Employed to self employed- sole trader

Manicmac86

Hi everyone, I'm considering starting my own business but trying to work out actual figures of income. I have a business advisor working on my business plan. 

Was wondering if I give a few figure if anyone could give me a rough figure of take home pay. 

So my business I hope to earn £42k per year. My advisor asked about expenses so I give her rough figures. So in my calculations I've worked out Inc personal tax allowance this allows me £17k. 

So 5k in expenses then 12k personal tax allowance?

So I then pay tax on 25k?

Sorry if this is a basic question.

Currently I receive £2200 a month from my employer, tax credits and CB so I'm looking on increasing my income by becoming self employed. 

Hope I've explained myself.

Thanks in advance x

Grumpy_chap

I'm finding your post difficult to follow, but what is the Business Adviser providing as a service?  Surely, they are best placed to give accurate indications in this regard.  If not, engage the services of an Accountant.

Manicmac86 said:

Hi everyone, I'm considering starting my own business but trying to work out actual figures of income. I have a business advisor working on my business plan. 

Was wondering if I give a few figure if anyone could give me a rough figure of take home pay. 

So my business I hope to earn £42k per year. My advisor asked about expenses so I give her rough figures. So in my calculations I've worked out Inc personal tax allowance this allows me £17k. 

So 5k in expenses then 12k personal tax allowance?

So I then pay tax on 25k?

Sorry if this is a basic question.

Currently I receive £2200 a month from my employer, tax credits and CB so I'm looking on increasing my income by becoming self employed. 

Hope I've explained myself.

Thanks in advance x

Manicmac86

Sorry grumpy,

Shes to revert back to me once she's wrote the plan. I came on here for a rough figure for what I'd be paying tax on those figures. 

I have no business history at all so the business side is very daunting. 

Grumpy_chap

Does this business need external finance to get going?  
A new business where an external person writes the business plan could be confusing - the business owner needs to be able to live and breathe that business plan.

Manicmac86

No i basically just need my laptop. Its admin services for a specific profession. 

Atm I'm just trying to work out my income to compare with my current employment 

Secret2ndAccount

Your takings will be 42k?
Your expenses, wholly, exclusively, and necessarily incurred in doing business will be 5k?
Then your profit will be 37k.
Your personal allowance is 12570, so you pay 20% tax on 24,500, that's 4,900 tax.
You will also pay national insurance of approx 3k
So 29k left in your pocket

Is that what you were asking?

Manicmac86

Secret2ndAccount said:

Your takings will be 42k?
Your expenses, wholly, exclusively, and necessarily incurred in doing business will be 5k?
Then your profit will be 37k.
Your personal allowance is 12570, so you pay 20% tax on 24,500, that's 4,900 tax.
You will also pay national insurance of approx 3k
So 29k left in your pocket

Is that what you were asking?

That's exactly what I was asking. Thanks so much. Does 5k expenses seem excessive? This was proportion of gas, electric Internet. Petrol, then my indemity insurances, stationary and i didnt even include buying a laptop as my dad said I can use his starting off. 

Secret2ndAccount

5k doesn't sound out of the ballpark to me, but it's between you and HMRC. The test is as above: wholly, exclusively, and necessarily for the business. It's okay to apportion things which are shared business/personal. You should be able to explain how you arrived at the proportions you chose. You need to have receipts and bills for the things you bought.
Incidentally, you can pay into a pension (for example a SIPP) up to 80% of your profit, and the taxman will give you back the 20% by topping up whatever you put in the SIPP. So if you contribute 4k, he will make it up to 5k.

Manicmac86

That's very helpful. I appreciate you taking the time. I've done a few calculations myself that aren't far off yours so I know im on the right track. I'm hoping to speak to a family friend that's an accountant so I will run it past him-just wanted to be a bit prepared for meeting as I said I've no business experience, only an idea. 

As I said in my op I'm considering the new business but has to be more than my current civil service salary/tax credits etc to make it work for me.

Thanks again x

Secret2ndAccount

Bear in mind that the Civil Service pension is very generous. Figure out how much pension you are in line for, and you might find it's equivalent to putting 30% of your profits into a SIPP each year.

Manicmac86

Thanks again. I'll admit I'm 36 and have no clue on pensions so really need to take advice on this. It's all so overwhelming I'm trying to suss out what I can. Thanks again x