Setting up a Business for tax

Macca206

I have begun a Driving School and one of the issues Im having trouble with is the tax. I have been advised to set up a company (which I have done as a sole trader) then pay myself a wage from it each month, paying all PAYE and stamps etc. Any remaining profit will stay with the company and be paid at corporation tax of 20%.

1st of all does this all sound correct or am I missing something or would anyone advise me to do something different?

2nd Im afraid of having a massive tax bill so can I pay the tax each month via direct debit from my business account? Also how do I work it out is there some computer package I need to buy and how much does it cost?

acc grinds

Have you set up a company or are you trading as a sole trader. They are different type of business.

DId you register your company with the CRO?

A company would be liable to corporation tax at 12.5% and a sole trader would be taxed at the Income tax rates , 20% up to a certain amount and 41% on the balance.

Thomas_S_Hunterson

Well if you do set up a limited company, your salary will be deducted before profits. You will pay standard income tax on whatever you pay yourself, and the Net Profit of the company will be liable for corporation tax at 12.5%.

Out of that profit, you can then pay yourself a dividend, which would come under your normal income, so it'll be liable for the standard 20/41% tax bands.

Macca206

When paying myself a salary how do I work out what tax I need to pay?

Yes ive registered with the CRO

Thomas_S_Hunterson

It's 20% upto a threshold (can't quite remember what it is)
41% on the rest

And deduct your tax-free allowance from the tax payable

I reckon sometimes there are false economies in trying to do all this yourself, especially if accountancy/tax is not your background. If you miss deadlines or payments, the penalties involved can often exceed the costs of a good bookkeeper / accountant! If you are going it alone, SAGE have a package specifically for small businesses. I do a lot of my work on Excel though as well!

information

Macca206 wrote: »

When paying myself a salary how do I work out what tax I need to pay?

Yes ive registered with the CRO

http://www.revenue.ie/index.htm?/services/ind_work7.htm

registered what ?, are you a company or sole trader ? you haven't made that clear

Mr. Incognito

I have a feeling you are a sole trader.

If you are a company you are required to do up a memorandum and articles of association outlining all your details, company aims etc and lodge them with the CRO. Did you do this? Compaies are actually complicated mechanisms for extracting cash as you have only two options really in the form of salary or dividends.

If you are a sole trader you are not a company. You can still register with the CRO but you are oblidged to self account for Income tax, PRSI and all that good stuff. You do not have limited liability. Business expenses incurred wholly and exclusively are deductible and all that. As a self employed person you would be oblidged to file a Form 11 return by the 31 of October each year. You might even have PAYE employment income included in your heads of charge. There is an option to pay preliminary tax by direct debit in a minimum of eight equal installments. Preliminay tax is calculated on 90% of current years forecasted income/100% of preceding year or 105% f pre-preceding year.

I would not attempt to do this without professional help.