Join Date: Nov 2007
Location: UK
Thanked: 82 Times in 71 Posts
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depends how you structure yourself.
Are you a sole trader or a limited company is the first question.
If you are a limited company director then there are 4 kinds of tax. Corporation tax on profit the company makes, paye tax if you pay yourself paye, tax on profit dividend (only 10%) and capital gains.
Most directors pay themselves on PAYE up to the personal limit and then take advantage of dividend and capital gains allowance
Accumulated funds could be withdrawn on a sale of shares with the benefit of capital gains tax (CGT) business taper relief which reduces the effective CGT rate to 10% once shares have been held for two years. Make sure you use your 7k (roughly) capital gains every year.
If profits are left in the company these are subject to Corporation Tax (0% on the first £10,000 and then 19% on profits up to £300,000). Corporation tax has to be paid to the tax man nine months after the accounting year end of the company.
If you are a sole trader then it's a lot simpler but if you make good profit a lot more expensive
first thing as a sole trader (or partnership)
Register as self employed
This is quick and easy – but you must remember to do it by the end of your third month of self-employment, otherwise you could be fined.
When you come to fill out your tax return you will also be taxed on any other income you have, such as any salary from paid jobs you have, interest from any savings and investments, rental income form property you own and gains by disposing of assets.
In the current 2007-08 tax year, you have £5,225 as a personal allowance: you can earn this without paying any tax. After that you pay either 10%, 22% or 40% tax on your earnings depending on how much they are.
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March 2010
