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An Accountant's Guide to Company Registration, VAT, Tax and Employment

Discussion in 'Money, Accounts & Finance' started by ladyvgw, Sep 12, 2010.

  1. QualityControl

    QualityControl

    Joined:
    Jan 18, 2011
    Messages:
    33
    Good Morning,

    Thank you so much for this information. Very useful.

    Quality Control
  2. Thepodfather

    Thepodfather

    Joined:
    Feb 6, 2008
    Messages:
    178
    Hi there,
    I am VAT registered and have started doing business in Europe. The buyers I have are all VAT registered in Europe and do not need to pay the VAT. What do I need to supply for my tax and quarterly VAT records. I have been told I need to get a copy of their VAT sheet, what else do I need to do thanks for the help
  3. kuniva101

    kuniva101

    Joined:
    Sep 19, 2011
    Messages:
    15
    I love you so much, I've been meaning to do this but couldn't be bothered sourcing the info myself. Thanks for making by the time to create this.
  4. GMMA

    GMMA

    Joined:
    Jan 5, 2012
    Messages:
    11
    Excellent guide, thanks Vicky :) . I have one question, wonder if you can help please.
    Income Tax – 20% on profits up to £37,400
    National Insurance – Class 2 is currently £2.40 per week (paid monthly) AND Class 4 which is 8% on profits between £5,715 and £43,875
    Corporation Tax - 21% on profits

    so if i make a £100 profit, will i be paying £58.6 (calculations below) as TAX or just £20 (20% of profit)?

    Profit £100
    Income Tax - @ 20% - £20
    NI CLASS 2 - 2.4/week - £9.6
    NI CLASS 4 - @ 8% - £8
    Corporation Tax - @ 21% - £21
    Total Tax - £58.6

    New to this so please excuse naivety. Am I trying to complicate it too much?

    - Mushtaq
  5. RWA

    RWA

    Joined:
    Dec 21, 2005
    Messages:
    2,989
    Ignore the Class 4 NI contributions as you would add that up over the course of the tax year, in your example you won't be paying Class 4 NI.

    If you are a sole trader then Corporation Tax won't affect you.

    You won't pay income tax in that example either.

    Bottom line, speak to an accountant.
  6. GMMA

    GMMA

    Joined:
    Jan 5, 2012
    Messages:
    11
    Thanks RWA. A bit early to speak to an accountant as i dont have a business yet. So I am just trying to understand some basics and how it works.
  7. Zurrgle

    Zurrgle

    Joined:
    Sep 14, 2011
    Messages:
    12
    Hello. I'm 19 and just starting to sell stuff on eBay and will soon get my own eStore. I don't work and this will be my only form of income. Do I need to register as a company still? Even if I am only trading very small amounts to begin with.

    edit: About £200 worth of stock
  8. RWA

    RWA

    Joined:
    Dec 21, 2005
    Messages:
    2,989
    Hi Zurrgle,

    You don't have to set up a company, but you will have to tell HMRC that you're self employed. Check out the link below:

    http://www.hmrc.gov.uk/working/intro/selfemployed.htm
    Zurrgle likes this.
  9. Zurrgle

    Zurrgle

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    Sep 14, 2011
    Messages:
    12
    Thanks a lot RWA.
  10. Shakespeare

    Shakespeare

    Joined:
    Feb 15, 2012
    Messages:
    41
    Great thread! Some really good information here.

    Although so many of the examples here are for sole traders and not limited companies and I have a question or two, if I may:

    To inform HMRC about your status as self employed, that is only for those who are registered as a sole trader, right? So if I'm employed as a director in my own limited company, I would only have to register for self assessment?

    As a limited company, I will only pay corporation tax and national insurance?
    I'm not a British citizen, but I still have to register my company for National insurance and pay that "fee" as I will be employed by the company? I will not take out any salary though...

    So in the end when I do my own accounting I will only use a spreadsheet for my income, a spreadsheet for my costs (pretty straight forward - but it's the next bit-->) and I will have to do the final account for the TAX office and annual return? I really have no idea about that , but as many people on the forum have pointed out - it's a hassle to do it yourself and I should hire an account when I have to do it at the end of the year....? I will not register for VAT, so from what I understand I will not have to do anything else with my books other than holding a good overview over all my costs and income and I will then do the annual return at the end of the TAX period?

    Do I get the information by HMRC when I have to do this or will I have to remember the dates this should be done and thus send it in (online)?

    Hmm.. that was more than one or two questions... I will do 20 push-ups as a punishment!!

    Thanks guys :)
  11. Godfrey77

    Godfrey77

    Joined:
    Apr 4, 2012
    Messages:
    9
    Regarding Income Tax and Corporation tax - you obviously don't pay both so how will I know which to pay?

    Is it Income Tax for not VAT compnay and corporation tax for a VAT registered company?

    Sorry for the stupid question!
  12. ladyvgw

    ladyvgw

    Joined:
    Aug 14, 2010
    Messages:
    5,097
    Hi,

    Income tax is the tax you pay on your wages.
    Corporation is the tax you pay on your company profits

    So if you own the company and draw a wage then you will pay both.
    M.Abbas likes this.
  13. Godfrey77

    Godfrey77

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    Apr 4, 2012
    Messages:
    9
    Thank you - that's a great help.
    ladyvgw likes this.
  14. MSFB

    MSFB

    Joined:
    Dec 13, 2010
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    2,248
    when you say company profits, what if they are all reinvested almost immediately? or you're planning to reinvest everything. does it still get taxed?

    would this depend on ow you report your accounts each year?
  15. ladyvgw

    ladyvgw

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    It depends what you are investing the profit in?
  16. MSFB

    MSFB

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    new stock mainly
  17. Andy Rodrigues

    Andy Rodrigues

    Joined:
    Apr 9, 2012
    Messages:
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    there are so many people selling on ebay. What is the revenue threshold for them to have to register as an individual trader to HMRC?
    Some people only sell £50 pounds worth or items annually others for £1,000 and others for more but surely there sure be a threshold because not everyone who sells on ebay, registers as a sole trader
  18. ladyvgw

    ladyvgw

    Joined:
    Aug 14, 2010
    Messages:
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    If you invest it in stock it doesnt really make any difference to your profit and therefore how much tax you pay. By adding more stock you reduce profit by the cost of the purchase but your closing stock level will be higher thus raising your profit back to where it was. Hope that makes sense :)
  19. UneeQ

    UneeQ

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    May 8, 2012
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    Priceless information this, thanks again.
  20. Godfrey77

    Godfrey77

    Joined:
    Apr 4, 2012
    Messages:
    9
    Hi, I am just about to register as a sole trader but want to do a few final calcs to see if there is really any profit in our plan after all the tax implications:

    I have read the following useful info:

    • Income Tax and National Insurance rates for 2010/2011:

    Income Tax – 20% on profits up to £37,400, 40% between £37,400 and £150,000 and 50% over £150,000.
    National Insurance – Class 2 is currently £2.40 per week (paid monthly) AND Class 4 which is 8% on profits between £5,715 and £43,875 and 9% on profits over that.
    If you are running a Limited Company, your tax year will end on a date you specify and you will pay Corporation Tax on all profits the company makes. This must be paid 9 months and one day after your year end.

    • Corporation Tax Rates 2010:

    21% on all profits up to £300,000, 28% if profits are over this.
    Keep in mind that if you draw a salary, this will be liable to PAYE tax and National Insurance.

    If the Company is profitable, you can take dividends out of the taxed profit. Tax paid on this would depend on any employment income you earn!

    For example, if my company made a profit after the first year of trading of £10,000, are the following calcs correct?

    Corp Tax = 21% of 10,000 = £2100
    NI = £2.40 x 52 weeks = £124.80

    Therefore £10,000 - (£2100+124.80) = £7775.20. (net profit)

    If I then took this total as a wage or dividend, would the calc then be:

    £7775.20 x 20% (Income Tax) = £1555.04

    This then leaving me an actual net amount of £6220.16

    Is this correct?

    Thank you in advance for any help received. I just want to make sure there are no more costs (taxes) that will sting me later.
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