What options do I have ??

[mug2k]

Hi

I'm looking to start trading this year and will be selling online, the whole tax thing is really confusing and hope somebody could lay it out in laymen's terms for me. Below is a set of hypothetical figures that would be earning this year. Please let me know if I've missed anything out:-

£4000 - Startup Capital
£30,000 - End of year Bank Balance
£6470 - Salary (personal tax allowance) *Live at home, don't need much*

1. So is my taxable income and NI contributions is based on £19530 (Bank Balance - Startup Capital - Salary) ?.
2. What else can I do to pay less tax ?.
3. Would becoming a limited company rather than a soletrader make any difference ?

Thanks,
Marcus

p.s. Sorry for such simple questions :redface:

[CassioAcc]

Your tax bill will be calcualted on your profits. As a sole trader you do not pay a salary but are taxed on the business profits - in your example £26K. £30K less £4k - capital introduced does not come into it.



Read the sticky on the forum LTD co vs Sole Trader.

[elainec100@cheapaccounting]

As Aaron says - have a read of the sticker. Also consider getting some advice from an accountant up front. It can be surprising how useful this can be and how much it could save you in the long run.

Good luck with the business.