Sole Trader - Pay

[SDLBiz]

Hello,

I have been wondering this for a while, before I start up my business. If I am a sole trader, I am paying myself. However, I am assuming I pay myself a variable cost which depends on the profit however how does this get taxed and how do I pay national insurance contributions etc.

Thank you,
Sam Lowe

 

[ryedale]

As a sole trader, you can take whatever you want out of the business, it goes as drawings and is not included as an expense

Your tax owing is simply calculated on your profit minus personal tax allowance minus allowable business expenses

More here

http://www.orchidbookkeeping.co.uk/drawings.html

 

[SDLBiz]

Thank you very much, you have helped a ton! It sounds easier than I originally thought.

 

[ryedale]

You're welcome.
With regard to NI - you pay fixed class 2 contributions regardless of profit and you pay Class 4 NI contributions depending on the profit detailed above

See here

http://www.taxdonut.co.uk/tax/national-insurance

 

[Jeremiah@RHJ Accountants]

This may help

Basic Facts For 2014)/15

The tax free allowance is £10,000 - so tax is not payable on the first £10,000 of income.

If your taxable income exceeds £100,000 this allowance is gradually withdrawn.

The next £31,865 of income is taxed at 20% - any income above this (i.e. £41,865) is taxed at 40% up to £150,000 with income over £150,000 taxed at 45%.

As a self employed person Class 2 NIC is payable at the flat rate of £2.75 per week this is usually paid by monthly direct debit. If your self-employment income is below £5,885, Class 2 NIC is not payable.

Class 4 NIC is also payable at the rate of 9% on self employed profits between £7,956 and £41,865 and at 2% on profits in excess of £41,865

 

[Jeremiah@RHJ Accountants]

Also not too sound biased (actually yes very biased) I would advise you go an see an accountant and get some tax planning advice as it is best to start you company off on the right foot.

I have seen so many business fail to do this and engage an accountant when it is too late to change this come end of tax year or company year. Resulting in fines and penalties or missed tax savings.

Most offer a free consultation so what is the harm in receiving the advice?

 

[Jeremiah@RHJ Accountants]

Plus is sole trader or limited best for you ?

http://www.rhjaccountants.com/accountancy-faqs/sole-trader-or-limited.php