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Paying tax in The UK

Discussion in 'Business & Tax Advice' started by Jon0, Jan 16, 2012.

  1. Jon0

    Jon0 Regular Member

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    There's obviously a few people on here with knowledge in this area.

    Example - You make £1000 per month using Internet Marketing. How would you pay tax for it in The UK? Without setting up a new company and all that lark. Do you get into touch with HMRC and let them know what your up to or what? :)

    Cheers!
     
  2. BlueTurtle

    BlueTurtle BANNED BANNED

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    You either get an accountant or do your own taxes. I wouldn't recommend seeking any advice here, and there's no point me reiterating what you can already find by Googling. There's a ton of information out there on how you go about things, including plenty of information on the hmrc's own site.
     
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  3. dreadnought2020

    dreadnought2020 Junior Member

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    Register as self employed, do tax returns. You have 3 months to register starting from the day you earn your first bit of money.
    I would advise putting about 30-40% of your earnings aside each month ready for tax season. If you end up with a smaller bill than you've saved up for you get a nice wedge of cash to play around with.

    If you're working with clients rather than a CPA company (for example) I would advise thinking about starting a ltd company. Last thing you want is an unsatisfied customer taking you for all you have.

    Hope that helps.
     
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  4. CPAchick

    CPAchick Regular Member

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    You've got 3 months to let the tax man know that you're trading or you're up for a fine. As said, get in touch with the tax man, they're really very friendly IF you play straight and they offer a load of info for you to get things right.

    I went on a day workshop at my local tax office and got the information I needed to stay legal.

    Speaking of which, I've doing my self-assessment in the next few days :( and I'm ready to pay the bill!

    As said above, put money aside to pay the bill!
     
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  5. savvypro

    savvypro Regular Member

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    Here's something I sent to a member who asked me about his situation.

    Income Tax rates and allowances: http://www.hmrc.gov.uk/rates/it.htm

    The Personal Allowance is currently: £7,475, come April 6th it will be: £8,105 - and in the last tax year it was: £6,475

    If your not going over the allowances I wouldn't bother. But if your over the allowances then find a competent accountant. And make sure you have good records, you don’t need to do double entry book keeping, simple: date, description, income, expenditure - will do. The accountants bill will be a lot less that way.

    On the LTD, if it's just you. You need to make sure everything is kept separate (personal vs business - LTD should have it’s own business account), otherwise the limited liability doesn't stand.

    For the LTD, you only need to put away 20% to 26%. See: http://www.hmrc.gov.uk/rates/corp.htm
     
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  6. bakxos

    bakxos Regular Member

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    First of all, you need to register with HMRC. All of the things mentioned above seem correct.

    Lets assume that you make £1000 per month. No reason to create an LTD because it costs. The tax is less but it costs money to create it.

    So, lets assume you register as a sole trader.

    You pay 3 different taxes. Class 2 NIC, Class 4 NIC and Income tax.

    Class 2 = £2.5/week (direct debit)
    Class 4= 9% above £7225
    Income tax = 20% above £7475

    So for £1000 per month, you will have to pay APPROXIMATELY:
    2.5x52=130
    (12000-7225)*9%=429.75
    (12000-7475)*20%=902

    Total ----$1464.75
    Assumption=£1000 PROFIT not Revenue
    You have three months to call HMRC to register as a sole trader (from the first time you operate) and the tax year ends 5th of April.
    Class 2 are paid monthly
    Class 4 and income tax are paid annually when you submit your tax return.

    Its easy to register as a sole trader and everything (tax submissions etc) are online(you will get an account for that).
     
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    Last edited: Jan 16, 2012
  7. pokerjk

    pokerjk Senior Member

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    Get some good software to keep track of everything like Sage.

    Speak to an accountant to see what you can claim as expenses. e.g. If working from home how much utility bills you can claim. The more you claim as an expense the less tax you pay. Say you use your car for work and please you can claim a % of that too.
     
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  8. Jon0

    Jon0 Regular Member

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    Cheers for the advice guys. So effectively here, You're saying. It's 29% tax once you've pretty much gone over £7500 ish? Cheers
     
  9. bakxos

    bakxos Regular Member

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    Essentially yes:)
    You can claim certain expenses though (server costs,domains,outsourcing) as well as expenses such as a part of your house which you use to work,a part of cleaning expenses , a part of heating etc etc.

    I would advise you to register as a sole trader (its illegal not to do anyway). The tax return takes 1 hour to submit and they only require you to have evidence of income and expenses(not formal accounting records like an Ltd does). So for example, for £1000 per month, paypal transactions history should be enough. You can even register on sage (it has a free account). If you dont make enough money (less than £5500 if i remember correctly), you can even claim back your £2.5/week.

    Good luck :)
     
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  10. Jon0

    Jon0 Regular Member

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    Fantastic, Cheers! If you're only receiving Cheques (100%) of the time. How would you usualy record these?
     
  11. VirtualSEO

    VirtualSEO Newbie

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    What about if you live abroad, eg in Japan or Philippines but earnings still get paid to your UK account but you are not physically based in the UK?
     
  12. CPAchick

    CPAchick Regular Member

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    What I was told, by the tax man himself, is that even if you haven't gone over the personal allowance threshold you still do need to bother!

    File your accounts and let the tax man see that you're below the threshold!

    If you want to stay legal in this country, UK, you have to have accounts filed EVERY YEAR, even if you come in below and or don't turn a profit.

    Very dangerous advice "not to bother"!!! :eek:

    OP, take no ones word for it, not even mine, GO find out for yourself, the consequences of screwing with the big dog and getting it wrong are just too horrible to think about.

     
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  13. bakxos

    bakxos Regular Member

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    You are correct, you cant just dont bother.Its tax evasion and its illegal ofc. Why not bother actually?If you are below the threshold, you pay nothing but you are sticking to the laws and 100% legit professional....

    Even if you have zero earnings, you need to submit tax returns. Operating a business is not connected to profits. Dormant companies are still companies for example.

    For the cheques, you can :
    1.Keep copies of them (photocopies)
    2.Have a record of the bank transactions(money flowing in...:))


    If you leave abroad and your business is abroad, then you need to adhere to your local laws. For the UK for example, a business is liable for UK tax if it is operates in the UK (the bank account is irrelevant).
     
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    Last edited: Jan 17, 2012
  14. Jon0

    Jon0 Regular Member

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    This just about covers most things i believe. Thanks all! ;)
     
  15. BlueTurtle

    BlueTurtle BANNED BANNED

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    @jon This is *exactly* the reason my advice was NOT to listen to anyone on here when it comes to tax. The advice this man has just given you with land in trouble with the HMRC. I also think he should learn the difference between "your" and "you're" before he even thinks of giving someone tax advice next time.

    Whether you owe them money or not, you always have to declare your income and do send in a tax return.

    The HMRC aren't as crazy as the US IR, but it's best to always stay above board as you never know when something can come back to bite you. A member of my family recently got hit with a £20k tax assessment because of some discrepancies. In reality they owed only a couple of grand, but when you don't declare all your income and keep good records you're open to these "tax assessments" of what they believe you should owe.

    You'll be fine doing your own taxes online just now, it's easy, but do make sure you spend a few days reading as much as you can from authority sites and the HMRC's own site, and of course give them a phone if you have any questions for them.
     
  16. BlueTurtle

    BlueTurtle BANNED BANNED

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    The bank give you a receipt when you deposit a cheque.
     
  17. savvypro

    savvypro Regular Member

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    If you reread my post you'll see that I say: I wouldn't bother. Never said: "not to bother".

    But I'll make it clear why I said I wouldn't bother: most people reading this thread will be spending more than they will ever make back - not exactly a definition of a self employed person - more a bankrupt person.

    The horses mouth: read: http://www.hmrc.gov.uk/manuals/salfmanual/salf210.htm
    Bolding is my emphasis. Only if you ?has profits? or "chargeable gains on which tax is due" which for a person only starts above the threshold allowances for when they are "chargeable to tax". Then you must notify.

    You have until the 5th of October in the next tax year, to tell them about tax you owe them in the previous tax year.


    See above.

    Most businesses need to make a profit to keep going.

    Irrelevant here, as when you submit form CT41G, you tell HMRC that the company is not trading, that it is dormant and you don?t have to file a tax return for that period on (but you still have to for the period up to the dormant date). Now if you trade after having told them that the company is dormant (without filing form CT204), than you are breaking the law - which is a completely different situation to a person not filing a tax return when they don?t earn above the threshold.

    My point being: It is not tax evasion, when you owe no taxes. Nor is it illegal. Just a technicality. And one from 10+ years of experience, they don't care about.

    For those abroad:
    As a basic rule: UK tax is territory based, especially for company's (for the most part).
    For individuals it's domiciled based - if you spend less than 90 days a tax year in the UK. Then you as an individual owe no tax.
     
  18. killakem

    killakem Regular Member

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    Stay on the right side of the tax man cause once he gets his teeth into you he wil squeeze and squeeze until your not moving anymore!!
     
  19. savvypro

    savvypro Regular Member

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    Take a look at my previous post in which I quote HMRC directly.

    I do know the difference, it just so happens my brain works faster than I type. And English is a second language to me.

    See my direct quote.

    IRS not IR.

    Reason to find a competent accountant to check everything before you send them anything. Because the moment you sign the declaration, you are entering into a contract with HMRC.
     
  20. MKelly

    MKelly Regular Member

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    I'm doing my tax right now!

    October is just for paper tax returns, It's tax time right now for people who submit their tax returns online, so I'm doing mine this week to avoid any fees, the due date is the end of January.

    It's not that hard to do you own tax, just go through your bank account and key in your businesses income and outgoings to an excel document, then key them in online at HMRC.

    Accountants can help, but for what they charge and what they will save you, to me it's not worth it unless you are doing HUGE business or have employees.

    Tip: NEVER try to trick the HMRC, they can come down on you and literally ruin you.