Partnership, Profit and Tax Questions

NuttyBird

My friend is going to start up a small business with her friend and she was working out some finances. If her turnover was £22,000 per year. Expenses were £2135. Wages for the two partners £19200 @ £9600 each. The company profit would be £665. How much of a tax bill is she likely to get at the end of the year?

How does she work out how much tax to pay on her earnings?

Thanks

Wywth

NuttyBird wrote: »

My friend is going to start up a small business with her friend and she was working out some finances. If her turnover was £22,000 per year. Expenses were £2135. Wages for the two partners £19200 @ £9600 each. The company profit would be £665. How much of a tax bill is she likely to get at the end of the year?

How does she work out how much tax to pay on her earnings?

Thanks

She should consult an accountant.

Costs would be tax deductable, and any half decent accountant should save her more money than they charge anyway.

Pennywise

Will depend on whether a partnership or a limited company.

If a partnership, tax and NIC is paid on profit share, not drawings (there is no such thing as partner wages in a partnership).

If a company, PAYE/NIC would be applied to the wages they want to take and then corporation tax on the resultant profit.

nomunnofun

NuttyBird wrote: »

My friend is going to start up a small business with her friend and she was working out some finances. If her turnover was £22,000 per year. Expenses were £2135. Wages for the two partners £19200 @ £9600 each. The company profit would be £665. How much of a tax bill is she likely to get at the end of the year?

How does she work out how much tax to pay on her earnings?

Thanks

On the basis of the question, I would strongly recommend that your friend does not attempt to do this herself.

Turnover is £22000, expenses are 2135 - profit is £19865. Each partner's share of the profit is £9932 - tax payable is approx. £100 each. Class 4 NIC about £195 each. 'Wages' for the partners are totally irrelevant in a partnership unless, as you suggest later in your post, that it is indeed a company which is a totally different ball game!

NuttyBird

Looks like an accountant may be in order - Thanks for your help