Why bother

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ali
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Why bother

Post by ali » Wed Mar 14, 2012 11:01 pm

About 8 months ago I decided to set up a second business selling used bicycles in Edinburgh and called it Soul Cycles.
The shop has taken off supremely and I couldn't have predicted such a turnover in a short space of time.
I'm now on the borderline of having to register for VAT but as I buy all the bikes in from jo public I don't pay VAT on them yet am expected to pay vat on the profit.
So in total the tax is like this
I have to pay HMRC
1-Employee tax Basically match what the employee pays in tax themselves and NI contribution.
2-VAT on the profits I make
3 Taxed on company profits at end of each year.
If there is any £££ left over for dividends then I have to pay tax on that too.
How the hell is anyone owning a small business expected to make a living
Hardly seems worth all the hassle to me
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Post by Chas » Thu Mar 15, 2012 12:52 am

I can only sympathise with that one. The tax take in this country is horrendous. When you look at every £1 you earn, whether that's gross salary or business income, the amount that goes in tax is unsustainable, probably around 60% but more in the case of high earners.

Why is it so high..? It's not just the taxes that are taken off before you get the 'net' in your hand, it's also the taxes that are charged on what you spend.

The gross salary most people earn has already suffered 13% employers NIC before it hits their top line. Then it gets another 12% employees NIC and up to 50% income tax at the top level (although income tax starts at 20%, of course). At the lower tax rate, for £1 of gross salary the government is taking 45p in total; 32p from you and 13p from your employer.

If you spend the 68p you are receiving as net pay, 20% of that will go in VAT, which is another 14p. That makes nearly 60p in every £1 of gross salary going back to the treasury. For the highest earners it would be 73p for each £1 of gross salary spent going back to the government.

Those are pretty general examples, and don't take allowances etc. into account. But it's still waaaaaay too much. The only consolation is that we are all in the same boat... except, of course, those who are well-enough off to avoid many of the taxes by employing schemes set up for that purpose. Apparently that includes several high earners in HMRC :!:

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Post by joylove » Thu Mar 15, 2012 10:15 am

What annoys me about the taxes being so high, is that I barely agree with a single way in which it is spent.

We have some excellent causes and hundreds of disgraceful wastes, and the balance is all wrong.
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Re: Why bother

Post by Broch » Thu Mar 15, 2012 10:24 am

ali-bumble wrote: Hardly seems worth all the hassle to me
'Employ' the wife who can then use her tax allowance.
One way to beat the tax man :wink:


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Bruce M
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Post by Bruce M » Thu Mar 15, 2012 1:32 pm

That's pretty rough, especially if you can't justify a clever accountant to work the system in your favour. If you/your wife are paid a wage (as above, lots of tradesmen seem to have wives that "do the books") , perhaps you could set up a bike-to-work scheme and supply yourself with a £5K bike (from stock) paid from pre-tax earnings. Always the risk it gets stolen in the 1st week you have it, of course.

As for sourcing the bikes. Have you tried the police lost property auctions? They sell them in big batches I think. Or look into buying batches of catalogue/retailer returns (often minor or zero faults).
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ali
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Post by ali » Fri Mar 16, 2012 10:48 pm

Thanks Chaps. I honestly don't mind paying tax and in my main property maintenance business that is my monday to friday job I pay the proper amounts of tax there. The bike shop is more like a pension fund as I don't have one and it would be nice to make a few £££ from it without it all going back to the treasury.
I would employ Mrs Ali to do the books but as she gets the child tax credits. What I pay her would be taken away by the tax credits
Seems they have us all over a barrel whether self employed or employed.

Is it Finland or Norway that just taxes everybody 60% at source and there are no other taxes? No road tax , no council tax etc. You pay one lot and that is that.
Seems a much fairer way top me as it's all out in the open. No hidden taxes anywhere
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Post by joylove » Sat Mar 17, 2012 2:53 pm

ali-bumble wrote:Thanks Chaps. I honestly don't mind paying tax and in my main property maintenance business that is my monday to friday job I pay the proper amounts of tax there. The bike shop is more like a pension fund as I don't have one and it would be nice to make a few £££ from it without it all going back to the treasury.
I would employ Mrs Ali to do the books but as she gets the child tax credits. What I pay her would be taken away by the tax credits
Seems they have us all over a barrel whether self employed or employed.

Is it Finland or Norway that just taxes everybody 60% at source and there are no other taxes? No road tax , no council tax etc. You pay one lot and that is that.
Seems a much fairer way top me as it's all out in the open. No hidden taxes anywhere
IT's not really surprising that small businesses struggle here, the Govt and the local council make the paperwork overheads so huge that only massive companies can afford to deal with it. That's partly why every high street has exactly the same damn shops in it.
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