are these accurate calculations?

joanne_d_3

Hi again.

So...after asking for and receiving help from lots of wonderful people on this site regarding my husbands move to self employment , i now feel a lot more relaxed and stress free lol.

Being new to self employment sure is worrying when you have kids and mortgage etc when you are used to having the "stability" of a regular paye income coming in.

I panic that we are going to be paying more out than we have coming in !

Because of this i have found myself playing around with figures....

Looking at the records of my husbands first 2 months or so of self employed taxi driving , i have kind of been able to arrive at a figure which i "assume" hes going to earn over the course of the year.

In the same way i have arrived at an APPROX figure of what his expenses are likely to be .

I have calculated expenses to include the business % of:

Taxi insurance
Road tax
Diesel costs
Capital allowance for new vehicle bought
Repairs (only allowed a very small amount for this as car is in excellent order with A LOT of work having just recently been done)

Radio hire / depot rental fees

Any how......i got the shock of my life when i counted this all up!!!

Im estimating that he will earn *around* 16k and when i counted it up the expenses side of things comes in at *around* £7k !!!!

Wow.....I NEVER IN A MILLION YEARS WOULD HAVE THOUGHT IT WOULD COST SO MUCH TO RUN A TAXI FOR A YEAR!

So....would i be right in thinking (please bear with me because im only doing examples to see if i can get it right as I will be doing my husbands self assesments when the time comes) that i use the total income figure MINUS the expenses figure and this tells me the PROFIT ?

Is it then FROM this profit amount that the personal allowance is deducted and he would pay tax on the remaining amount ?

So eg

income 16 , 000

minus

expenses 7 ,000

= 9k profit

minus

6 , 400 personal allowance

= tax payable at 20% on only £600 ?

I understand there would then be class 4 NIC payable but this is basically worked out in the same manner i think ?

Nic payable at 8% of totol profit OVER £5, 700(?)

I do apologise , this post turne out much longer than i thought but bear with me whilst i learn lol:p

fengirl_2

Your tax calculations are correct except that the tax free allowance is 6475 not 8400, but I am a bit concerned about your capital allowances. What have you actually included in calculating this monthly expense? Have you included 100% of the cost of the car less private use, or 20% less private use?
You also need to include phone and office costs.

joanne_d_3

fengirl wrote: »

Your tax calculations are correct except that the tax free allowance is 6475 not 8400, but I am a bit concerned about your capital allowances. What have you actually included in calculating this monthly expense? Have you included 100% of the cost of the car less private use, or 20% less private use?
You also need to include phone and office costs.

Hi fengirl and thanks for replying , its appreciated.

lol of course the personal allowance is 6475 , that was actually a typing error (i meant to type 6470).

I dont understand what you mean about the capital allowances?

The amount i have included for the cost of PURCHASING of the car is only around £280 - the car cost us £1500 and we will be using it for business use 75%. (i got some useful advice on calculating capital expenses from a user called Malcindebt - thank you Malcindebt if your reading:rotfl:) He gave me figures in one of my other posts

The expenses i have listed are for a YEARS expenses. This post was more "hypothetical" than anything else , i just wanted to see if i was doing my sums correct lol.

The expenses i am allowing are (hubby is a taxi driver remember):

Taxi insurance
Road tax
Servicing / repairs
Diesel
Valeting.

For the above expenses i am using the assumption that the taxi is 75% business and 25% personal use.

Hubby also pays a weekly fee for depot charges / radio hire and seeing as he would NOT pay this if he wasnt a taxi driver , im assuming its ok to allow 100% for this ? Would that be right?


Thanks again.

joanne

joanne_d_3

Sorry Fengirl can i just ask you another question.

As per my other posts , the car which my husband uses for taxi'ing in..... to be totally honest , the car doesnt get used much at all when my husband isnt out working.

As we have two cars in the family , if we are going out at night or weekends , chances are it will be in MY car . (maybe it's something to do with our 3 kids;) lol)

For this reason , we are toying with the idea of using the figures 75% business use and 25% personal use on the self assesment.

Be honest....do you think we are pushing it here ? What would be the "usual" business use used by taxi drivers?

I appreciate your opinion

Any other taxi drivers feel free to chime in and let me know what figures you use.

Joanne

fengirl_2

OK, thanks for the capital allowances answer, thats fine.
Yes, you need to include the radio and depot fees.
There is no 'usual' figure for private use of a vehicle. Your OH needs to keep a note of his business mileage over a period of a couple of months and use that proportion for the accounts. In actual fact you should really include all the vehicle running costs in your accounts and then add back the private proportion in his self assessment - accounts which do not show a private proportion on self assessments are a risk factor in selection for investigation.

joanne_d_3

fengirl wrote: »

OK, thanks for the capital allowances answer, thats fine.
Yes, you need to include the radio and depot fees.
There is no 'usual' figure for private use of a vehicle. Your OH needs to keep a note of his business mileage over a period of a couple of months and use that proportion for the accounts. In actual fact you should really include all the vehicle running costs in your accounts and then add back the private proportion in his self assessment - accounts which do not show a private proportion on self assessments are a risk factor in selection for investigation.

Thanks Fengirl , dont know where i would be without people on this site giving such good advice:T

Yes , we are planning to include all the running costs and we also plan to do as you suggest , as in we are keeping note of the total amount in our accounts and then adding back 25% in the self assesment.

To be honest im actually DREADING the time coming when we have to complete our first self assesment , i would bet NO-ONE has ever been so scared of tax matters before ! I panic incase something innocently gets over looked or calculated wrong.....i would just die if hmrc thought we were trying to be "dodgy" lol .

Thanks again.

Joanne

fengirl_2

I bet I know hundreds of people who are just as terrified about tax as you - people who dont even open brown envelopes as they are so scary. But then I couldnt drive up a motorway!
If in doubt, it might be worth asking an accountant to help for the first year.

joanne_d_3

fengirl wrote: »

I bet I know hundreds of people who are just as terrified about tax as you - people who dont even open brown envelopes as they are so scary. But then I couldnt drive up a motorway!
If in doubt, it might be worth asking an accountant to help for the first year.

lol sorry Fengirl but i actually laughed when i read that post! Are you serious ? Do motorways scare you ?

joanne

joanne_d_3

joanne_d wrote: »

lol sorry Fengirl but i actually laughed when i read that post! Are you serious ? Do motorways scare you ?

joanne

By the way , i AM seriously considering getting an accountant fro the first year or so . I saw one advertised , was called tax doctor or something along those lines . Apparently if your total earnings are below £30k they only charge £99 .I think that would be money well spent.

Joanne

zygurat789

In your circumstances, as descibed above, 25% may be too high a proportion for private use.
You should keep a log of all use, be it business or private, then the actual proportion of business to private can be ascertained. Ie business miles 12000, total miles 15000 then private use is 3000 or 20% which is your private add back. Most people do not keep a log, if you do, and it is accurate, you should have no problem from HMRC.
So you will not be able to determine your private use until the end of your accounting period then it is what the figures tell you it is. As you have another car it could well be as low as 10%.
I have had a car which I claimed 100% business use, I was never challenged but at the time we had three small children and child seats had to be screwed into the car so whenever we went anywhere as a family we used my OH's estate which was the family car.

fengirl_2

Oh yes, any dual carrigeway in fact. Havn't always been like that - just in the past 20 yrs. I can drive to my nearest station and from then on I let the train take the strain.