Originally posted by boxingbantz
View Post
- Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
- Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!
Reply to: Tax and expenses (outside of IR35)
Collapse
You are not logged in or you do not have permission to access this page. This could be due to one of several reasons:
- You are not logged in. If you are already registered, fill in the form below to log in, or follow the "Sign Up" link to register a new account.
- You may not have sufficient privileges to access this page. Are you trying to edit someone else's post, access administrative features or some other privileged system?
- If you are trying to post, the administrator may have disabled your account, or it may be awaiting activation.
Logging in...
Previously on "Tax and expenses (outside of IR35)"
Collapse
-
-
Originally posted by boxingbantz View PostSay, for arguments sake, I earnt £5000 (before tax) and submitted £500 of expenses every month - is this, in effect, £500 off of the tax I would be paying HRMC?
Your company makes an income of £5,000 - £500 expenses = £4,500 profit. The company then pays £900 (20%) corporation tax on the profit leaving £3,600 which it pays to you as a dividend. It also pays you £500 to reimburse the expenses that you claimed from the company. You get £4,100 in your pocket.
So by claiming expenses of £500, you have reduced your corporation tax bill by 20% of £500 which is £100. If you didn't claim the £500 in expenses then you would get £4,000 in your pocket.
The bottom line is that if your company incurs an expense then 80% of that comes out of your pocket and 20% of it comes out of money that would otherwise be paid to HMRC.
That's a simplistic view of it. If you are a higher rate tax payer or IR35 caught then the percentage is higher because you are paying more tax.
If you are VAT registered and not on the flat rate scheme then you can claim back the 20% VAT (if VAT applies and it doesn't apply to things like train travel).
However, if you are on the VAT FRS and you make a capital purchase of >£2,000 then you can claim the VAT back.
Leave a comment:
-
The OP is possibly making the usual newbie mistake of mixing up corporate and personal monies.
For the company it is as Sockie says. If, however, you are talking abut reimbursing your own business expenditure, it's effectively tax free if (a) you've actually spent the money - don't ever claim expenses you haven't incurred - and (b) it's wholly and exclusively for business purposes. In effect reimbursed expenses are paid before calculating PAYE/NNICs due.
The smarter move is to get a company credit card and usse that for business expenditure, so you never have to fork out your own money in the first place.
There are some good guides around that cover all this. The one over there ---> ain't tooo shabby, the definitive one is the recently updated Guide to Freelancing on the PCG website www.pcg.org.uk and both SJD ACcounting and Nixon Williams have useful financial guides. Read them all - especially the PCG one - and discover how much you don't know
Leave a comment:
-
Best speak to your accountant if you're having trouble with this as its very basic. Tax is worked out at year end and is roughly 20% of the difference between profit and expenses.
e.g. bill 10000 in year, expenses are 2000. Tax is 20% of 8000.
Leave a comment:
-
Tax and expenses (outside of IR35)
Recently started my first contract which is outside IR35. I have an accountant etc but just wanted to ask a quick question on here, as I can't contact them today, regarding expenses.
When you submit an expense in every month with your accountant, with regards to your tax, how does this actually work?
Say, for arguments sake, I earnt £5000 (before tax) and submitted £500 of expenses every month - is this, in effect, £500 off of the tax I would be paying HRMC?
I know this is pretty basic and my accountant will tell me more but just so I have a rough idea how this actually works?Tags: None
- Home
- News & Features
- First Timers
- IR35 / S660 / BN66
- Employee Benefit Trusts
- Agency Workers Regulations
- MSC Legislation
- Limited Companies
- Dividends
- Umbrella Company
- VAT / Flat Rate VAT
- Job News & Guides
- Money News & Guides
- Guide to Contracts
- Successful Contracting
- Contracting Overseas
- Contractor Calculators
- MVL
- Contractor Expenses
Advertisers
Contractor Services
CUK News
- Streamline Your Retirement with iSIPP: A Solution for Contractor Pensions Sep 1 09:13
- Making the most of pension lump sums: overview for contractors Sep 1 08:36
- Umbrella company tribunal cases are opening up; are your wages subject to unlawful deductions, too? Aug 31 08:38
- Contractors, relabelling 'labour' as 'services' to appear 'fully contracted out' won't dupe IR35 inspectors Aug 31 08:30
- How often does HMRC check tax returns? Aug 30 08:27
- Work-life balance as an IT contractor: 5 top tips from a tech recruiter Aug 30 08:20
- Autumn Statement 2023 tipped to prioritise mental health, in a boost for UK workplaces Aug 29 08:33
- Final reminder for contractors to respond to the umbrella consultation (closing today) Aug 29 08:09
- Top 5 most in demand cyber security contract roles Aug 25 08:38
- Changes to the right to request flexible working are incoming, but how will contractors be affected? Aug 24 08:25
Leave a comment: