Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: A.J on June 14, 2010, 07:08:36 am
-
Hi Guys,
Having a bit of an issue with the tax man atm and finding it hard to see the light.
For the year ended april the 6th 2009 on turnover of 32 - expenses & allowance - a profit of 21 I'm having to shell out with the two payments a whoping 9,500 45% of my profit by October. Also I have paid the £100 fine and ongoing intrest. I've been told by them and my accountant to expect "about the same in January" :o :'( And just been hit by some 5% surcharge which I wasnt told about.
I Haven't fully worked out the year end april 2010 yet but have strong reason to belive that the profit might not be as much due to re-tooling and investing back in. I have tried to mention this to my acountant and the tax man and they dont want to know. nor tell me to much about how payments work or whats coming up.
Can anyone put to me in a simple answer how this whole paying up front thing works and whats gonna happen in January as im getting close to either shuting up the shutters and flying a new flag. Or going to find a bridge :-\
Is it possible to be overpaying? and can i get it reduced? Also anyone else been hit with this 5% charge as I have been told there computers are spiting out all types of made up fines and charges.
Thanks in advance.
A.J
-
Hi Guys,
Having a bit of an issue with the tax man atm and finding it hard to see the light.
For the year ended april the 6th 2009 on turnover of 32 - expenses & allowance - a profit of 21 I'm having to shell out with the two payments a whoping 9,500 45% of my profit by October. Also I have paid the £100 fine and ongoing intrest. I've been told by them and my accountant to expect "about the same in January" :o :'( And just been hit by some 5% surcharge which I wasnt told about.
I Haven't fully worked out the year end april 2010 yet but have strong reason to belive that the profit might not be as much due to re-tooling and investing back in. I have tried to mention this to my acountant and the tax man and they dont want to know. nor tell me to much about how payments work or whats coming up.
Can anyone put to me in a simple answer how this whole paying up front thing works and whats gonna happen in January as im getting close to either shuting up the shutters and flying a new flag. Or going to find a bridge :-\
Is it possible to be overpaying? and can i get it reduced? Also anyone else been hit with this 5% charge as I have been told there computers are spiting out all types of made up fines and charges.
Thanks in advance.
A.J
That £9.5k bill doesn't sound right to me either - unless you had a big jump in profits from the previous year. Normally, if there was no "payment on account" due, the profit on £21k would be (very roughly) in the region of £4k. One of the problems with "payments on account" IMO is that it is all lumped into the January payment. It is usually more expedient having a gradual rise in profits year on year so that the payments on account aren't too large. I must admit to not fully understanding the system myself but that is the general gist of it.
Another issue might be the way you and your accountant calculated profits. Is it possible that your accountant capitalised some of your expenses - meaning that the tax relief would be spread over a number of years rather than just in the year of purchase?
As for the 5% surcharge, I believe that usually occurs if you haven't paid the January 31st bill by the end of February. The £100 charge is usually for not making your tax return by their deadline. This used to be January 31st but I think it has changed since electronic submissions began in earnest.
The person you really need to talk to about this is your accountant. This seems to be a big part of the problem as he/she sounds like they are a very poor communicator.
-
21 grand that was left was this your wage?
u had a turn over of 32 grand, after expen and allowance u was left with 21 grand does this money include your wages, in not pay your self more and start buying gear to bring your tax bill down
ur accountant sounds crap, as any decent account would tell you how to pay less tax, the problem i see with wc when doind accounts is they go at the end of the tax year and then are worried about how much tax they pay, you shoudll know what u r roughly making monthly, so you can tell months in advance if you need to invest in your business
all the tax man will say is you should have it saved as you have made it, even if you shut down u will get a tax bill
-
£21k after expenses and allowance means you are taxed at 20% plus 8% class 4 so 28% of 21K = 5.88k that is then split into 2 payments usually however the first year you have to pay it all.
Plus half of the amount 'on account' = 8.82K due.
The following year you pay the difference due in Jan + half of the actual then the other half of the actual in July.
You are not paying 'up front' as you have already earnt the money you pay tax on. You had a year and a half without paying tax.
I commented a couple of months ago that anyone starting should put aside 45-50% of turnover for expenses and tax, the poster said he would deal with it when the bill arrived.
Daft IMO.
It sounds like you owe what they say. Have you spent the money?
-
I agree with Stuart - this is my understanding of Tax as well - you are not paying up front.
if you were fined for late tax forms then you need a new accountant as they would be well aware of deadlines and def. be explaining how tax works for you.
so, go back to the accountant if they submitted your forms late then they owe you the £100 then change to someone more helpful.
Darran
-
think ur self lucky there was someone on here with a £30 grand bill who had spent the money
-
Has your accountant factored in your 6.7K allowance ??
so 21 k profit less tax allowance = 14.3 ( approx ) ??
Darran
-
I dont understand tax and also got myself in a right mess a couple of years ago, even though I have a good accountant my lack of "office skills" meant I got a little behind.
I employed a woman who understands tax, PAYE, and everything else concerning my day to day finances.
She works 3 hours a week and is the best £36 a week i spend. My company has gone from strength to strength as I am now able to concentrate on what I do best.
I am sure you will get through this and once you do I would very seriously think about getting some help.
We are not all good at everything so employ someone to help in the areas that let you down.
Good Luck.
-
Has your accountant factored in your 6.7K allowance ??
so 21 k profit less tax allowance = 14.3 ( approx ) ??
Darran
He said in the first post that the £21k was after expenses and allowance.
-
I dont understand tax and also got myself in a right mess a couple of years ago, even though I have a good accountant my lack of "office skills" meant I got a little behind.
I employed a woman who understands tax, PAYE, and everything else concerning my day to day finances.
She works 3 hours a week and is the best £36 a week i spend. My company has gone from strength to strength as I am now able to concentrate on what I do best.
I am sure you will get through this and once you do I would very seriously think about getting some help.
We are not all good at everything so employ someone to help in the areas that let you down.
Good Luck.
Good Idea for anyone to do.
-
oopsss :-[
Darran
-
u had a turn over of 32 grand, after expen and allowance u was left with 21 grand does this money include your wages, in not pay your self more and start buying gear to bring your tax bill down
I can understand "buying more gear" as you put it, but as my accountant says" don't buy unnecessarily just to bring your tax bill down" You'd need to spent £5000 just to save £1000 ish tax.
As for the "pay your self more " how is that gonna save you tax.... don't you pay tax on earnings anymore?
-
I can understand "buying more gear" as you put it, but as my accountant says" don't buy unnecessarily just to bring your tax bill down" You'd need to spent £5000 just to save £1000 ish tax.
Ive never got that either.
-
it all depends on what the 21 grand is, is it profit after paying your self or is it your wage?,
becasue a lot of people who are self employed earn money take out expensise (not wages) and what is left is theres, then a lot get screwed over by the tax man
because if it is profit then it should still be in the bank and shouldnt be a problem to pay the bill
-
If it was me I would take the 21K as a divedent and only something like 20% on it which would only be 4.5k, much better than a 9k tax bill
-
It's obviously spent and not 'profit' in the bank. If he paid himself a wage he would pay weekly his tax. Plus I thought you could only take a dividend if you were LTD. Even then you pay tax on the company profit as well as your wage.
As for spending on equipment, thats just daft as the tax year he is paying tax on is 08-09 so anything spent now or even 09-10 will have to come off that year.
-
It's obviously spent and not 'profit' in the bank. If he paid himself a wage he would pay weekly his tax. Plus I thought you could only take a dividend if you were LTD. Even then you pay tax on the company profit as well as your wage.
As for spending on equipment, thats just daft as the tax year he is paying tax on is 08-09 so anything spent now or even 09-10 will have to come off that year.
so basically he need to pay the tax on his wages and he hasnt saved it, then he is screwed, i think he is finding out he reason a lot of business close down in there second year
-
I think you might be right! Why folk dont think about saving it or even paying it weekly up front I dont know.
-
just do what i do fill in the under 15000 form and say you earn 4000 you pay no tax and no national insurance, i put on gross then outgoings then profit bobs your uncle job done no accountant. No tax ;)
-
just do what i do fill in the under 15000 form and say you earn 4000 you pay no tax and no national insurance, i put on gross then outgoings then profit bobs your uncle job done no accountant. No tax ;)
and go to prison for evasion when they catch you. unless of course you DO only earn £4k
-
just do what i do fill in the under 15000 form and say you earn 4000 you pay no tax and no national insurance, i put on gross then outgoings then profit bobs your uncle job done no accountant. No tax ;)
Bumper that works out at £76.92p per week.............................................................................right,..erm :-\
-
you can say i work 45 weeks a year, and prisons are all full so might get away with Suspended sentence, if they can be bothered to have Surveillance on 1 small fry urchin ;D
-
You can always spot the newbies to this forum when they havent already read any of bumpers posts...
Bumper you are a legend ;D I love your posts....
-
You can always spot the newbies to this forum when they havent already read any of bumpers posts...
Bumper you are a legend ;D I love your posts....
just did, bumper, you bloody wind up merchant. Hook, line and sinker.
-
You can always spot the newbies to this forum when they havent already read any of bumpers posts...
Bumper you are a legend ;D I love your posts....
just did, bumper, you bloody wind up merchant. Hook, line and sinker
Whos winding who up i dornt tell pokies only to taxman and the person who says have you done anywork this week bumper errrrr no sign here then,ohh i lost my wallet any chance of a Crisis Loan, you no the rules bumper you already had your
maximum.
-
Somethings not right there,
He must have missed your tax free allowance.
Dean
-
bumper you are the man
just go bust pocket the lot and knock the accountant he sounds a bit of a mug
let the tax man swivel
then start up again and have a nice holiday on the government
-
Why is it his accountants fault. If he didn't get his books to them on time they cant process them before the deadline. If his figures are correct then he owes the amount they say.
-
It's obviously spent and not 'profit' in the bank. If he paid himself a wage he would pay weekly his tax. Plus I thought you could only take a dividend if you were LTD. Even then you pay tax on the company profit as well as your wage.
You don't pay tax on both your wage and the company profit. You pay 20% on the profit and you pay no income tax on that unless you go over about 39K.
-
It's obviously spent and not 'profit' in the bank. If he paid himself a wage he would pay weekly his tax. Plus I thought you could only take a dividend if you were LTD. Even then you pay tax on the company profit as well as your wage.
You don't pay tax on both your wage and the company profit. You pay 20% on the profit and you pay no income tax on that unless you go over about 39K.
How can an individual who gets a wage from his own company not pay income tax?
-
you pay your self £450 a month as a director. which is no tax and n.i. Your wage is taken off your profit. This brings your tax liable down. You then take dividends which are tax at 22%. Assuming you are ltd.
-
Has your accountant factored in your 6.7K allowance ??
so 21 k profit less tax allowance = 14.3 ( approx ) ??
Darran
He said in the first post that the £21k was after expenses and allowance.
Indeed he did. That's the main reason why my very rough calculation was so far out. I should have gone to Specsavers.
-
I think you might be right! Why folk dont think about saving it or even paying it weekly up front I dont know.
Because often people come into window cleaning when they are on their arses financially. It's all very well to tell them "save 50% for tax and expenses" when they can't eat or pay the mortgage.
-
I think you might be right! Why folk dont think about saving it or even paying it weekly up front I dont know.
Because often people come into window cleaning when they are on their arses financially. It's all very well to tell them "save 50% for tax and expenses" when they can't eat or pay the mortgage.
What has made things trickier in more recent years is the payment on account system which seems to create a heavier tax burden for the year one tax bill. Not certain but it seems that you need to find one and a half years tax after working a year.
It's not very encouraging for new businesses just starting up - whatever field they are in. I suppose you have a bit of money behind you and can run at a small paper loss in year one then that might help but would be pretty pointless because you would have the money to pay the tax anyway.
-
It 's the double whammy that everyone needs to be aware of. Not many realise the extra Ni payment you have to make either.
-
I think you might be right! Why folk dont think about saving it or even paying it weekly up front I dont know.
Because often people come into window cleaning when they are on their arses financially. It's all very well to tell them "save 50% for tax and expenses" when they can't eat or pay the mortgage.
If they had a PAYE job they would be deducted at source, they would have to live off that and prob get Tax credits to top up. Same for self employed. They are often blinded by turnover thinking it is income.
I think you might be right! Why folk dont think about saving it or even paying it weekly up front I dont know.
Because often people come into window cleaning when they are on their arses financially. It's all very well to tell them "save 50% for tax and expenses" when they can't eat or pay the mortgage.
What has made things trickier in more recent years is the payment on account system which seems to create a heavier tax burden for the year one tax bill. Not certain but it seems that you need to find one and a half years tax after working a year.It's not very encouraging for new businesses just starting up - whatever field they are in. I suppose you have a bit of money behind you and can run at a small paper loss in year one then that might help but would be pretty pointless because you would have the money to pay the tax anyway.
If you start work in April 08 you dont pay any tax till End of Jan 10 that is a full 20 months. Then you pay 18 months worth of tax, hardly unfair.
-
true stuart but there is no 'tax on account' for PAYE. you pay the right amount of tax on your weeks/months pay and thats it.
I think its just the difficulty in moving from not having to worry about tax cos you never see it to having to pay huge bills!
-
true stuart but there is no 'tax on account' for PAYE. you pay the right amount of tax on your weeks/months pay and thats it.
I think its just the difficulty in moving from not having to worry about tax cos you never see it to having to pay huge bills!
True it's a huge leap, a lot bigger than many appreciate. I'm glad I started while I was living with my parents.
One of the reasons I encourage new startups to start to pay the tax man weekly from week one is that it more closely reflects PAYE. Even if it is only £50 out of £500 its a start, you get into the habit of the money going out and you cant 'borrow' it whenever you want.
I've paid weekly for a few years now. I have a good idea from my accountant what my liability will be and split it accordingly.
-
Here is a nice little tool for the LTD versus sole trader debate...
http://www.newmanandpartners.co.uk/resources/tax_centre/tax_calculators/incorporation.php
I'm a one man band and limited. Get yourself a good accountant and its very smooth.
-
You could always set up a direct debit like I have with the tax man every month so any small differences at the end of the tax year are paid or refunded annually.
-
I had a similar situation some years ago, and this might be your problem. After window cleaning as a second job for a number of years, I was made redundant and went full-time window cleaning. After about three or four years I was hammered with a double tax bill. Apparantly, the idea is to pay your tax in advance, and so, at some point you have to get in front. No warning was given to me, and no option to post-pone.
-
This thread has shown up the number of people who haven't got the faintest clue, and then there are those who think it is clever to try and carry out a fraud. Then there are those who think as a sole trader you can 'pay' yourself a wage, NO YOU CAN'T AS A SOLE TRADER ANY PROFIT IS THE WAGE.
As for Ltd there has to be by law TWO directors of the company as listed on Companies House register.
Simply stop reading the cr.p on here and get some real professional help/advice.
Finally a bit of friendly advice to any newbies. You might not make a tax payment for a year after starting up but at some point you will have to pay the tax on any money EVER earnt so stick 20% away from day one.
-
This thread has shown up the number of people who haven't got the faintest clue, and then there are those who think it is clever to try and carry out a fraud. Then there are those who think as a sole trader you can 'pay' yourself a wage, NO YOU CAN'T AS A SOLE TRADER ANY PROFIT IS THE WAGE.
As for Ltd there has to be by law TWO directors of the company as listed on Companies House register.
Simply stop reading the cr.p on here and get some real professional help/advice.
Finally a bit of friendly advice to any newbies. You might not make a tax payment for a year after starting up but at some point you will have to pay the tax on any money EVER earnt so stick 20% away from day one.
very true ;)