Sole Trader take home query

Bear777

Can someone please help me. I’ve got myself in a mess trying to understand the principle of returns from self employment as a sole trader. I am trying to review it against my current situation an an employee on PAYE

Im fundamentally looking to see what my annual ‘take home’ return is after tax etc. based on the following assumptions.

Turnover - £53k per annum

Misc Annual Allowances - 2k per annum

Car Business Hire Lease allowance - £4320 per annum (this is based on a monthly lease of £600 a month and me being able to allocate 60% of the use being for business)

Other vehicle allowances of £1620 per annum (this is based on £2.7k per annum for electric charging cost, tyres, insurance etc).

I’m also proposing paying £500 a month into my pension. 

Can someone please sense check my figs but, based on above I think I am right in saying the following:

T/O less tax and NICS = £43165 take home. 

This then gives me £3596 per month and from that based on the allowances above it would mean that I have to pay out £500 towards my pension, £609 towards my car and £300 on other associated costs per month and as such this brings my monthly return after all of that to £2197? 

Am I correct on all of the assumptions above or is my understanding flawed?

Thanks!!

[Deleted User]

Bear777 said:

Can someone please help me. I’ve got myself in a mess trying to understand the principle of returns from self employment as a sole trader. I am trying to review it against my current situation an an employee on PAYE

Im fundamentally looking to see what my annual ‘take home’ return is after tax etc. based on the following assumptions.

Turnover - £53k per annum

Misc Annual Allowances - 2k per annum

Car Business Hire Lease allowance - £4320 per annum (this is based on a monthly lease of £600 a month and me being able to allocate 60% of the use being for business)

Other vehicle allowances of £1620 per annum (this is based on £2.7k per annum for electric charging cost, tyres, insurance etc).

I’m also proposing paying £500 a month into my pension. 

Can someone please sense check my figs but, based on above I think I am right in saying the following:

T/O less tax and NICS = £43165 take home. 

This then gives me £3596 per month and from that based on the allowances above it would mean that I have to pay out £500 towards my pension, £609 towards my car and £300 on other associated costs per month and as such this brings my monthly return after all of that to £2197? 

Am I correct on all of the assumptions above or is my understanding flawed?

Thanks!!

I am sorry but there is so much wrong with all that - it is difficult to know where one starts. 

Let’s say that all of the expenses that you quote are allowable (except for the pension which isn’t) leaving you with a profit of around £45000. I have ignored the ‘miscellaneous annual allowances’.

The tax and NI on that would be £8431 - leaving nowhere near 

£43165 ‘take home’ 

I would respectfully suggest that you engage an accountant as your assumptions could create difficulties for you. 

On those profits your pension contributions will have no effect on your tax position. They are also not an expense against trading income

[Deleted User]

Tax and NI is calculated on profits. 

Turnover less expenses = Profit. 

Your ‘take home’ will be Profit less tax on profit (not on turnover). 

Bear777

[Deleted User] said:

Bear777 said:

Can someone please help me. I’ve got myself in a mess trying to understand the principle of returns from self employment as a sole trader. I am trying to review it against my current situation an an employee on PAYE

Im fundamentally looking to see what my annual ‘take home’ return is after tax etc. based on the following assumptions.

Turnover - £53k per annum

Misc Annual Allowances - 2k per annum

Car Business Hire Lease allowance - £4320 per annum (this is based on a monthly lease of £600 a month and me being able to allocate 60% of the use being for business)

Other vehicle allowances of £1620 per annum (this is based on £2.7k per annum for electric charging cost, tyres, insurance etc).

I’m also proposing paying £500 a month into my pension. 

Can someone please sense check my figs but, based on above I think I am right in saying the following:

T/O less tax and NICS = £43165 take home. 

This then gives me £3596 per month and from that based on the allowances above it would mean that I have to pay out £500 towards my pension, £609 towards my car and £300 on other associated costs per month and as such this brings my monthly return after all of that to £2197? 

Am I correct on all of the assumptions above or is my understanding flawed?

Thanks!!

I am sorry but there is so much wrong with all that - it is difficult to know where one starts. 

Let’s say that all of the expenses that you quote are allowable (except for the pension which isn’t) leaving you with a profit of around £45000. I have ignored the ‘miscellaneous annual allowances’.

The tax and NI on that would be £8431 - leaving nowhere near 

£43165 ‘take home’ 

I would respectfully suggest that you engage an accountant as your assumptions could create difficulties for you. 

On those profits your pension contributions will have no effect on your tax position. They are also not an expense against trading income

Yes, sorry I appreciate that the 43165 isn’t take home. I was working that back as the gross turnover less tax and NICs contributions (after the allowable expenses that I have calculated have come off to give me the profit before tax) and then rounding the allowable expenses up to 100% based on actual full costs compared to the 60% that I had allowed for to understand how that would impact my income as these are costs that I currently don’t have. 

I understand that pension contributions have no impact on my tax position. 

I have over complicated and that’s why I have managed to baffle myself. I have and am speaking to an accountant. I was just trying to do some homework, but I’ll ask him to explain it for me. Was just looking a bit of advice in the interim for someone to point out what the scenario could look like. 

[Deleted User]

Bear777 said:

[Deleted User] said:

Bear777 said:

Can someone please help me. I’ve got myself in a mess trying to understand the principle of returns from self employment as a sole trader. I am trying to review it against my current situation an an employee on PAYE

Im fundamentally looking to see what my annual ‘take home’ return is after tax etc. based on the following assumptions.

Turnover - £53k per annum

Misc Annual Allowances - 2k per annum

Car Business Hire Lease allowance - £4320 per annum (this is based on a monthly lease of £600 a month and me being able to allocate 60% of the use being for business)

Other vehicle allowances of £1620 per annum (this is based on £2.7k per annum for electric charging cost, tyres, insurance etc).

I’m also proposing paying £500 a month into my pension. 

Can someone please sense check my figs but, based on above I think I am right in saying the following:

T/O less tax and NICS = £43165 take home. 

This then gives me £3596 per month and from that based on the allowances above it would mean that I have to pay out £500 towards my pension, £609 towards my car and £300 on other associated costs per month and as such this brings my monthly return after all of that to £2197? 

Am I correct on all of the assumptions above or is my understanding flawed?

Thanks!!

I am sorry but there is so much wrong with all that - it is difficult to know where one starts. 

Let’s say that all of the expenses that you quote are allowable (except for the pension which isn’t) leaving you with a profit of around £45000. I have ignored the ‘miscellaneous annual allowances’.

The tax and NI on that would be £8431 - leaving nowhere near 

£43165 ‘take home’ 

I would respectfully suggest that you engage an accountant as your assumptions could create difficulties for you. 

On those profits your pension contributions will have no effect on your tax position. They are also not an expense against trading income

Yes, sorry I appreciate that the 43165 isn’t take home. I was working that back as the gross turnover less tax and NICs contributions (after the allowable expenses that I have calculated have come off to give me the profit before tax) and then rounding the allowable expenses up to 100% based on actual full costs compared to the 60% that I had allowed for to understand how that would impact my income as these are costs that I currently don’t have. 

I understand that pension contributions have no impact on my tax position. 

I have over complicated and that’s why I have managed to baffle myself. I have and am speaking to an accountant. I was just trying to do some homework, but I’ll ask him to explain it for me. Was just looking a bit of advice in the interim for someone to point out what the scenario could look like. 

Excellent! Moving from employed status to self-employed can be daunting. 

Compile a list of questions for your initial meeting. Good luck!