Paying Myself (Sole Trader)

[crispIT]

Hello all,

I've just spent an hour or two googling and searching the forum but am struggling to find an answer or make sense of how I'd pay myself as a Sole Trader.

I'm a student and work various part-time / temporary jobs during the holidays, etc. I'm also registered as self-employed as I provide website design and hosting plus IT services to small companies.

I understand that the profit from self employment is added to all my other employee income and anything above my personal allowance is taxed - does this therefore mean the profit is mine and I can simply take it from the business account?

And can I pay myself part way through my financial year (although I don't know what my final profit will be at the end)?

Or should I be paying myself via PAYE?

If it makes any difference I'd be paying myself on an irregular basis both in amount and frequency depending on the value and nature of the work I'm doing.

I'm also registered for small earnings exception on NI as my total profit from self employment is expected to stay under the threshold.

And what happens on profits that I want to keep in the business, as it seems I'd get taxed on those too...correct?

Any advice greatly appreciated!

Chris.

[Princess1983]

Can't help you I'm afraid as I'm literally trying to figure it all our myself. However, I can make a suggestion. Our local tax office has a tax officer that will explain everything you need to know in detail and its a free service! Maybe your best bet maybe to contact your tax office and ask them if they have time to explain business matters/pay issues with you? Plus you have a few questions they will be able to help answer in more detail.

Just a thought.

Princess

[MK Printing]

I used to work fulltime and also have a small imcome from a promotions business.

The way it works is that whatever profit the business makes is your to keep. You need to have at the end of the tax year your P60 and your accounts from your small business. You need to call up the Inland Revenue in advance i.e. now and inform them that you rum a sole trader organisation and to send those pages for your tax return.

You then fillout your employment pages and self employment pages in your return. If your business makes less than £15k net then all you need to put in is gross, costs and net for this section.

Always keep accurate records of everything as the tax people may call at any time and you have to have it all sorted. I can send you the tax software I have developed, it is just in Excell but it does me right like.

James Smith on here will probably be able to help you more than I, but the answer to your question is the money your business generates in net value is your, less tax.

Matt

[alanogden]

When you're a sole trader 'you are your business' so any profit the business makes is your personal income, subject to tax etc.. etc..

[James Smith]

As per the last two posters It really simple really.

You earn some money, keep good records of what you have earned and spent and fll a tax retuern in. You then pay any tax after you have completed your tax return.

What you do with the money is in the mean time is up to you. You may see things about directors PAYE and dividends - this is nothing to do with being a sole trader, it is to do with being a limited company which is a lot more complex.

I personally wouldn’t bother with the tax office - have a good look at the business link website they have a good overview about what you need to do here:

http://www.businesslink.gov.uk/bdotg/action/layer?r.l2=1073859209&r.l1=1073858808&r.s=tl&topicId=1073867993

It’s written in easy to understand language.

Hope that helps,

Regards,