Self Employed but no yearly profit

Peter999_2

Hi all,

My cousin is self employed and I am trying to help her with the announcement made today.

Her company is owned by herself and a friend.  It is not a limited company and doesn't appear on Companies House.

At the moment, they pay themselves each month and then at the end of the year they complete tax returns.   At the end of the year there are no profits as they only earn £7,000 a year and they will have paid themselves £3,500 each so about £300 a month.

As they do not make any profit does this mean that they won't get any help?  or will they be able to get 80% of the £300 a month?    She's asked me to help as she knows I have my own company but mine is a Ltd company and I use PAYE to pay myself so I don't know much about self employment.

Thanks

Peter

Petriix

The profit is what they pay themselves. Self employed profit = earnings.

Peter999_2

Thanks for that.   So I guess they'd get 80% of £300 a month which is £240.

kedmond

If you are a sole trader (self employed) as opposed to the director of a Ltd. company, then there is no company tax return and no corporation tax. A company doesn't exist as a separate entity if you are self employed. So this statement will relate (as I understand it) to personal tax returns, which in your example 80% of £300. Note this grant is also taxable.

Luvoj

Peter999_2 said:

Hi all,

My cousin is self employed and I am trying to help her with the announcement made today.

Her company is owned by herself and a friend.  It is not a limited company and doesn't appear on Companies House.

At the moment, they pay themselves each month and then at the end of the year they complete tax returns.   At the end of the year there are no profits as they only earn £7,000 a year and they will have paid themselves £3,500 each so about £300 a month.

As they do not make any profit does this mean that they won't get any help?  or will they be able to get 80% of the £300 a month?    She's asked me to help as she knows I have my own company but mine is a Ltd company and I use PAYE to pay myself so I don't know much about self employment.

Thanks

Peter

Its not a company if its not registered as such, it's simply a business.
You appear to be mistaking company accounting policy with sole trader accounting policy.

Are you saying they are drawing £7k each per year, or that is the total so they are only drawing £3.5 k per year?

Whihever it is, how can they possibly live on that. It's less than you could earn fippling burgers at McDonalds. It doesn't sound like a viable business at all; perhaps its a hobby business? If so, that is not covered.

Where does their other income come from?

Jeremy535897

This post shows a fundamental misunderstanding of how self employed people are taxed. I am not being critical, and I understand OP says he doesn't know anything about tax and self employment, but I want to emphasise the point in case it is a more widely held belief.
It does not matter for tax whether self employed people take every penny of profit out of the business or leave it in. Their taxable profit is calculated without any reference to what they pay themselves. So in this case the profit declared (subject to any adjustments for tax purposes like private usage) is £7,000 and that is what will be used (or rather the average of the three years' profits 2016/17-2018/19).