Living Costs

[aaclapham]

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One day I will get my head around this!!

Say I pack in my full time job and have no savings and I am earning 2k a month from AM but my running costs of the house, food, and clothes are 1.5k.

Can I offset all my bills against the business monthly, or as a sole trader do I have to wait until the I have declared my business profits at the end of the financial year and then I can have the profits minus tax to pay the household costs?

If the answer is the latter than I need to have a years savings before I can pack in my full time job!

... and no answers of I need an accountant. Once I get my head around the above question I will be fine

[ian]

Not 100% sure on the question, but....

You take your income as it comes (monthly, weekly etc)
You pay your bills as they come (monthly, quarterly etc)
You pay Class 2 NI every week (£2.20)

You complete a self assessment return at the end of the year, bend over and pay your taxes on the profits.

You shouldn't need to have a years savings as you can pay this months bills from this months income, but it would help in case things go wrong. Keep a log of your profits and save the amount you'll have to pay in taxes come the end of the year.

Have a look at Setting up as a Sole Trader and use an income tax calculator to see how much tax you'll need to pay out on a 2k a month income

[Barry]

Here is a rough key as to what tax you would pay:-

Free UK PAYE Income Tax calculator 2008. Updated for 2008 / 2009 budget.

You cannot claim for general day to day food or clothing (unless its safety clothing) as a business expense. You can also only claim a proportion of you bills if you are working from home.

Ta

[aaclapham]

Here is a rough key as to what tax you would pay:-

Free UK PAYE Income Tax calculator 2008. Updated for 2008 / 2009 budget.

You cannot claim for general day to day food or clothing (unless its safety clothing) as a business expense. You can also only claim a proportion of you bills if you are working from home.

Ta

So therefore you do need to have some savings to live off for the first year.

[Barry]

It really depend on what your lifestyle is.

Its more than minimum wage thats for sure.

Ta

[ash]

How are you planning on setting up?

As a limited co? and pay yourself PAYE? or as a sole trader?

As a sole trader your tax bill would be due in the January after your first tax year.

I.e if you start up on the 6th April 2008 you won't HAVE to pay your first tax bill until January 2010 as thats the latest you can do your self assesment tax return for 6/4/08 - 5/4/09.

[aaclapham]

I am already a Sole Trader since dec 2005, but trying to plan ahead for when I can take the plunge into full time AM.

[Barry]

If you are a sole trader then you can just spend the money out of your account as if it was your personal account - whenever you like or as it comes in. You only have to save enough in your account to pay for your tax.

I know how you feel though - its a very big jump quitting full time employment and going it on your own. Its a time thats full of questions and what ifs and buts.

If I were you I would have a little in savings packed away before making the jump I know I did. Before I went full time I had the equivalent of 5 month wages in the bank and I waited until my affiliate income was more than my job.

That saying I was also sick of my job - so that helped the jump.

Anyway good luck.

Ta