Confused about tax

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Alice92

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Feb 17, 2014
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Hi, im starting up as self employed. Ive just been looking into registering with the tax place (HMRC or something) and I find the info' a but vague.
Firstly, do I pay tax on my income separately from tax on my business profit? I plan on opening a business account and paying myself for the hours I work . Or do I pay tax on everything in one go? Reason I ask is that I thought that labour costs were a business expense ?
Also, although its unlikely that I will reach the VAT threshold, you never know, is it best to be prepared and up my prices by 20% incase I have to start paying it later on and dont want to increase my prices ?

super confused
do I also HAVE TO pay petrol expenses to myself at 45p per mile ?
 
Could an accountant help me sort all this out ? If so how much do they cost?
 
there are quite a few threads on here with the same sorts of questions and they were exactly the same sort of questions I had when I started out!


First, avoid using phrases like 'pay my self a wage, or an hourly rate'. I know what you mean....but in business /tax speak ...you are saying something totally different.:D

This is what I think you mean and my answer:

self employed:

money comes in to the business ( ie what clients pay you for treatments) - That's called turnover.
money goes out of the business ( by that I mean allowable business expenses )- That's called business costs.

At the end of your financial year turnover minus business costs is your profit.
You will pay tax on the proportion of the profit that is over your personal allowance ( I think that's £10,500.00 ).

So to answer your questions:

Millage: yes you should claim millage at 45p a mile as a 'business cost'. You can leave it in the business but on paper it will reduce your profit so you will pay less tax.

'Paying' your self.......what you mean is taking money out of the business, based on the treatments you do.
You can do that any time, BUT is is not an allowable business expense. You can't be your own employee!!!!
So you will just be taking some of the profit out of the business as cash. As it is part of your profits, you will already be due to pay tax on it at the end of the accounting year.

hope that helps a bit
 
Accountants are helpful they will answer all your questions. An accountant will also tell you how much money you should be putting aside each month to cover your tax bill. :)
I would get the accountant to do your tax records as they can claim back all sorts f things that you might never have thought of!!
Accountants charge all different amounts. But I was told by my accountant that the easier I make my books for him to understand... The less money he will charge me. I'm really good at doing my book keeping. However some people aren't. If you just take your accounts to them every year not all corresponded month by month etc and then your accountant has to sit through and sort everything out... They will charge you more. :)

Hope that helps


Nicola! Xxx
 

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