Hi guys, I hope I am in the right place to put this! I have started my own business a year ago as a handyman and all is well. Whilst talking to a book keeper I was working for she has advised me to keep a hold of receipts for materials I purchase and put them through for tax reasons but I cant seem to get my head around what she was saying. Currently I charge for my labour only and any materials I buy I just hand over the receipts and they reimburse me for them - pretty straight forward and some might say stupid as I see that tradesmen put a percentage on top to cover getting the materials from stores and diesel and so on. The reason I don't quote for materials on the spot, as they look at me with their devilish eyes, is because I don't know the prices off the top of my head and I feel as though I could shoot myself in the foot and undercharge myself and I am the type of person to swallow the cost than to think they may be thinking I might be ripping them off. Probably because I am new to the game I guess. Any ways back to the question, say I charge £100 labour per day and the tax man wants his bit of £20 for all my hard work that leaves me with £80 on top. If I include receipts of £50 so therefore the job that the tax man see's is now £150 he the now wants £30 tax off me, as the £50 of materials were to do the job does that £50 cancel the tax of £30 that I should pay as a business expense. I hope someone can shed some light on this for me and give me a little guidance. Regards Ian
Labour charge + what you charge for materials - actual cost of materials = your taxable profit. You won't pay 20% on that though as you will have other deductable expenses and you also have an allowance of about £10.5k per year before you start paying tax.
The customer is not doing you, you are doing yourself. As Para said £10.5k before you pay any tax also you will be required to pay national insurance. You will also require a liability insurance, keep receipts for everything, petrol, tools, materials, work clothing etc even sandwiches whilst working these are just a few things that are allowed against income tax.
If you are getting paid in cash don't declare it. I get paid with materials sometimes or livestock as I own a small farm so no paper trail for the tax man to follow. Get my drift?
I get knocks on the door regular. Futile exercise though. What you don't get paid can't be taxed. Blokes on here have a hard time getting their heads around that.