Do we all pay 40% tax ?

[Evans Electric]

Am I losing it ?  Someone  check my maths please. 

Scenario :  

I do a job for a builder , I get Forumite Andy ,say,  to help me ...we want £1000  each from the job .

Materials cost £1000  incld. VAT  .  I invoice builder for £3000  showing labour @ £2000 for CIS

Builder deducts £400                                                                                                                               HMRC  get £400 income tax

I pay Andy £800  with a CIS docket to show tax is paid.

I pay for the materials  £833.33                                                                                                         HMRC get  £166.70    in VAT

I then have to buy four tyres for my private car + a washing M/c  £800                           HMRC get  £ 160.00   in VAT

Andy also has to spend £800  on  non- business goods                                                          HMRC get £  160.00  in VAT  

OK  I earned £800 

Andy earned £800

HMRC earned  £886.70    without leaving their office.  

 

[Murdoch]

Not quite sure if your numbers are correct but there is no doubt that the UK has a tax system dependent on indirect taxation rather than direct taxation ...

if VAT was 5% , direct taxation would be far higher

and don’t even think about taxation on vehicle fuel!

 

[ProDave]

The CIS tax paid is just a way for HMRC to get their tax quicker than waiting for you to file your tax return at the end of the year.  So is "cost neutral" to you apart from not having that £200 to play with for a few extra months.

But you are right, having been taxed 20% on your earnings, you are then taxed 20% on almost everything you buy new as well.  Though if those "new" things are tools or work clothing, then their cost reduces your profit so reduces the tax you pay, so in effect you get your 20% VAT back in the form of less tax paid.

Don't forget the first £13K or so (I would have to check the current years figures) that you earn is tax free, so for low (part time) earners like me, the tax burden on earnings is lower. 

 

[Evans Electric]

£13K or so (I would have to check the current years figures) that you earn is tax free, so for low (part time) earners like me, the tax burden on earnings is lower. 

I think that is the figure   as I'm also part time low earner . 

I did specify the spending was on non - business stuff .  

Something that occurred a while back made me think .    I was called out to a minor job , did job , charged £50  ,  damaged the sidewall of my rear tyre somehow , called into my local garage , new tyre  , £50  .  

HMRC   £  8.34  in VAT 

Deke  nil  

 

[Murdoch]

Something that occurred a while back made me think .    I was called out to a minor job , did job , charged £50  ,  damaged the sidewall of my rear tyre somehow , called into my local garage , new tyre  , £50  .  

HMRC   £  8.34  in VAT 

Deke  nil  

I wouldn’t be looking at it like that. Monthly nett profit is what I look at the most

 

[ProDave]

I think that is the figure   as I'm also part time low earner . 

I did specify the spending was on non - business stuff .  

Something that occurred a while back made me think .    I was called out to a minor job , did job , charged £50  ,  damaged the sidewall of my rear tyre somehow , called into my local garage , new tyre  , £50  .  

HMRC   £  8.34  in VAT 

Deke  nil  

When you opt to charge business mileage at a fixed HMRC rate, then you personally take on and pay for the vehicle maintenance (that is how I operate)  the alternative is that the company owns the vehicle and you charge actual running costs to the business.  You need to work out what is best for you.

Think of all the other times like yesterday, I called in on the way home to connect a cooker. Took 5 minutes, charged £20 Travel expenses about £2 so £18 gross.  hmrc £3.60 me £14.40 and £2 in the pot to fuel and maintain the vehicle.

 

[Evans Electric]

I wouldn’t be looking at it like that. Monthly nett profit is what I look at the most

I was trying to make the point  that had I decided NOT to help them out ...(a)   I wouldn't have damaged a good tyre  and (b)   the HMRC  would not have profited from my ill fortune .     

 

[Murdoch]

I was trying to make the point  that had I decided NOT to help them out ...(a)   I wouldn't have damaged a good tyre  and (b)   the HMRC  would not have profited from my ill fortune .     

You could damage a tyre anytime .... and do you need to earn a living / pocket money