The Safety Net - What Do You Pay Tax On

Wednesday May 25, 2016

Dear Nettie @ The Safety Net

I have been referred to you by one of your clients who is already working with RIFT Accounting.

I have a friend who has been giving me some business advice but the more I talk to others, the less I trust what he tells me. I have subsequently discovered that although my friend is self employed, he does not have a limited company like I do.

The thing that is worrying me the most is that he has told me that I only have to pay tax on the money left in my bank account, and I’m now not sure that’s correct, can you help me? I am concerned now about my tax.

Thanks James

Dear James

Thank you for your email, and I think your gut instinct is correct here, and although I am sure your friend means well, the advice they are giving you is totally incorrect.

Tax is paid on the profits of the company. Although your business bank account is linked to your company and would be reconciled as part of the annual accounts check, it does not drive the amount of tax you pay.

You don’t say how long you have been trading for, but I am guessing that from your questions, you have not yet completed a full year, and have not yet appointed an accountant. (If this is not the case, please come back to me as soon as possible).

What I would suggest we do next is book some time for a telephone chat as soon as possible, so that we can help you with any further questions you may have and help you to get some systems set up with regards to tax, advice and business planning generally.

I often say to clients how important it is to ‘surround yourself with the right people and advice’, and I can guarantee it is always cheaper to do so in the long run.

Would you like to email me on abunn@riftgroup.com or call on 01233 653006 to arrange a convenient time for a chat.

Would really love to help, learn about your business and your future plans, and look forward to hearing from you

Kind regards Nettie

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