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business tax

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v3rob11 | 21:07 Fri 21st Mar 2008 | Business
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hi, i am in process of buying a shop. i'm going to be a sole trader paying myself a wage.

what is the best way to pay less tax?

shall i pay myself less wages and let the shop take more profit or the other way around?

how much tax do i pay on my annual shop net profits??

pls help me....
happy easter
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It won't make any difference. The wage you pay yourself is just an advance on the annual profits of the business, it's not a deductible expense. As for how much tax you'll pay, it'll be 20% unless you get into teh higher rate bracket. Don't forget the national insurance, though; Class 2 and Class 4...
Yes, the only way to 'let the shop take more profit' is to establish a limited company for the shop with you (and at least one other) as Directors. Then you can play tunes on deciding where the money sits - you either pay yourselves as employees or leave the money in the shop, some of which you can extract as dividends.
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Not quite Roaldo.
If you pay yourself as a Director of the LtdCo, you lose about 43% - 22% PAYE tax, 10% employees NI, 11% employers' NI.
If you pay out as dividends, the business loses 20% paid as corporation tax on the profits, then nothing more to pay in income tax if you keep your earnings below the higher rate tax threshold.
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thanks for your answers people, it's funny it is currently a limited company and i'm reverting back to sole trader. thanks.
I'm no expert on tax implications,but have you thought about setting up a company pension scheme and putting a percentage of the profits into that.
from day one establish your gross profit at a lesser % value than it is,

like most sole traders this is done by trousering a fair amount of cash in advance of book-keeping,

the tax man knows this is what happens and providing you chuck a bit of tax over without taking the p!$$ such as running a ferrari and making �10 per week all will be well!
I wonder which minimum security prison helpmetoo writes from? Sure, you can get away with tax evasion for years, if you're lucky . But you'll get caught eventually - and besides, what's wrong with paying your fair whack? People who wink at tax cheats don't usually have the same attitude to benefit fraud but what's the difference?

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