Sole Trader Tax
yatesee started this topic @ 10:12 on 10/10/2008
Hi,
Background:
I'm in the process of setting myself up as a sole trader doing IT Maintenance\Support and suchlike.
I am employeed full time, and i currently pay the middle rate of tax via my employer and if all goes according to plan, i'm not that far off from the higher rate.
Plan:
I've been doing a lot of extra work for people in my spare time, and i just want this to be under a business so that i can pay tax for it accordingly and not get a stonking great tax bill in one hit. So, the figures - I'm not bringing in that much each year it averages between 1-3k per year. So, i could apply for exception from paying class 2 NIC contributions. Am i correct in thinking that the other thing left to pay is INcome tax? If so and my profit is under 4k, does that mean i dont pay income tax on my profit as its below the 6k personal allowance?
I hope somebody understands what i mean here - its all new stuff and i cant really afford or justify an accountant for the small amounts of work i'll be doing. The overall plan is if more work comes in, then i have the structure and methology in place to make it successful and organised.
Cheers,
Tom
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RE: Sole Trader Tax
JohnG | 12/10/2008 05:28 PM
Hi Tom
As a soletrader that is already in employment, you don't get to benefit from the personal allowance twice. The profit is in addition to your current salary so may be pushed into the higher tax band... and NIC would also be payable.
The alternative is to run with a Ltd company, though the amount of savings in tax are likely to be wiped out in additional costs unless you can manage it all yourself.
I'd say it's a personal preference, and just depends to what extent you want to deal with some extra administration and if you feel this is worth the reduction in total tax/NIC.
Hope that helps.
John
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