£200 Tax on £1000 Profit?

pennypincher3562

Hi

I've more or less completed my first self assessment, and it looks like HMRC are looking for £200 tax on £1000 profit. Maybe I'm being naive, but it seemed liked to much to me? My day job salary is 37k, and I have no other sources of income or investments.

Does this figure sound about right?

Thanks
PennyPincher3562

jennifernil

The basic rate of tax is 20%, so £200 on £1000 sounds exactly right to me.

Kynthia

For the 2011/12 tax year, wasn't the higher 40% tax level at earnings over £35k. Therefore shouldn't it be £400 liability? To make it worse the level is dropping. For 2013/14 it's earnings above £32,010 that incur the 40% rate. So at the moment even if your salary doesn't increase your take home pay will decrease as well as your bills increasing.

Does your P60 show your earnings for the 2011/12 year from your employer to be £37k

p00hsticks

Kynthia wrote: »

For the 2011/12 tax year, wasn't the higher 40% tax level at earnings over £35k. Therefore shouldn't it be £400 liability? To make it worse the level is dropping. For 2013/14 it's earnings above £32,010 that incur the 40% rate. So at the moment even if your salary doesn't increase your take home pay will decrease as well as your bills increasing.

I think you're missing the fact that these limits apply to Taxable income - that is, income above your personal tax allowance.

For 2011-12, the personal tax allowance was £7,475 and, as you say, the higher rate tax band kicks in at over £35,000 - meaning the majority of people can have an income of £42,475 before starting to pay tax at 40% (the exception will be if HMRC have adjusted your tax code for the year from the default 747L for any reason)

For 2012-13, the personal tax allowance rises to £8,105 but the start of the 40% band drops to £34,370 - which means that the level at which anyone on the default tax allowance starts paying 40% tax remains unchanged at £42,475

chrismac1

I think you make a good point. Many clients who have been PAYE for say 20 years then go self-employed are staggered by the amounts of cash they have to hand over when it all comes out in big chunks not already deducted.

Things were worse still in 2009 and 2010 when the public sector spend was over 50% of GDP.

agrinnall

pennypincher3562 wrote: »

Hi

I've more or less completed my first self assessment, and it looks like HMRC are looking for £200 tax on £1000 profit. Maybe I'm being naive, but it seemed liked to much to me? My day job salary is 37k, and I have no other sources of income or investments.

Does this figure sound about right?

Thanks
PennyPincher3562

How did you make £1000 profit if your day job is your only source of income and you have no investments?

CLAPTON

pennypincher3562 wrote: »

Hi

I've more or less completed my first self assessment, and it looks like HMRC are looking for £200 tax on £1000 profit. Maybe I'm being naive, but it seemed liked to much to me? My day job salary is 37k, and I have no other sources of income or investments.

Does this figure sound about right?

Thanks
PennyPincher3562

look on the bright side

if you got a pay rise of 1,000 in your day job the government would take

20% tax i.e. 200
and 12% NI i.e. 120

so you would lose 320 out of your 1,000 (assuming you don't have a student loan or making pension payments when there would be a lot more deduction)



but you knew that already.

pennypincher3562

In response to Agrinnal. Sorry my original post was not worded well. I am in full time employment with a small self employed venture on the side.

Even with the tax I am happy overall - I justed wanted to try and run a small business from start to finish.

Thanks for all your replies.

PennyPincher3562

susiedee_2

I too have just completed my tax return for my small jewellery business. I had losses of £2229.00 with a total business income of £455.00 (a bad year). The calculation has said I need to pay £158.40. I don't understand how they've come up with this figure, any ideas anyone?

agrinnall

Susiedee, I would imagine you must have filled in some part of the return incorrectly, you should only ever be paying tax if your business has made a profit.