1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

UK sole trader tax advise

Discussion in 'Business & Tax Advice' started by MrClifford, Jul 27, 2014.

  1. MrClifford

    MrClifford Registered Member

    Joined:
    Dec 12, 2013
    Messages:
    73
    Likes Received:
    11
    Occupation:
    Vehicle Technician
    Location:
    Worcester, UK
    Fellas this seems stupid, i could have blown this all out of proportion but:

    Hyperthetically speakig if I was a sole trader earning over £79,000 I would need to be VAT registered and collect VAT from all sales at a rate of 20% to pay the skanky taxman.

    So what we have: (please correct me if i am wrong as this sounds silly)
    Assuming turnover is over a 1 year period is 79k+ with a gross profit of 40k
    VAT at 17.5% = £33k (I assume VAT is taken off before taxed on remaining 33k profit)
    Edit: 20% VAT = 32k - sums below adjusted
    Tax at 40% = £19.2k
    Class 4 NI at 9% = £1,920
    Class 2 NI £2.70 per week £140.4

    So your 40k profit turns into £17,138.60 to take home?

    Let alone my PAYE income from my full time job that would then get taxed at 40%
     
    Last edited: Jul 27, 2014
  2. jammie

    jammie Jr. VIP Jr. VIP Premium Member

    Joined:
    Feb 24, 2008
    Messages:
    773
    Likes Received:
    453
    VAT registration cut off is 81k so you dont have to even bother thinking about it.

    Basically, if you register for VAT (can do it regardless of gross income, but have to over 81k), you claim back the VAT on your purchases so it's not paid twice. Currently you can imagine you buy a product with VAT and then sell that on to the customer with VAT (although it may not be that explicit).

    Of course, if you sell products exempt from VAT, you dont have to register.

    google VAT registration for the HMRC website, it covers most of the ground you'll need.

    Only certain products/services include VAT so you can't just take off 17.5%. You're probably better of registering as a company and registering for VAT so you can get the tax benefits. i.e. VAT reclaim on fuel for "business trips", expenses for daily sustenance, business purchases etc. You can effectively pay <5% tax if you're smart and have a friendly accountant.

    Good luck!
     
  3. MrClifford

    MrClifford Registered Member

    Joined:
    Dec 12, 2013
    Messages:
    73
    Likes Received:
    11
    Occupation:
    Vehicle Technician
    Location:
    Worcester, UK
    Ill check it out, it will all be digital goods so may not even have to +VAT onto them. Less than 5% tax sounds good to me! How does this reflect onto my PAYE? Cheers for your input!
     
  4. davids355

    davids355 Jr. VIP Jr. VIP Premium Member

    Joined:
    Apr 25, 2011
    Messages:
    8,776
    Likes Received:
    6,307
    Home Page:
    You pay VAT when you buy something, then you charge it when you sell. So it doesn't make any difference.
    In fact, once you become VAT registered you should be better off - because a lot of things that have VAT on them so even if your not VAT registered, you still pay that VAT, but once you become registered, you can charge it when reselling.
     
    • Thanks Thanks x 1
  5. trevormorley

    trevormorley Junior Member

    Joined:
    Feb 25, 2010
    Messages:
    170
    Likes Received:
    46
    Vat is 20%....

    You are only taxed at 40% on income over £41,865, first £10K is tax free, 10K to £41865 is at 20%, only the amount over £41865 will be at 40%
     
  6. MrClifford

    MrClifford Registered Member

    Joined:
    Dec 12, 2013
    Messages:
    73
    Likes Received:
    11
    Occupation:
    Vehicle Technician
    Location:
    Worcester, UK
    Yeah i thought it was 20%, was reading an old post that had it at 17.5%. And yeah i would be looking to breach 40%, currently earn 21.5k with my employeed job
     
  7. mapp2819

    mapp2819 Regular Member

    Joined:
    May 7, 2011
    Messages:
    390
    Likes Received:
    266
    Occupation:
    Director
    Location:
    London, UK
    Some good information in this thread already. It's worth speaking to an accountant about this though, it could save you lots of hassle, costs, etc in the long term.
     
  8. Castiel999

    Castiel999 Junior Member

    Joined:
    Jul 5, 2012
    Messages:
    105
    Likes Received:
    12
    Location:
    Gone with the wind.
    Hi as everyone seems to be giving tax advice .I would like to know if any non-uk resident is earning from azon's u.k. program so what do we need to do.For the U.S. It was the EIN & W8-BEN .Likewise what do we need to fill for double tax avoidance.
     
  9. DanDanger

    DanDanger Junior Member

    Joined:
    Nov 11, 2010
    Messages:
    129
    Likes Received:
    147
    With VAT it really depends on what you're doing.

    If you earn commission from affiliate sales or money from google adsense, these payments are sent to you and you cannot invoice them with VAT added.

    So if you're VAT registered, your VAT thats owed on that money comes straight out of your pocket.

    However if you are unable to charge VAT, the government reduce the rate to 12%. So you're getting 12% of your earnings stolen from you solely because you earn more than £81k.

    If however you're earning from invoicing clients, selling products etc then you can add VAT to the invoice so you're covered. This will actually work better off for you as you can reclaim VAT on purchases such as computers etc.


    If you are earning via commission / adsense, my accountants advice is: keep your declared gross income below £80k in a 12 month period.