Income Tax query for sole trader

roady rhodes

Hi
I,m trying to do my end of year income tax return and need some help.

I know that the tax liability is based on the net income (total income less allowable expenses)

Is that total income gross or net ?

Thanks in advance to anyone who can clarify.

Penguin3029

Hi,

I'll try help if I can, but might need some more information to fully assist. Are you self-employed looking to file your Form 11 income tax return? This is the form you file annually if self-employed, and the following is based on the assumption that you are self-employed.

Your gross income is effectively calculated as sales minus your cost of sales (usually your purhases). Your net income is your gross inocme minus tax deductible expenses. Be careful with this, because there are plenty of rules about what you can and cannot deduct. The "general rule" is that the expense must be "wholly and exclusively for the purpoes of the trade". Your income tax is then calculated based on your net income.

If you're not self-employed and you're looking to claim certain expenses such as medical expenses it's more restricted, but I think you're talking about self-employed situation.

roady rhodes

Hi Penguin

Thanks for reply

I'm in construction and have my 20 % tax automatically taken from my wages to go into my RCT account so was wondering if my gross income would include the RCT money ?

Basically i am trying to workout the formula to calculate my income tax.

Penguin3029

Yes, you should include the amount of income gross of RCT (ie income before RCT deduction).

You get credit for the amount of RCT already deduced, and this should happen automatically when filing online (just throw your eye over to be sure all details correct).

Calculating the end tax bill depends on all your figures and your personal circumstances. If doing it online, it'll do the calculation for you.

roady rhodes

Very much appreciated.

Thank you for your time and help.