[Ian_Giles]

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

[Sir Squeaky]

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... :

[Chris Cottrell]

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

[Paul Coleman]

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.

[windows_chepstow]

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.

[[GQC] Tim]

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.

[Moderator David@stives]

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

[busydaffodil]

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.

[Sir Squeaky]

Mine doesn't work.

It's called forgetting all about it, then going "Oh no! Tax in January!"
Then realising it's after Christmas and I'm skint...

[busydaffodil]

but it must work for you Squeaks......your not in prison for Tax evasion,etc

[DASERVICES]

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

[DASERVICES]

£2.5K is my profit on my balance sheet but actually have a lot more by using the
40p mile route

Doug

[Moderator David@stives]

£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

[Moderator David@stives]

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.

[DASERVICES]

 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

 

 

[Moderator David@stives]

Doug

You cant claim both , mileage and running costs.

Its either one or the other

[DASERVICES]

  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.

[sair]

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

[windows_chepstow]

but as they say there are two certainties in life death and taxs.

I thought the only two certanties was death and nurses?

[matt]

all my comercail gets paid into a biz account

that pays for my holidays and tax bill

it works well