contracting newbie...expenses

[northernladuk]

You also need to be aware of self assessment payments on account, as they can surprise people in the first year of trade.

Still surprise me even now!

[madge2014]

Looking at the questions on this thread and the fact you have an accountant I think it is time you actually went to go speak them and get them to do what you are paying for.

Yes I am seeing my accountant later this week but just though I would run it by the seasoned veterans on here first as I'm a tad confused.

Thanks in advance

As stated in previous post.

[madge2014]

If you're trying to figure out your personal tax liability, try this:

The higher rate limit is £41,865 if you have a normal tax code.

Deduct any gross income from that - so prior salary, gross bank interest, rental profit, foreign income etc.

Whatever is left is your remaining basic rate tax band, which is your max gross dividend value before tax kicks in. Divide by 10 and x by 9. That's your net dividend value, so the amount you can actually take in cash.

Any dividends in higher rates will be taxed at 25% of what you take, until you get over £100k, then it gets more complex.

So if you've had £10k so far, the calculation is:

£41,865 - £10,000 = £31,865/10*9 = £28,678.

If you're taking a dividend of say £2,000 now, that leaves £26,178 left up to 05/04/2015.

It can get a lot more complicated if you have pension contributions, donations, an odd tax code, benefits in kind etc. but it the above will give you a general view. You also need to be aware of self assessment payments on account, as they can surprise people in the first year of trade.

Thank you very much again for the details response. This is much clearer now