sole trader help

chrismac1

It isn't right. If you read my earlier post, most sub-contractors get a tax refund at this time of year. He keeps records of the tax his contractor deducts from him. Then for the 2010-11 return, there is a box for "Construction Industry deductions". He keys the total of all deductions statement tax into this, for statements dated 6 April 10 to 5 April 11. Unless he is a 40% taxpayer for the tax year, the 20% deduction guarantees him a tax repayment for 2 reasons:

1. It does not build in a tax-free allowance of 6,475.
2. He is taxed on his gross income, in reality he'll have lots of claimable expenses including his own sub-contractors, mileage, materials and so on.

linzi1uk

what i mean about the tax is when he has earned £35001 wont he start to pay 40% tax, then also he will have to deduct 20% tax to his subbies, making a 60% tax out of his pay,

longforgotten

Linzi, I think you're mixing things up with paye.

Your other half is a self employed sub contractor. He will need to prepare a profit and loss account to calculate his taxable profit ( ie total up his gross income and deduct allowable business expenses ). Only then will you know if his profit is high enough to be a 40% tax payer.

The person/company your OH works for will continue to deduct 20% tax no matter how much work is done........

chrismac1

linzi, I think you should find a good local accountant and ask him or her these sorts of questions, find out if they really know what CIS is all about or they just say they do. CIS is by far the worst part of the UK tax system, it has by far more complaints about it from accountants than any other part of it - which is saying something as the whole thing is a shambles right now! And what is worse, CIS penalties are £100 per month, so far the highest penalty value I have seen on websites is £80k. One client who had unwittingly registered as a contractor by mistake has a grand total of £35k in CIS penalties. There are no sense checks in the system, no mercy for mistakes, and to top it all I've had one CIS client where HMRC deleted two filed returns then tried to fine us £200.

This is not the part of the UK tax system to take a punt of, no place for a beginner to start. HMRC aggressively target the CIS system as a cash cow in the opinion of many aco!!!!ants in the sector.