Few Questions About Tax....

wealthymarketer

Hi,

Few fairly simple q's about tax, appreciate all responses:

1) Is sole trader tax the same rate as someone who isn't registered
2) I understand tax is on a progressive scale but does that man the first £5000 is 0% tax, or when you hit each tax bracket all money is taxed at that percentage.
3) If myself and 2 brother have earned £100k from creating websites, can we split the amount between ourselves then pay tax on it seperately.

Thanks,
Alex

malcindebt

1) everyone pays the same 'rate' of tax dependant on income.
2) £5035 is tax free, the next £2150 is at 10%, the next 31150 is at 22%, anything in excess of this is at 40%
3) Essentially what you have described is a Partnership, you need to register this partnership with the Revenue. You would then decide on the %age split and be taxed seperately on this.

wealthymarketer

So even though we have already made the money, we can register as a 3 person partnership and will be taxed separately?

Alex

ballyblack

Ref answer 2

I'm trying to gert my head around this

So anyone earning a total of 31,150 will pay an effective rate of roughly 17.5%

Ta

malcindebt

£31150 is the amount of money in the band, not the top level you can earn.

The levels of pay for the tax bands are as follows.

income less than £5035 -0%

income between £5036 and £7185 -10% tax pay in band (£2150)

Income between £7186 and £38335 -22% Pay in band (£31150)

Income in excess of £38335 taxed at 40%

If you are looking for the %age of tax paid on £38335 as a whole then it is around 18.4% (£7068)

In answer to wealthy marketer, if you have worked on the basis that you share the workload, then yes, even though you have already earned the money you should register as a partnership. Thats taken from how you explained in the OP, as though you all worked on the 'business' and intend to split the profits.