Where to put Tax payments in S/A return??

billymadbiker

Mikeyorks wrote: »

You really need 'face to face' with an accountant. It will pay you in the long run ....... and even in the short term as it looks as though you've been overstating profits in years since the investigation.

Your basic problem stems from using a single account and then attempting to account for both business and personal expenses within it. If you had an account for business and an account for personal use ...... it would become much clearer. But an accountant is essential ..... even if only to give you a template for getting back to DIY.

On your last post ...... the tax always comes out of your personal account. You can't pay it from within the business ...... and your hybrid account is simply causing you confusion

Funny thing is, I did have 2 accounts up to the date of the investigation.
Natwest were charging me £12/pm to hold the business account and charged for each credit to the account. My total bank charges for the year were around the £500 mark and the investigator suggested that most of the smaller cheques I recived should be payed into my personal account (as this was fee-free) and I should write one cheque every few weeks to move the whole lot into my business account.
When I spoke to the bank to see if it was ok for them to do this they simply said, close the business account and put it all through the personal one.

I don't really have a problem putting the lot through one account, it's not like I am turning over millions a year and it is pretty easy to see which payments are personal.
I have a few direct debits (electric bill etc) then just withdraw enough cash at a time for a months spending.

If I did have 2 accounts I presume I would, (say in one go) just transfer the whole £25k profit into my personal account. Then take the money from the personal account to pay the tax bill.

Meaning, I would get taxed on the money used to pay my tax?
(the whole £25k profit gets taxed)
I know tax is not an expense so the money I make to pay the bill has to be profit right?
Is it as simple as, it is an allowable expense or it is profit and you pay tax on it?

Artaxerxes

billymadbiker wrote: »

When I completed my second tax return in Dec 2002 this covered the period 01-02 when I had made that tax payment. As (I thoguht) advised by hmrc, I put the sum drawn from the business (to pay the bill) into box 3.33.

Was this the wrong thing to do and will I have over paid much if it was?

Yes, it was the wrong thing to do*. You will have potentially overpaid your tax bill x 22% (for 2001/02).

* Unless, you had also put it in box 3.51 (in which case which would cancel out against what you put in box 3.33).

It makes no difference which period the tax bill related to, year 1, year 2 or year 39. It is still drawings.

Mikeyorks

billymadbiker wrote: »

Meaning, I would get taxed on the money used to pay my tax?

No. The profit you move out into your personal account is untaxed at that point.

You then .. via your Return calculate your overall tax. And you pay it from the personal account. Yes - you're paying it from your 'gross' - just the same way I pay my PAYE from my gross. The only difference is mine is turned to 'net' before I get it. You turn yours to 'net' after your Return is done.

An accountant is your way forward. You appear to work things very methodically (not a criticism). But if the method is wrong - you're stuffed? Get an accountant to redo your method ...... then take over again after a year or so?

jennifernil

If you are setting aside 30% of your profits each month to cover tax and NI, surely you are using that money to make your payments, not drawing more money?

I would agree that you need someone to show you how you should be doing things. As Mike says, once you get the hang of it, it is pretty simple.

You need to keep each year separate I reckon, that way you will not get so confused. For 09/10 you should have made the first POA 31st January 2010, so within the tax year. The second one is 31st July as you said, and as you are setting aside 30%, you should have plenty of money left in the building society to pay that.

If your POAs did not cover all the tax, then you will be making a balancing payment 31st January 2011, plus your first POA for year 10/11 at the same time.

morgani

It seems many people have gone over this point of what is taxed and what is not.

I may not be helping at all by going over it again but hopefully it may help you to understand.

Using your example above

Income £50k
Expenses £25k
Profit £25k

Personal allowance c£6.5k

Taxable income £18.5k

You will be taxed on this whether you withdraw £10k, £15k, £20k or whatever as drawings.

Anything that goes through the business account which is not business relayed needs to go as drawings (this includes tax and national insurance as well as house hold running costs groceries etc).