A Tax Question!

[KCI]

Does anyone know how much you can earn if you are self employed, before you have to pay tax?

Trying to work out my tax form - I hate April! :eek:

[footie chick]

Not sure but the tax people in Inverness are very helpful give them a ring.

[davem]

Ask Stuart Whiteley he's in the paper.
An accountant is usually able to save you more than his fee!

[Bill Fernie]

A self-employed person can earn exactly the same as an employed person before they pay tax. The same personal allowances apply.

A self-employed person is taxed on profits after expenses. An employee is taxed on wages or salary.

For full details go to the HM Revenue and Customs web site http://www.hmrc.gov.uk/home.htm

The section Starting Up In Business may be useful to you
http://www.hmrc.gov.uk/businesses/tmastarting-up-in-business.shtml

Perosnal Allowances etc to see how much you can earn before you pay tax can be found at http://www.hmrc.gov.uk/rates/it.htm
In relation to your question the prsonal allowances are the same for employed and self-employed people.

However careful attention should be paid to what is and is not allowed under expenses of a business that are not available to an employed person. In simple terms almost anything that is required to be spent and can be justified to the Revenue and Customs can be set against the gross income and deducted to arrive at the net profit.

There are many things to consider in relation to self employment and the expenses. For example vehicles might be used in the business and Capital Allowances may be due and can be calculated depending on business usage. If a vehicle is used for private purposes then an adjustment requires to be made in relation to that.

The number of things that might be used in a business is extremely wide and all of them can be claimed for if a legitimate expense has been incurred.

If self -employed it is possible that in the fiorst year or two a loss is made. this can be set agsint future profits and in some cases claimed against other income say from a job taxed under PAYE.

All of this is covered on the Revenue and Customs web site. Read the useful guides on the site and if you have any questions go into your nearest tax office to get the latest advice and answers to make sure you do not go wrong.

You will also have to consider the rules under Self Assessment for making returns as does anyone under PAYE but the self employed person will also require to do calculations regarding the business either for themselves of using an accountant.

You can also phone the helpline for many straightforward enquiries.

Hope that helps.

Bill

[Angela]

Bill's advice is excellent, and as davem says, an accountant can almost always save you money -and his/her fee is itself an allowable expense of course.

An accountant will sort out any queries with the Inland Revenue on your behalf, although I've always found the IR themselves very helpful and friendly.

Your, or your accountant, can fill in the return online rather than using the paper version if you prefer.

[KCI]

Thanks very much for all the help everyone.

Bill - I checked the links, and found the info I needed, so hopefully that's my tax return completed for another year! :)

Thanks again for all the help.