Self assessment and paypal

[cyberpedz]

Hello all i know this is probably a simple question to some so pease don't shoot me down.

Most of my income is via paypal. My question is how do i best record this for self assessment?

For an example, i sold a service for £100
1. Should i just add income as £96.40 which is after paypal fees.
2. Should i be adding income as £100 and then deducting fees (£3.60) as expenses?

I am presuming #2 but just wanted to check.

 

[TheCyclingProgrammer]

The second one.

 

[DontAsk]

PayPal is irrelevant.

Banks can also charge fees, Credit card payments have commission, ...

 

[MyAccountantOnline]

Hello all i know this is probably a simple question to some so pease don't shoot me down.

Most of my income is via paypal. My question is how do i best record this for self assessment?

For an example, i sold a service for £100
1. Should i just add income as £96.40 which is after paypal fees.
2. Should i be adding income as £100 and then deducting fees (£3.60) as expenses?

I am presuming #2 but just wanted to check.

I'll second its the second one

Its not a daft question by the way lots of people get it wrong.

 

[Mr D]

Its always good to check.

 

[cyberpedz]

Thanks guys.
Another quick question. I want to ensure as much as I can there is no big shocks come tax time. I have read in places as a rough rule to save 30% of what you earn a month.

Firstly is this correct and if so is this 30% of income or 30% of what you have left after experiences?

 

[Scalloway]

It would be 30% after expenses. 20% for tax and 10% for NI.

 

[MyAccountantOnline]

It would be 30% after expenses. 20% for tax and 10% for NI.

In your post today you mention you've got other income so the 20% may be 40%.

It may be worth looking at a limited company.

 

[cyberpedz]

SA 100 is the basic self assessment tax return. SA103f is the full version of the Self Employment pages. This is where you will enter your income and expenses for the tax year.

The rounding only applies when you come to total up your figures at the end of the tax year. It will only be a difference of a few pennies so don't worry about it.

In your post today you mention you've got other income so the 20% may be 40%.

It may be worth looking at a limited company.

Yes i have other income because i am employed so already pay tax via PAYE so would assume that i would just need to save money for tax for the self employed bit?

 

[MyAccountantOnline]

Yes i have other income because i am employed so already pay tax via PAYE so would assume that i would just need to save money for tax for the self employed bit?

You should always set aside funds for tax, but you may have to set aside less if you trade via a limited company rather than as a sole trader. It'll depend on a number of factors including how much you earn as an employee.

 

[cyberpedz]

oh ok employment before tax is 19500. Self employment is likely to only be about 6000 for first year if that. My plan is that self employed will eventually earn me enough to not be employed.

 

[DontAsk]

So tax will be 20% for now.

 

[cyberpedz]

Ok thanks. With NI contributions am i right that this is now taken at the same time you pay tax and is no longer paid monthly? Also being that i am paying NI for my employment do i need to still pay NI contributions for self-employed? Thanks for all the help guys.

 

[STDFR33]

You'll still pay class 2 and 4 national insurance contributions - depending on on thresholds.

https://www.gov.uk/self-employed-national-insurance-rates

 

[QuickRebates]

You will pay 20% on self employed profits (until you hit higher rate)
Class 4 NIC won't kick in until your self employed earnings exceed £8,060 (9%)

 

[cyberpedz]

Thanks all just out of interest at what point would I need to be saving 40%?

 

[Scalloway]

Higher rate tax rate comes in at £33,500 of taxable income. You only pay 40% tax on income over that sum.