PAYE Tax + Self Employed at same time - Help!

gsk

Hi All,

I have just set up as a sole trader and intend to pay the Class 2 NICs (£2.50 per week?). I anticipate that in my first year of trading my turnover will be less than £10,000 and my profit will be less than £4000.

I am in full time employment earning £21500 pa. I do the 'sole trader' stuff in my own time. I want to know how much to put aside to pay any tax bill that might arise.

To give an example, say I had done 1 job all year that brought in £100.

To do the job and setup the 'business' i I had the following expenditure:

Website: £25
Business Cards: £10
Parts for the one job: £30
Postage to send the contents of the job to customer:£10
Total:£75

This would leave a profit of £25.

How much tax would I need to pay?
Are all of the items listed for expediture ok to list as expediture?
Do I need to keep all the funds in seperate bank accounts or can it all go through my regular current account?

I imagine that these are all real newbie questions, and I have a good idea at what the answer might be, but if someone could help confirm it, I will rest a lot easier. I am trying to avoid getting caught out if/when (hopefully) the sums involved have moved one or two decimal places!

Regards,

GSK

CLAPTON

basically you will pay tax of 20% on your profit

you may be able to apply for NI exemption on the basis of low earnings (less than 5315 pa) but other wise you pay £2.5 per week and 9% of earnings (profit) over 7225

gsk

Thanks, I was hoping it would be that simple. I have had a detailed look at the HMRC website and had cometo that conclusion, but had a nagging feeling I was missing something!

gsk

Sorry, I have one other question. Using the numbers above, would my first tax bill be £5 (IC @ 20% on £25 profit) or would it be £7.50 (IC @ 20% on £25 profit + 50% to pay on account)?

Cat2011

I had my first SA tax bill this year after starting to gain income from property+working full time and paying via PAYE too. I put all the property money through a completely seperate bank account - that makes it so much easier to keep track of things I can claim as expenses and my income - it doesn't get all confused with my private stuff. I'd also recommend using some accounting software, like Money Manager. Simple to use and easy to add up income/expenses.

I thought I'd have to pay my whole bill+50% of next years bill, but I only paid this years tax (1.2k). When I was previously filling in the form with other numbers which gave me a higher tax bill (over 2k), the calculator said I would have to pay 50% of next years bill as well. So maybe you only pay the 50% of next years bill if you're due to pay over a certain amount?

I found it really hard to work out how much tax I'd owe on my income. A good rule is put 30% of income aside, but due to all the claimable expenses I think I only paid about 10% in the end, but it completely depends. The HMRC website has pretty good explainations on things you can and can't include so I'd have a look through that. e.g. you might be able to claim screws as they're a consumable, but not a screwdriver as thats a capital purchase. Or if you're working from a home office you can claim a percentage of your household bills.

Mikeyorks

gsk wrote: »

Sorry, I have one other question. Using the numbers above, would my first tax bill be £5 (IC @ 20% on £25 profit) or would it be £7.50 (IC @ 20% on £25 profit + 50% to pay on account)?

You only make the payments on account if the tax due in the previous year is £1k or more or - less than 80% is (PAYE) deducted at source.

So - using your £4k profit figure there would (liability £800) be no POAs due. Assuming - your PAYE is OK and doesn't throw an underpayment of £200 into the mix?