general idea of end of year taxes

[ehhwhat]

Hi

Im 6months in to my first contracting experience, limited company set up. I have an online accountant who give me a monthly running total of how much i should keep in my bank for future taxes, this gets updated as i inform them of income, dividends, expenses etc

6month in and the figure is around £14k, so i believe it will be around £28k by the end of the year. Does this figure sound right? I speak to friends in the IT industry on similar day rates (around £325) and they reckon it should be about £15k

Just wondering

Thanks for any information.

[stek]

Depends how much you've been drawing.

Who's doing the PAYE and dividend vouchers?

[LisaContractorUmbrella]

Do you fall inside or outside of IR35?

[Martin at NixonWilliams]

It is difficult to say without seeing what is on the system however there is a possibility this figure includes VAT, which is not a tax on your company's profits. You effectively collect VAT on behalf of HMRC and pay this over to them quarterly.

The majority of the remaining tax is likely to be corporation tax. Broadly speaking, this is 20% of your income less expenses, and so you should be able to work this back to your company's profit and loss.

[stek]

But if he's six months into it, he should paid at least one VAT payment.

[Martin at NixonWilliams]

True but on £325 per day the VAT payable on the second quarter alone will be towards £4k..

[jmo21]

Ok, lets work it out, it's not difficult.

£325/day for say 46 weeks (assuming working the full year, but time off hols, sick days)

total = £74750 billed.

If you had zero expenses, your corp tax would be: £14950 (20% of above)

Assuming say £10,000 salary, £1000 for an accountant.

74,750 - 10,000 - 1000 = 63,750
So corp tax of: £12,750

Very rough ballpark there, and in line with what your friends suggest. Any other expenses will bring the number down more.

As others have said, it must be VAT

[TheFaQQer]

How many days are you going to be invoicing? Is it comparable to the past six months? Have you incurred more expense in the past six months than you will in the next?

[northernladuk]

People knock the SJD spreadsheet but it does show exactly this in great detail. Can play with the numbers to see how it is affected as well.

[Alan @ BroomeAffinity]

general idea of end of year taxes

Don't forget your personal tax. If you've withdrawn all of your profits there'll be a decent whack due. About £6-7k based on JMO21's example.