Question regarding tax as a Sole Trader

[DannyLewis]

As a Sole Trader, is ANY money you earn counted as taxable in terms of when I come to fill in my tax return. Now I know that only PROFIT is taxable, but I'm wondering if any income I receive is considered a part of my sole trading business?

So for example, this week I got paid £235.01 for last weeks wages from my employment, and I spent £138.88 on stock for the business. Is the remaining £95.13 classed as 'profit' or even included in my tax return? So confused..

Also, expenses.. what sort of things can be included as expenses. As I am trading from home at the moment there are the obvious things to take into consideration; stock, listing prices on ebay etc.. Is my 'board' that I pay to my family (for electricity, accomodation and gas at £50 per week) taken as an expense when working out what I can pay tax on? That's £50 per week, cash. Should I basically track every bit of money that I receive on a personal and business level? Please could somebody explain this all to me as I'm just so confused right now. Will this affect tax that I pay on my wages by the way? Any help will be greatly appreciated!

 

[DannyLewis]

I suppose to sum my question up in a sentence:

Total income from ANY (wages, personal, sales etc.) source - expenses = taxable income?

 

[OldWelshGuy]

everything goes on your tax return as income, but you only pay tax on profit after all your tax deductables are taken out.

Stock is a different beast however, materials if used are deductable, but stock is a different animal entirely as it is an asset.

 

[Newchodge]

Presumably your wages from last employment were subject to PAYE and are not an income from your business, so should be excluded from business income. The fact that you use your previous wages to fund your business does not make it business income.

 

[arcon5]

Your profits as a sole trader and your income from PAYE are entered in different boxes on the self assessment.

In your example, £138.88 would be put through your books as an expense, but the source would be classed as PAYE income and not 'takings' from your business activities.

 

[PDRD]

If you are this confused by the simple tax questions then I would suggest you get an accountant to do your tax return. It will only cost you about £200.

Sent from my GT-I9305 using UK Business Forums

 

[paulears]

It's quite possible to be self-employed and do some PAYE work, in fact, very often tax is deducted at a straight 20% on the emergency code, so you may well at the end of the year have paid more tax than you owe on your self employment. I would 2nd the recommendation for the accountant. They'll usually save you more than they cost, and frankly - some of the things you see them put on the form, you wouldn't have the knowledge to do yourself.

If you are living with parents and they give you receipts for the 'rent' and other expenses, you can use them - but it could of course impact on their circumstances - it's an extra income to them. Using your own home for business is covered, but an accountant would be best to deal with being effectively a 'lodger'.

 

[DannyLewis]

Thankyou for the clarification, I have never seen a self assessment tax return form by the way. I'm just trying to cover all the bases as I don't want to find out that I have to pay an unexpected amount and find that I don't have the funds, which would mess me up. Thanks again for clearing things up

 

[cheaper accountant]

Take a read of this article which explains what sections you need to complete: http://www.cheaperaccountant.co.uk/blog/which-tax-return-do-i-complete-

 

[arcon5]

If you are this confused by the simple tax questions then I would suggest you get an accountant to do your tax return. It will only cost you about £200.

Sent from my GT-I9305 using UK Business Forums

And i'm assuming you was born with knowledge and know-how of submitting tax returns? With it being quite a basic process, there's no harm in op wanting to learn to do it himself

 

[PDRD]

And i'm assuming you was born with knowledge and know-how of submitting tax returns? With it being quite a basic process, there's no harm in op wanting to learn to do it himself

Yes I was, you assume correctly. Looks like you were born psychic.

 

[DannyLewis]

Well I'm 20 years old and this is my first venture into business. I have had a few jobs since leaving school, so really a lot of this is a learning curve to me. Saying that, its enjoyable working for myself. The way I see it, I'd rather minimise my expenses (at least until/if/when business starts booming) and learn to do things myself, as I don't see the point in spending money on things that I could do myself with a little research and effort. That's just my philosophy, although some of you may disagree. Again, thanks for all the help