Clean It Up
UK Window Cleaning Forum => Window Cleaning Forum => Topic started by: Ian_Giles on November 24, 2006, 06:27:23 am
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On replying to Tosh's post about declaring your earnings honestly to the tax man, I mentioned about the perils of earning good money.
The more you earn then the more tax you pay (obviously) now if your turnover under 15k you are only going to be paying a few hundred quid tops for your tax bill.
Easy enough to find when you have to pay your bill.
But if you are knocking out somewhere in the region of 30k, your tax bill is going to run into thousands.
Most of us tend to spend our money as we earn it, just a few hundred quid in the bank if we are lucky, but having to find 2 or 3 grand very quickly is a much tougher option than finding £300-£400.
Every week I now stick money into my ISA to cover my eventual tax bill, have done for well over 12 months.
Because of WFP my turnover has shot up, so my tax bill worries me and I want to be sure I can afford it when the time comes!! :-\
So who else does something similar?
Or don't you care?
Ian
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God knows...
I'm going to be hit with a £500(ish) bill in January and I'm potless.
Just after Christmas?
I'd be lucky... ::)
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I always put whatever I have allowed for tax each week in a savings Acc ( Transfered from my Business Acc ) , so when it comes to it I'll just write the cheque
Chris
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On replying to Tosh's post about declaring your earnings honestly to the tax man, I mentioned about the perils of earning good money.
The more you earn then the more tax you pay (obviously) now if your turnover under 15k you are only going to be paying a few hundred quid tops for your tax bill.
Easy enough to find when you have to pay your bill.
But if you are knocking out somewhere in the region of 30k, your tax bill is going to run into thousands.
Most of us tend to spend our money as we earn it, just a few hundred quid in the bank if we are lucky, but having to find 2 or 3 grand very quickly is a much tougher option than finding £300-£400.
Every week I now stick money into my ISA to cover my eventual tax bill, have done for well over 12 months.
Because of WFP my turnover has shot up, so my tax bill worries me and I want to be sure I can afford it when the time comes!! :-\
So who else does something similar?
Or don't you care?
Ian
I used to put most of it away but became burdened with debt so I live pretty tight to the line anyway.
When pay up time comes, I right out a credit card cheque and spend the next 6 months repaying it. Not clever I know but I made some bad decisions several years ago and will be paying for them for a while yet.
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When pay up time comes, I right out a credit card cheque and spend the next 6 months repaying it. Not clever I know ...
Shiner, I reckon you'll be paying more interest on your credit card bill than what the tax man will charge you.
Do as I did; phone the tax man, tell him you're skint and agree on a repayment plan.
With regards to your debt, I used to be a debt councillor in the army (one of my many hats I used to wear) and have also been in debt after a messy marraige break up, where my ex took all the assets and I took all the credit; which soon turned to debt.
If you're struggling with debt, you have many options these days; bancrupcy being one of them (from what I understand, bankcrupcy isn't as bad as it used to be).
Try searching for some debt forums, there's many about and find out what your options are.
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30% of what I make each week goes straight into an account. Should get a savings account really, but at the moment I just have a Basic account for that. Oh well....
It's Simple :
If you have set money aside : no problem. You will probably even have money left after deductions.
If you have Not set money aside : Big problem. You will have a very hard time getting the money. Where are you getting that money from all of the sudden?
So don't be stupid, set money aside each week. If you don't, well, you get the idea. I didn't do it in the beginning, and had to put almost everything I earned for a couple of weeks in that account. Horrible.
It's very easy with George, in the right pane of the main menu, see what you made each week, divide by 100, multiply by 30% (22% Income Tax, and 7% NI just to be on the safe side : ~30%) Yes it will probably be less then that total amount every year, but at least you don't have to worry ey?!!
Get Internet Banking, and just transfer the funds from your business/current account into your Tax/NI account. Easy.
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I dont tend to save any , but I dont live hand to mouth neither, I have always got a good healthy working balance in my account, If I have not got quite enough, it goes on the credit card and is usually paid off within a few months and the bill is very managable
I get my bills 31st July and 31st January.
I would rather borrow it and pay it back later, I would hate to die and think at least i have got my tax money.
I want to enjoy my money and not put it away for tax, at least borrowing it you are basicaly paying it a year in arrears.
My business is expanding so i am always paying a smaller amount on account than the actual bill when it comes , also paying it in arrears in an expanding business means you are paying a smaller % of your actual turnover for each given year in tax
eg year 1 £20'000 turnover = £2000 tax
pay that tax in arrears (borrowing) in year 2 when turnover is say £25'000
year 2 turnover £25'000 but paying year 1 tax but actual tax bill is £3000
year 3 turnover £30'000 paying year 2 tax £3000 actual bill £4500.
Even taking interest into account , this is taken care of by my round price inflation which is about 10% a year ie a £10 customer pays £11 the next year.
I hope this makes sense but it is hard to describe if you know what I mean.
This may not seem logical to most but it works for me.
I am NOT reccomending this way of doing it , as it is not for everyone.
Dave
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My Tax bill is in the thousands. I also dont mess about with the 2 payment system of Jan & July. I pay it all in December usually...the reason I pay it all in 1 go is because I might forget the July deadline & be fined! theyre not getting 1p more than necessary. And yes, I do know theyre earning interest out of my advance payment........and I do know that I could probably get reminders off IR or set my compy to remind me BUT I dont take the risk. Also, Dec is my BEST month & its when I am the most flushed. Best get the big bill outta the way before Xmas, paying it off with what I have saved all year, then the rest is left for Xmas shopping, meals out etc
We all probably have our own system. Mine works for me. Yours works for you. Each to their own.
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Mine doesn't work.
It's called forgetting all about it, then going "Oh no! Tax in January!" :o
Then realising it's after Christmas and I'm skint... >:(
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but it must work for you Squeaks......your not in prison for Tax evasion,etc
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My turnover has been around £12k but my profit comes in at £2.5k. This year
my turnover will be a lot more due to WFP but what I tend to do is spend
money on new equipment to keep it below the tax threshold. So this tax year
will invest in DIY gutter cleaner.
I do however put 20% of what I earn into an ISSA account as to run a business
you always need funds available for the unexpected. Tend to save up for everthing now and never use credit, this I find works for me.
Doug
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£2.5K is my profit on my balance sheet but actually have a lot more by using the
40p mile route ;)
Doug
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£12k turnover and only £2.5k profit , how do you justify that to the tax man, I seriously think you will be in his "keep your eye on this one pile"
I wish you the best of luck
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quote from D.A services, taken from another post
Only earned £10k last year and £6k was netted off by claiming for mileage.
How do you claim £6000 vehicle expenses on that turnover, I reckon thats 15000 miles for only £200 a week earnings
300 miles to earn £200 That must be £50 in juice before you even start work.
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Dave I also record running costs which came out at £2.8k so I pocketed
£3.2k, this is all legit and verified by the tax man.
When I started out I realised this and hence all my work is rural, if I worked
within a 8 mile radius then this would not work out.
Don't forget have been only been going for 3 yrs and prices in Scotland are low
which I have quite a lot of houses which I quoted low when I started. But
thanks to you guys that is now changing as I am in a position to do so.
Have had a many a conversation with other window cleaners on the 40p
per mile, so trying to develop a what if senerio spreadsheet to see if it
is worth it for them going down that route. I also have the advantage
of doing accounts.
Doug
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Doug
You cant claim both , mileage and running costs.
Its either one or the other
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Dave,
Sorry if it came out wrong but I only claim against mileage on my accounts,
but seperately I also track actual expenses. You can never swap your
prefered route until you have bought a new van.
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like ian i put away monthly by transfer to an ofset account against my mortgage.at least it can offset the % on that for a while
£1500.00 per month it just covered my tax bill this year and last
i dont under stand why people do not put away! i have done ever since i started back then was 30% in seperate account which meant i had some spare at the end year.
Being self employed doesnt make you tax exempt there are areas you can gain benefits from but its not that different to employment , yes there are fringe benefits
but as they say there are two certainties in life death and taxs.
and in my opinion too much of both
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but as they say there are two certainties in life death and taxs.
I thought the only two certanties was death and nurses? ;)
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all my comercail gets paid into a biz account
that pays for my holidays and tax bill
it works well :)
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same as matt, don't miss it beacause i have to wait for it anyhow. I am still reeling from the 12k turnover. I am paying my first tax bill in jan as i understand 1 year plus 50% don't really know what thats all about but have covered myself anyway
simbo
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you only pay for what you have earned.
say you submitted your tax return for the year ended April 2003, you have had a years delay from paying your tax that year.
That years accounts need submitting by December 2003 then payment due by January 31st 2004 , basically you have not paid any tax for 21 months.
at that time you will have to pay on account half of the next tax years account (year end april 2004) so you are paying tax owed upto April 2003 and half the tax for the year ending april 2004 considering it is due in January 2004 and the next payment due in JJuly 2004
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cheers dave i was sort of thinking that way am still well coverd anyhow and have started putting away for jan 2008, have had a couple of very good jobs lately
simbo
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Glad you understood my post , sometimes its hard to type these things
example, on 31 January 2007 you will have to pay both of the following:
the balance of tax owing for the year 2005-2006
the first 'payment on account' for 2006-2007
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Viewing the results so far I have to say I'm quite surprised by how many of us put money aside every week to cover the tax bill.
In years past I never bothered, to be honest, prior to WFP my income was fairly modest, or when it was a little higher I had things I could offset against tax to reduce my bill.
I'm now at the point where I'm going to have to increase the money I'm putting aside.
For those that think, "Hell, how on earth can I afford to put 30% of my turnover aside to cover my tax bill?"
Well of course you don't have to put anything like that to one side.
You need to put to one side ....er...what is the standard tax rate? Is it 20 or 25%??
Well anyway, you need to put away roughly 20% of your profit, as it is this part of your turnover you will eventually pay tax on.
Don't forget, the first 5k or so is exempt from tax, then you have all your personal exemptions and all of your business costs.
You experienced guys are well aware of all that of course, but some of you newbies may not be.....unless you come from an accounting background of course! ;D
Ian
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Ian
with the first £6500 of profit you only pay £150 tax and about £120 NI , also i would say most would have between £5000 and £10000 in running costs if wfp so no tax to pay on that , also if you employ your wife that is about another £5000 tax free.
The way i work it out is approx , First £17500 no tax to pay due to above then 30 % on the rest of turnover until you get to the 40 % bracket
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I put away 20% of my weekly profit.
This is more than enough to cover my Tax bill but because I pay my bill in December, I use the left over money for Xmas. This has always been enough saving to cover tax & Xmas comfortably. I use my Tax bill savings as a sort of yearly saving plan that covers Xmas too. Works for me.
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When pay up time comes, I right out a credit card cheque and spend the next 6 months repaying it. Not clever I know ...
Shiner, I reckon you'll be paying more interest on your credit card bill than what the tax man will charge you.
Do as I did; phone the tax man, tell him you're skint and agree on a repayment plan.
With regards to your debt, I used to be a debt councillor in the army (one of my many hats I used to wear) and have also been in debt after a messy marraige break up, where my ex took all the assets and I took all the credit; which soon turned to debt.
If you're struggling with debt, you have many options these days; bancrupcy being one of them (from what I understand, bankcrupcy isn't as bad as it used to be).
Try searching for some debt forums, there's many about and find out what your options are.
Tosh.
Thanks for the tips.
I have looked and researched the options that are open to me.
Bankruptcy would leave me at risk of losing my home.
IVA would also because a 75% (I think) majority of creditors have to agree to allow it. This is not guaranteed because the equity in my home is almost as much as the debt so the creditors would probably note this and disallow an IVA. Apart from that, you can still get stung for the money after an IVA has expired - especially if there is equity still in the home.
The other method of reaching an informal arrangement with creditors still allows them to keep phoning you and that would grate on my nerves.
I could sell my home and use the equity to repay and go and rent somewhere. This would not be a disaster as I am single. In fact it could give me some freedom back.
However, the option I have gone for is to remortgage. Although this isn't ideal, I feel it is the best option open to me. It will cut my outgoings by about £600 a month at a time when I have escalating income and income potential - mostly thanks to WFP. Because of WFP I have two weeks spare in my 6 weekly work cycle which can be used to earn a lot more money.
The deal will be done within a week. The surplus money will be used to repay unsecured debts. A few clothes and a week in Spain would go down a treat too.
I have fixed the deal until Autumn 2009 and this was achieved before the recent interest rate hikes.
By Autumn 2009 I anticipate my mortgage to be my only debt and a lump sum thrown in to reduce it a bit plus I will be earning far more than I do now.
I just got sick and tired of my head spinning with all these different card bills etc coming through the post.
It's not greed that is motivating me but financial survival.
Of course it may all go wrong if I get unexpectedly ill or something goes pear shaped. But what's the worst thing anyone can do to me really?
The worst that can happen is to be skint and homeless. If I had a serious enough health problem the state might step in, they might not.
I've been in worse situations but I was much younger then and bounced more easily :) .
I'm looking forward to getting a bit of freedom back once this remortgage goes through.
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My Tax bill is in the thousands. I also dont mess about with the 2 payment system of Jan & July. I pay it all in December usually...the reason I pay it all in 1 go is because I might forget the July deadline & be fined! theyre not getting 1p more than necessary. And yes, I do know theyre earning interest out of my advance payment........and I do know that I could probably get reminders off IR or set my compy to remind me BUT I dont take the risk. Also, Dec is my BEST month & its when I am the most flushed. Best get the big bill outta the way before Xmas, paying it off with what I have saved all year, then the rest is left for Xmas shopping, meals out etc
We all probably have our own system. Mine works for me. Yours works for you. Each to their own.
I know you might be set in your ways, but you're giving your money away doing this.
Your tax bill is in the thousands - mine is too and it breaks my heart - but how much interest are you losing by paying early, and in a oner? Enough to buy a few extra Xmas presents, I think. It's not A big bill, it's a bill you're allowed to pay in two instalments, and one of the advantages of being self-employed is to arrange your own finances to suit you, not the taxman.
Trust me, you won't forget to pay the July one when it comes in. You can say to yourself that this is really costing me so much less, because of the extra interest I've earned. WooHoo - Result!!
Think it through - you know it makes sense.
As an aside, visit www.stoozing.com
WARNING - if you're not completely in control of your financial situation, this is NOT for you!
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for those of us that have been trading a while, it is quite easy to take the last figure paid to the tax man, work out your estimated % increase in trade for the next period and apply that % to the tax paid figure. Gives you a good idea of what you will have to have and of course regular monitoring of your situation means you can regularly adjust up or down. what you put away each month. We use a savings account as a holding account for staff tax and ni, our own tax, vat payments and holiday payments. We put away per month a set amount for our own tax. If we have put away that amount early in the month, we then top up with more when we are "flush". It earns interest and give a very good savings plan too!
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The window cleaners on this forum are the cream of the crop! Look at the brilliant advice we've had here for free. £100 an hour from an accountant.
Say thank you.
Thank you (especially Dave St Ives, BusyD, Tosh, Ian, Wavie D ... well everyone actually!)
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I use an accountant because it gives me a feeling of security when dealing with HM taxman. (Actually I don't deal with him at all - the accountant does all that!)
Every year I do a "tax projection" so I know where I stand. It's not difficult, and all the figures are on the Inland Revenue website. This my forecast for the current year, all worked out ;)
Cheers,
Ian
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Ian
wasnt i spot on, as you dont employ your wife it works out at 30% above 12.5k
30% of £20k = £6500 approx
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You're right Dave ;)
I just like to see it all in black and white. The only thing in this world that can faze me is HM Taxman, so I have a "belt and braces" approach
Cheers,
Ian
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My Tax bill is in the thousands. I also dont mess about with the 2 payment system of Jan & July. I pay it all in December usually...the reason I pay it all in 1 go is because I might forget the July deadline & be fined! theyre not getting 1p more than necessary. And yes, I do know theyre earning interest out of my advance payment........and I do know that I could probably get reminders off IR or set my compy to remind me BUT I dont take the risk. Also, Dec is my BEST month & its when I am the most flushed. Best get the big bill outta the way before Xmas, paying it off with what I have saved all year, then the rest is left for Xmas shopping, meals out etc
We all probably have our own system. Mine works for me. Yours works for you. Each to their own.
I know you might be set in your ways, but you're giving your money away doing this.
Your tax bill is in the thousands - mine is too and it breaks my heart - but how much interest are you losing by paying early, and in a oner? Enough to buy a few extra Xmas presents, I think. It's not A big bill, it's a bill you're allowed to pay in two instalments, and one of the advantages of being self-employed is to arrange your own finances to suit you, not the taxman.
Trust me, you won't forget to pay the July one when it comes in. You can say to yourself that this is really costing me so much less, because of the extra interest I've earned. WooHoo - Result!!
Think it through - you know it makes sense.
As an aside, visit www.stoozing.com
WARNING - if you're not completely in control of your financial situation, this is NOT for you!
Thanks for the advice but I have heard it time and time again off my accountant. Its the way I work with most of my finances to be honest. I dont do monthly Council Tax payments, I dont do monthly water rates, I pay them off when I have the bill. I dont do monthly gas, electric or phone bills, prefering to pay them in full upon quarterly bill. My way means I owe everybody nothing. Having wads in the bank from messing around with my finances would be much more of a headache & worry than paying them off using my present system. Financial security is my biggest driving force and that doesnt mean having wads in the bank, it means owing nothing & being in control of my finances in a way that suits me.
As for stoozing, well, again I would not mess around like that. My credit card is used for my shopping and paid off in full every month. Yes, I know I could probably earn money from changing to a card that pays out a percentage on all payments, but again, its messing around & time consuming. I prefer to spend my valuable time making sure my business runs correctly & that all IR, EH & H&S systems are up to date.
Once again, thanks for the advice & opinions. On this occasion I'll not follow them through. Hope that doesnt offend.
Lizzy
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Paying tax hurts but not paying it hurts a lot more. On Jan 31st my tax bill is £3,800 and this is about typical. It would be SOOO easy to try and fiddle it but the truth is I don't.
The thing is if you earn the money you must ecpect to pay tax. I know someone who for the past three years has had the taxman on his back and he would have been better off if it has been the Mafia. Once they get their hooks in you they never ever let go.
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Once again, thanks for the advice & opinions. On this occasion I'll not follow them through. Hope that doesnt offend.
Lizzy
Not at all, but can I give you a different example of arranging your finances to suit your circumstances?
I just don't understand why some folk use Xmas Clubs. Instead of giving your money to the club, who gain interest on your money (and apart from the fact they've now got a captive market who're definitely going to have to spend that money with them), what's to stop people putting the money into a high interest bank account? It takes the same discipline to pay in the money, easier if they use internet banking, and now the interest goes to them, so they're gaining twice!
As you say, each to their own. I have customers who pay in advance cos that's the way they feel best with, and I must admit that I don't give them anything off for doing so. (evil laugh)
Anyway, that's me off my soapbox now - ta ta
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Too true, Davie.
I have my business account and a high interest savings account with NatWest. Every week I make sure I pay in enough to cover all my outgoings into the business account, then every couple of weeks I pick up the phone, any time I like, and transfer my income tax money to the saver account.
When it's time to pay the tax, I pick up the phone again, and the nice man (or lady ;)) transfers the amount I tell them back to my business account. I then give them my Inland Revenue reference number, and the correct amount is paid instantaneously to the Revenue. No cheques, money orders or any hassel, and no delays. I don't need to wait for confirmation from the taxman that my money's been received, so total peace of mind :)
Cheers,
Ian
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As a rule I save quite a chunk of my money that I earn each week. I have several Bank/Building society accounts, I run one as my busniess account which is a postal account, Thats just to avoid paying the bank for depositing cheques into my account. I get at least 30 cheques every week.
Though I save through the year its not for the Tax man. When it gets to December or June everything I earn for those four months goes to the Tax man.So I start saving in December for Jan 31st payment. As soon as I have the money saved I will pay my Tax bill on line.
I fill out our Tax forms online. The computer works it all out their and then on how much tax I pay.
Nel.