Taxing the self-employed

[anton pulisov]

Ok, when I worked in a grey and dull office building, my take home net salary was roughly 75% of my gross salary, so 25% tax.

Now, being self-employed and making roughly the same gross salary, the fuckers are looking for 46% of my profit.

Is it the same in the UK? Do the tax authorities punish people for daring not to work for The Man?

It nearly makes me want to shut my business down.

Or are there special tax tricks that companies use for their employees that self-employed people can also use?

[Rogin the Armchair fan]

Taxing the self-employed

In the UK, it would depend on whether your company was limited or not. If not, your profits are treated just the same as income from any other source for tax purposes. If limited, the company pays a much lower rate of tax on its profits, but any payments or dividends taken out of the company by you as a Director/Employee are, again, treated as your "income" and taxed at the same rate. So if your company made no profit (because its Director(s) were getting paid an equivalent amount to its trading profit) the overall tax position in that year would be broadly the same.

[Cavalry Trouser Tips]

Taxing the self-employed

You know that meal you took your missus for? She was a potential client, so it was a business expense.

Keep going and you'll pay no tax.

(in all seriousness, a good accountant is a must. My friend who is loaded and owns his own web hosting company probably pays less tax than me thanks to his 'Mr Loophole')

[Rogin the Armchair fan]

Taxing the self-employed

Oh God, yeah, what CTT said btw. I don't know a single self-employed person who isn't utterly morally bankrupt (but rolling in it) when it comes to tax write-offs. I've got a mate who's a plumber/decorator, who writes off his entire house's heating bills on the basis that he keeps his tools in the garage, his stock in the spare bedroom and uses his lounge as his office (ie that's where he sits with his laptop).

[sw2borshch]

Taxing the self-employed

Ah, the old Pay As You Earn vs Pay If You Like debate.

[anton pulisov]

Taxing the self-employed

The problem is that I translate documents. I basically have no costs. I ordered a laptop from the US when the dollar was $1.60 to the euro. But if they find out about that laptop they'll come looking for VAT and import tax on it, so I'm better off not trying to get the costs of it back.

There's a load of parking tickets littered in the car though.

[nefertiti]

Taxing the self-employed

Some of those could be deductible if occurred in the course of your work.

But anything that counts as continuing professional development would be deductible- it doesn't have to be directly incurred on a particular job. Books, which enable you to stay up-to-date in the areas in which you translate, for example. Anything which is associated with training. A lot of travel.

[garcia]

Taxing the self-employed

yeah, you should be able to write off a percentage of things like travel (excluding hotel bills), phone & internet bills, stationery costs... as for the laptop that should be 100% a business expense, as should be any associated equipment. as for VAT, it's pretty complicated and you should talk to an accountant about it.

[Ek weet nie]

Taxing the self-employed

You can't claim parking tickets.

Where do you do the translating? If it's at home you could claim a portion (usually about a third) of heating and electricity costs and telephone bills. Your mobile phone and internet costs could be fully claimed against your profit.

For stuff like entertaining clients and mileage/subsistence claims you need to keep a fair bit of documented back up in case you have a revenue audit.

The biggest legal tax avoidance scheme if you own your own company is to set up a company pension. Money goes straight to you tax free and it reduces your corporation tax bill significantly.

Things could be different in Netherlands though - it would be worth your while talking to an accountant for advice there. A small local practice would probably suit your needs best for the time being. Make sure that you check what you can file yourself and what you need to get an accountant to check for you.

[Max Payne]

Taxing the self-employed

Moving to OZ this week and will start anew over there with an accountant to help. Did my own books in UK and basically just got into the habit of putting aside 30%.

Certain posters are right about "business expenses" meals etc. And don't forget the car. Often a good way to chip a bit of tax off.

[Ek weet nie]

Taxing the self-employed

You can get killed in BIK if you're not careful with the car.

[Caliban]

Taxing the self-employed

I need to get more savvy. Do you think I could claim my Derren Brown tickets as a research expense?

[Logan Mountstuart]

Taxing the self-employed

Ok, when I worked in a grey and dull office building, my take home net salary was roughly 75% of my gross salary, so 25% tax.

Are you sure about that, Bryan. I'm not sure of the exact figures anymore, but I pay about 34% on my first E25000 and then around 42% on anything over that.

The tax free allowance is so negligible that it's hardly worth mentioning.

A Dutch Lorry driver pays a higher proportion of tax on a sizeable bit of his income than a Britsh millionaire does. Still at least the motorway verges are clean here and they don't go ape if the lid is slighty open on your wheely bin.

[anton pulisov]

Taxing the self-employed

You can't claim parking tickets.

Not the fine type of ticket, but a ticket purchased from a parking meter. You can in Holland, I think.

Are you sure about that, Bryan. I'm not sure of the exact figures anymore, but I pay about 34% on my first E25000 and then around 42% on anything over that.

I don't know what my last boss did to achieve it, but what came into my bank account every month was 75% of what my gross salary was. Something to do with koffiegeld and all sorts of other accounting magic that these companies seem to carry out.

[Tactical Genius]

Taxing the self-employed

In the UK if you have a limited company you can give yourself a relatively low annual wage and the top it up with Dividends which attracts a lower percentage of TAX.

The added advantage is that if the CSA come after you, you don't get a crippling child maintenance bill as my ex found out.
See an accountant cos if you do this wrong, you could end up with a massive bill or even Jail. Most governments don't look kindly on the working class trying to skank them on Tax.

There are wars to pay for after all.