tomasi wrote: »

You could form a Ltd Company and then the investment in this could be treated as a loan which can be repaid without any tax due on it. However the company would still have to pay tax on its profit (at 21%) but there is no nic to pay.

It infuriates me when people suggest to people with very limited knowledge of business that they should set up a Limited company. They are a totally different kettle of fish (whatever that means).

PlutoinCapricorn

£60,000 setup costs? It seems that a limited company would be best for you, but you really do need to discuss this with experts.

www.businesslink.gov.uk will give lots of free advice and information, and you can get free workshops too.

pelirocco

Ste_C wrote: »

It infuriates me when people suggest to people with very limited knowledge of business that they should set up a Limited company. They are a totally different kettle of fish (whatever that means).

Or any business tbh

Op what type of business are you setting up ? , to state that you will be making £1k profit a month before you have even started is worrying

Rolo_Tomasi

I never suggested that a Ltd company should bet set up - I was just pointing out that this was an option which should be considered - no matter how much business knowledge the OP currently has.

chalkie99

JayCee wrote: »

I was told, because I won't have any employees, it's very simple and I won't need an accountant.

All I will add, from reading your posts in this thread, is that you definitely do need an accountant, simply because you are making a relatively large investment in your new enterprise and seem to have very little understanding of how it all works.

Comment not meant insultingly but you really risk getting yourself into a mess.

roger_c

As long as you know what you are doing then maybe you won't need an accountant but if you are starting out with no accounting or tax knowledge it can be pretty difficult. You could always get started with an accountant then if you feel you can do the job yourself after a couple of years through the mill then you could go it alone to save on costs?

James_Trimby

HI I hate people doing it to me BUT most accountants offer a free introdution meeting Try a few (especially if you can get a reccomendation from someone you trust) see what they say. (and get an idea of price) THEN make your mind up if you will use this free advice and do it yourself OR sign up to the one you get on with best (and seemed to give good advice) and was not too expensive. A good accountant should be able to reduce your annual tax bill by as much as he charges for this size of job (assuming not going limited co route) For a start their fees are deductable so 20/40% saved already !

Debt_Free_Chick

Rolo_Tomasi wrote: »

You could form a Ltd Company and then the investment in this could be treated as a loan which can be repaid without any tax due on it

But this is the same treatment as a sole trader. A sole trader does not pay tax on any loan repayments.

Debt_Free_Chick

OP - now is a good time to understand the difference between cashflow, profit and balance sheet.

If you are keeping trading accounts, they will (hopefully) show a profit every month. But profit does not equal cash at the bank.

And remember that profit is taxable, so you can't draw all the profit out and spend it - you need to retain some of the profit to pay your tax at the end of the tax year (payable in July and January, on previous year's profit - plus an on-account payment for the following year).

Repayments of loan are balance sheet transactions. You need cash and profit to make the repayments, but all you will see on the balance sheet is a decrease in cash at bank and a decrease in current liabilities.

It is possible to learn this stuff, especially for a simple sole trader business, but without guidance you will learn through trial & error. And an error could have implications for your tax return.

An accounts software package can help you learn, but you will forever be restoring backups when you make a mistake - but if you can see how the mistake occurred and how you unravel it, you may get by and eventually become proficient. But it could be an expensive education!

Make use of Business Link and the HMRC sessions and then make a decision on the accountant. If you don't use an accountant through the year, see if you can find one who will take your bookkeeping and produce your accounts. But you will still need to be basically au-fait with some bookeeping/record keeping principles.

HTH