Self Assessment Tax

[jl2879]

I am a sole trader and have a small business for which my Accountant produces my Self Assessment charges. Can anyone please advise me on exactly what the Self Assessment tax is made up of, i.e. is it based purely on my net profit, and does that net profit take into account the weekly wage I transfer from my business account into my personal account? I keep meaning to ask my Accountant….

 

[ToYourInbox]

I am a sole trader and have a small business for which my Accountant produces my Self Assessment charges. Can anyone please advise me on exactly what the Self Assessment tax is made up of, i.e. is it based purely on my net profit, and does that net profit take into account the weekly wage I transfer from my business account into my personal account? I keep meaning to ask my Accountant….

If you are a Sole Trader wages aren't an allowable business expense. Your net profit is considered your income (wage) from the business.

The tax you pay via Self Assessment can come from various revenue streams - did they not provide you with a copy for your approval prior to submission?

 

[MyAccountantOnline]

I am a sole trader and have a small business for which my Accountant produces my Self Assessment charges. Can anyone please advise me on exactly what the Self Assessment tax is made up of, i.e. is it based purely on my net profit, and does that net profit take into account the weekly wage I transfer from my business account into my personal account? I keep meaning to ask my Accountant….

As a self employed person you will pay tax on your tax adjusted net profit and any other taxable income you have. You may also have some class 4 National Insurance to pay with the tax depending on your profits.

It does confuse a lot of people as they often incorrectly assume what they take out of the business (drawings) effects what tax they pay; it doesnt.

For most self employed people the profit shown in the profit and loss account is roughly what they pay tax on; the figure is adjusted to take into account expenses which arent allowed either partly or fully for tax eg depreciation or expenses which have a private element typically motor expenses, telephone calls etc and tax allowances which dont appear in the profit and loss account eg capital allowances, effectively a tax allowable version of depreciation.

Do ask your accountant how your tax is comprised. Hopefully they are working with you to make sure you are paying no more than is necessary.

 

[Swisaw]

You are not allowed to pay wages to yourself. You pay tax on your profit.

Your profit = All your earnings from your business and from others like money from selling something - (Your business allowable expenses + capital allowances)

 

[MyAccountantOnline]

You are not allowed to pay wages to yourself. ...

You can pay out what you want and call it whatever you want as a soletrader it's just that for tax purposes you cant claim your own wages, which are called drawings