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Working out Tax

Discussion in 'General Business Forum:' started by thematthewbrennan, Jul 30, 2013.

  1. I want to take a percentage of each project and set it aside for tax. What is a reliable way of doing this?
     
  2. Paul Murray

    Paul Murray Moderator Staff Member

    Put a third of what you earn into a separate bank account.
     
  3. Dave L

    Dave L Well-Known Member

    A third provides the ballpark figure for tax and NI (which I think takes you to about 32% at the basic rate). You'll have a personal tax allowance of c.£9.5k in the current financial year and will pay 20% (basic rate) on anything over and above. If you're a limited company, corporation tax takes 20% of any profits up to £300k (if earnings are modest and you work independently there's no reason why this should be complicated by income tax - you can pay yourself a salary up to the allowance and take the rest as dividends, taxed at the prevailing CT rate - good if your earnings take you into the higher income tax band). As a small business, you should really talk to an accountant as s/he will know how to help you keep more of the money you earn. Generally speaking, though, it's always best to set aside a generous amount for your end-of-year obligations (for obvious reasons).
     
  4. @GCarlD

    @GCarlD Well-Known Member

    I recently completed my tax return online (I usually do the paper version) and my PTA was something like £8.1K and some change. It seems to get lower every year! But yes 1/3 is good advice and if you find yourself with a bit extra left over, put it in savings or treat yourself :)
     
  5. Am I right in thinking that your tax free allowance is deducted from your income profits before tax is calculated. IE, if I bring in 20,000, I will only be taxed on 20000-9440=£10560?
     
  6. richimgd

    richimgd Member

    Yep. Also your operational costs (phone, internet, energy etc) and capital allowances (computer, camera equipment, ipads etc) are deducted from your income so your profit and therefore tax bill will be reduced. Obviously the exact items which you can claim for and what categories they fall under can be a little confusing but ultimately that is the general idea.
     

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