10 grand tax bill, is this normal

[Phil]

Evening gents, as a one man band is paying around 10 grand tax every year normal? Am I too honest?

I had this to pay last year and I know it will be more this year, its like everything I earn from now to Dec will just be for tax for the dole dossers to go on holiday with. Cant be right?

Yes I have accountant.

 

[hammers4spanner]

Are you doing contract work for H/A's?

 

[Phil]

I mainly do private bathrooms, its a difficult subject to talk about this. All I know is whoever trades I meet are all shocked at how much I pay.

Started trading 2008 and didn't really start proper money coming in until 2011/2012.

 

[rpm]

Is it possible for you to show your books to a different accountant Phil? Sorry bud but not being SE that`s all I can think of.

 

[SilentMike]

You get about 11 grand tax free. Plus you don't get taxed on overheads
So to get taxed 10 grand you will have had to make 61 grand profit

 

[Best]

Could you not spend what would have been some of your profit on a new van and/or tools and equipment?

 

[townfanjon]

Thats one hell of a tax bill phil , simply you are either "minted" or your accountant is useless .

I agree with RPM , I would let another accountant have a look , my best pal is a charted accountant in Leeds, let me know if you decide anything .

 

[Shower Engineer]

Very rough calculation.
You get about 10k tax free. You then pay 20% tax on all profit up to about 40k. You then pay 40% on everything you earn over 40k.
So your gross profit needs to be about 50k for you to pay 10k in tax.
Lots of different ways to pay less and that is what you pay your accountant for!

 

[Phil]

Thanks guys, so based on what you say shower engineer my bill for 2014 should have been £5600.

It was two payments, one about £6400 in Jan and another of about £3500 in July.

 

[markadams]

I think the confusion here is that the second payment is not for this years tax but it is half of the estimated tax that comes off next years tax.

 

[hammers4spanner]

Still a lot

 

[Phil]

I've just found the paperwork back from accountant dated 12 Jan 2016.

"I calculate that you will have a tax liability of £6,341.60 due by 31 Jan 2016 and a further £3,331.28 payable by 31 July 2016. This is obviously as a result of the increase sales and profits during 2014"

His bill is £480 per year he's a chartered accountant.

 

[townfanjon]

£ 480 , is ok in my opinion , my pal charges me around £800 Pfffttttt, but that involves some other " stuff" , mind you he has an office with about 30 or more people to pay , I would nt want his overheads .
He may have had to put what they call a "balancing payment " if you earned more from your previous year .

Treat yourself to a new van pal lol

 

[mfgs]

Judging by the fact you are being asked to pay half in advance for the following year, then you must be a sole trader? Go limited, at the profit you are making you will be able to get more out of the company while paying less tax.

 

[Last Plumber]

If you're paying that you may be better off as a sole director of a limited company.
You pay a good 8 or 9 percent on top of your tax, in NI contributions.

Have a word with an accountant and ask about the allowance you get for employing someone else or having another director ( 1% shares ).

 

[Phil]

I won't be earning anymore than all the guys on here, so are you saying I've paid half of 2015's tax already and I'll be getting a similar or higher bill in Jan?

I know I earn't a lot more in 2014 than I did in 2013.

 

[mfgs]

I think you should ditch your accountant if he hasn't explained any of this to you. The tax you pay in July is an estimated 50% for the following year.

 

[Phil]

To be honest I haven't seen him for about 4 years, I drop off and pick up in flying visits and only see receptionist.

I'd ring him now but its Saturday then during the week there's no time.

It seems a chunk of the bill is class 4 NI now i'm researching it.

 

[Last Plumber]

To be honest I haven't seen him for about 4 years, I drop off and pick up in flying visits and only see receptionist.

I'd ring him now but its Saturday then during the week there's no time.

It seems a chunk of the bill is class 4 NI now i'm researching it.

It will be. That's what I mean.
If you're Ltd, you pay NI on your salary but the company doesn't pay any.
Your salary can be as little as the tax threshold although you are better to pay a little tax and NI .
That allowance I mentioned earlier ( employing someone) altered this year so my NI went up a bit but you need to weigh up whether employing or having another director is worth it.

If you're Ltd, your tax bill is calculated after the year end and you pay it over. Next years is done the same way so you also get shut of the daft paying up front idea.

If your Net profit is £30000 plus it will be cheaper to be Ltd I reckon.

Talk to a proper accountancy firm. Mine charge a lot but I think it's worth it

 

[JAH HEATING]

Get a new accountant, someone who will advise you better

Seems like you're paying payment on account, so when you put this year's books in. That figure could of dropped.

 

[Shower Engineer]

Going Ltd can be a good idea for some, I have been Ltd for about 15 years and wouldn't change it but you have to remember to factor in the new 7.5% dividend tax, that takes a lot of the financial advantage away.

 

[lame plumber]

take some cash payments occassionally

 

[rocketmanbkk]

Are you getting paid in cash?

If so, do you declare all the cash?

If you're earning well then there'll be tax to pay

Life is life