Reply to: general idea of end of year taxes

[ehhwhat]

cheers for all the info guys, been helpful.

Some more details if poeple want to know

I withdraw as a dividend anything left in my account above the amount they ask me to leave in there for future taxes, i also take out expenses, mileage and pension and a weekly salary of £190.

I am outside IR35

Typical number of days invoiced will be 19-20, ive had quite a few holidays, one month was 15days another 24days etc

I am on the flat rate VAT scheme as an IT company so i dont know if this will make any difference.

When i say online accountants i just mean that i submit all my expenses through their website and most contact is done this way as well, im sure they are all qualified.

I will also contact my accountant today and ask for a breakdown and to check that nothing is out of the ordinary.

[jamesbrown]

Wonder what people have in their mind when they say "an online accountant". It's not a different breed of part cyborgs hooked up to the web...typically just a firm who tend to use email and cloud software as a preference over regular meetings/phone calls and posting stuff.

Yeah, FreeAgent should be able to help with most of the OP...but it's software, so data out is only as good as data in.

Wonder if the OP will come back to this thread...the above suggestions look plausible to me, though wondered if perhaps it was inside IR35 rather than a VAT issue? Who knows...

I wasn't suggesting the OP needs Free Agent, I was just making a snide remark

Anyway, it could be VAT or it could be a deemed payment, but neither make an awful lot of sense to me (VAT is paid quarterly and a deemed payment is presumably paid monthly in the context of RTI?). Perhaps the OP has been feeding their online cyborg the wrong info.

[Maslins]

Possibly, I have no experience of such a practice. However, they presumably have qualified accountants available on the phone (if not a personal accountant). Otherwise, it's just ~ Free Agent (which might do a better job, incidentally ).

Wonder what people have in their mind when they say "an online accountant". It's not a different breed of part cyborgs hooked up to the web...typically just a firm who tend to use email and cloud software as a preference over regular meetings/phone calls and posting stuff.

Yeah, FreeAgent should be able to help with most of the OP...but it's software, so data out is only as good as data in.

Wonder if the OP will come back to this thread...the above suggestions look plausible to me, though wondered if perhaps it was inside IR35 rather than a VAT issue? Who knows...

[jamesbrown]

Possibly a good example of the failings of an online accountant?

Possibly, I have no experience of such a practice. However, they presumably have qualified accountants available on the phone (if not a personal accountant). Otherwise, it's just ~ Free Agent (which might do a better job, incidentally ).

[Alan @ BroomeAffinity]

It's kinda odd that you'd ask this question of us before asking your accountant though).

Possibly a good example of the failings of an online accountant?

[Alan @ BroomeAffinity]

Of course my example does not show him withdrawing divvies.

I knew that. Which is why I helped you out. :-)

[jamesbrown]

Given your reference to dividends (assume outside IR35) and a day rate of £325, it's very difficult to arrive at a figure close to £28k, even assuming you work most weeks and this includes both company and personal taxes where all distributable profit is divvied out. It's kinda odd that you'd ask this question of us before asking your accountant though. Get them to break down the estimate for you, which may include a healthy margin for error (or they're projecting £14k as your year end liability, but that wouldn't make a lot of sense either).

[Alan @ BroomeAffinity]

general idea of end of year taxes

Don't forget your personal tax. If you've withdrawn all of your profits there'll be a decent whack due. About £6-7k based on JMO21's example.

[northernladuk]

People knock the SJD spreadsheet but it does show exactly this in great detail. Can play with the numbers to see how it is affected as well.

[TheFaQQer]

How many days are you going to be invoicing? Is it comparable to the past six months? Have you incurred more expense in the past six months than you will in the next?

[jmo21]

Ok, lets work it out, it's not difficult.

£325/day for say 46 weeks (assuming working the full year, but time off hols, sick days)

total = £74750 billed.

If you had zero expenses, your corp tax would be: £14950 (20% of above)

Assuming say £10,000 salary, £1000 for an accountant.

74,750 - 10,000 - 1000 = 63,750
So corp tax of: £12,750

Very rough ballpark there, and in line with what your friends suggest. Any other expenses will bring the number down more.

As others have said, it must be VAT

[Martin at NixonWilliams]

True but on £325 per day the VAT payable on the second quarter alone will be towards £4k..

[stek]

But if he's six months into it, he should paid at least one VAT payment.

[Martin at NixonWilliams]

It is difficult to say without seeing what is on the system however there is a possibility this figure includes VAT, which is not a tax on your company's profits. You effectively collect VAT on behalf of HMRC and pay this over to them quarterly.

The majority of the remaining tax is likely to be corporation tax. Broadly speaking, this is 20% of your income less expenses, and so you should be able to work this back to your company's profit and loss.

[LisaContractorUmbrella]

Do you fall inside or outside of IR35?