2nd job self employed

edited 30 November -1 at 1:00AM in Cutting Tax
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Jacka87Jacka87 Forumite
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edited 30 November -1 at 1:00AM in Cutting Tax
Not sureif this is the right forum for this thread as it covers a couple of issues.

A little background info first, I am currently employed and earn 23k with 1k in bonuses so 24k total. I am currently wanting to start a small business whilst keeping my current job. I expect the business will turn over around 15-20k. I am expecting to have to pay about 10-15k to start the business up.

What is the tax implications in terms of when do I start paying higher rate tax, I was told it was around 43k but I cant find it saying this anywhere, Directgov said its 37k this year?

I believe you only pay tax on the profit? So would that mean if I turned over 20k and profitted say 10k then I would not be anywhere near the higher rate tax band anyway as I would be adding 10k to my usual salary?

Questions can the start up money be used against the turnover to reduce the profit of the company as it is paying off a loan even if it is put up by myself?

How much NI do I pay? I have no idea how NI works at all tbh.

Thanks in advance
Here to help and be helped!

New to MB, running profit, £16 from MB, £30 cashback!

Replies

  • In the current tax year, yoou start paying 40% tax when your taxable income (after personal allowances) reaches £34,700. Don't forget that you only pay tax on your net profit, not yoour turnover and if you started your business now, you would only be trading for half this tax year.
    The capital introduced is not tax deductable, although the interest on the loan probably will be.
    You will pay class 2 NIC by monthly DD and class 4 NIC, which is profit based, along with the tax on your profits with your self assessment tax.
    You are talking about a company, but I think you mean to be a sole trader.
    £705,000 raised by client groups in the past 18 mths :beer:
  • Jacka87Jacka87 Forumite
    369 Posts
    Part of the Furniture Combo Breaker
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    Thanks.

    I would be intending on being a sole trader or maybe a partnership not a company, I meant business instead of company.

    I appreciate the tax year is from april so would only trade for half a year but the business itself is seaonal and would basically only trade for around 3months during the summer anyway so that doesnt really help me much.

    I thought you only paid tax on the net profit and was just checking on that.

    The NI is great news thats what I was completly unaware of so thats helpful. The only thing I dont get is how the class 4 is raised and how this is paid? Is it a lump sum at the end of the tax year when I pay my tax as well? Does my NI from my job affect this?

    Thanks very much for the answers they basically confirmed most of my thoughts which is very useful as all my thinking has been based on these assumptions.

    I do have one other question, how does; student loan repayments, Pension Contributions count towards calculating what tax bracket I am in. I also pay money towards buying shares in the company I work for that is based on an AESOP scheme. The contributions are taken off my salary pre tax so will they work towards reducing my total earnings when considering my tax bracket?
    Here to help and be helped!

    New to MB, running profit, £16 from MB, £30 cashback!
  • Even though the work is seasonal, your accounts will be on an annual basis, and tax is worked out on your annual profit - even if it was only earned for 1 month.
    Class 4 NIC is calculated along with your tax at the end of the tax year and paid along with your tax on your self assessment. This is completely separate from the NI on your job.
    The other items you mentioned are dealt with through your PAYE income and yes they do reduce your tax, but, as you have siad, they come off before you even see your main salary.
    £705,000 raised by client groups in the past 18 mths :beer:
  • Jacka87Jacka87 Forumite
    369 Posts
    Part of the Furniture Combo Breaker
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    Since te pension etc comes off before tax how do I include that when I am doing my self assesment, do I state how much I have contricuted to pensions etc or do I state my net salary after PAYE?
    Here to help and be helped!

    New to MB, running profit, £16 from MB, £30 cashback!
  • As the pension comes off gross pay and PAYE is applied to net pay, you dont include your pension on your SA. You just include the figures for pay and tax shown on your P60. HMRC dont need to know about the pension.
    £705,000 raised by client groups in the past 18 mths :beer:
  • Jacka87Jacka87 Forumite
    369 Posts
    Part of the Furniture Combo Breaker
    ✭✭
    Thanks,

    I never thought about the P60, that gives me all the information, I was thinking I would need to take the pension amounts etc off of my gross salary and do some sums.

    Thanks again you have been very helpfull.
    Here to help and be helped!

    New to MB, running profit, £16 from MB, £30 cashback!
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