Politics0 min ago
self employment - putting money away for tax
18 Answers
my hubby is working for himself as a builder and we are unsure about how much to put away for tax (still!) Once I have worked out all his expenses for materials and petrol etc do I deduct this off his labour costs and put away approx 25% of that or deduct 25% off the cost off everything including labour charges and materials?
Answers
Best Answer
No best answer has yet been selected by tigwig. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.He pays tax on his income - his profits after deducting all expenditure.
So he does a job for �100. Materials cost �25. He pays tax on �75.
If you put 25% of that away you will more than cover his tax bill - not a bad thing to have extra set aside.
Don't forget he has his personal allowance before he pays income tax - �5435.
He also has allowable deductions - his business expenses. Protective clothing, mobile phone (he has a seperate one for business, I hope), vehicle costs and transport, depreciation of his tools, business insurance...
But putting 25% as described will give you a good margin and keep things simple.
So he does a job for �100. Materials cost �25. He pays tax on �75.
If you put 25% of that away you will more than cover his tax bill - not a bad thing to have extra set aside.
Don't forget he has his personal allowance before he pays income tax - �5435.
He also has allowable deductions - his business expenses. Protective clothing, mobile phone (he has a seperate one for business, I hope), vehicle costs and transport, depreciation of his tools, business insurance...
But putting 25% as described will give you a good margin and keep things simple.
I'm sure you understand my example was very basic, just for illustration.
Remember to keep all receipts - depending on how many he has, think about using something like a poly pocket. One pocket per week / month.
Put a number on the back of each receipt and keep a written record in the polypocket.
1. Petrol. �30. 5/5/08...................................�30
2. Materials. �86.50 5/5/08.........................�116.50
and so on. If you do it each day it will take a very short time and will make your life so much easier in the long run.
Remember to keep all receipts - depending on how many he has, think about using something like a poly pocket. One pocket per week / month.
Put a number on the back of each receipt and keep a written record in the polypocket.
1. Petrol. �30. 5/5/08...................................�30
2. Materials. �86.50 5/5/08.........................�116.50
and so on. If you do it each day it will take a very short time and will make your life so much easier in the long run.
As self-employed you pay 40% on your net profit, (after exes). Its best to start a spreadsheet soonest to keep on top of your accounts.
Make friends with local tax office who will tell you how to fill in your tax return.
Keep Visa bills, bank statements, cheque stubs & bank paying-in slips for audit.
Make friends with local tax office who will tell you how to fill in your tax return.
Keep Visa bills, bank statements, cheque stubs & bank paying-in slips for audit.
I dont think you charge for 'labour costs' for yourself! You do list costs of labour when you employ someone. The trick is to balance the accounts by listing all your expenditure against your income for the year. You must show some profit for the Tax man as he will see your business as unviable.
If you earn more that �57k pyear (�4750pm) you will be in the VAT bracket.....that's another story!
If you earn more that �57k pyear (�4750pm) you will be in the VAT bracket.....that's another story!
Incme Date Ttl Tools Food Petrol Servce Home
400 8/6 B&Q 50 50
8/6 Tesco 30 30
8/6 Esso 30 30
9/6 BT 30 30
9/6 Mortge 250 250
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400 Jun 390 50 30 30 30 250
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Hope this helps....took me ages to type out...phew!
400 8/6 B&Q 50 50
8/6 Tesco 30 30
8/6 Esso 30 30
9/6 BT 30 30
9/6 Mortge 250 250
----------------------------------------------------------------------------
400 Jun 390 50 30 30 30 250
-----------------------------------------------------------------------------
Hope this helps....took me ages to type out...phew!
-- answer removed --
Yes Ethel is correct(as usual) apart from new tax band width for 08/09 is now 36k before hitting 40%. My husband is in same position as yours but i am a Financial Director of my own company and have been in accountancy for 30 years (gosh makes me feel old!), please be guided by ethels answers as they are accurate.
-- answer removed --
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