OK guy’s a little scenario for you,
“Billy Big Rigger” has been going as an O/D (sole trader) for a while now and its coming to the end of his first full tax year,he’s done alright
(Rob K take note!!) and after all his bills have been paid he has a small 5 figure profit.
He does not need to take any more in wages but has still got two years to go before the 4 year old truck is paid off.
To avoid the taxman taking a chunk of his profit and the fact that its burning a hole in his “Dickies” work trousers what should he do
A couple of options he’s considering are:
Paying off some of the remaining finance.
2.Upgrading the truck to a 03/04 for cash.
What should “Billy Big Rigger” do before 5th April 2006:?:
fire it all back into the business sharpish, personally i’d get rid of as much of the finance on the wagon as possible as you never know whats round the corner! thing is, the taxman is quite happy to except that you’ve run at a loss in your first year which on paper you would’ve done had you paid for the wagon up front plus the fact it should save you a fair bit in interest on the finance.
alternatively you could send it all to me as a consultancy fee, you’ll still be potless but my misses will be over the moon
paul b:
fire it all back into the business sharpish, personally i’d get rid of as much of the finance on the wagon as possible as you never know whats round the corner! thing is, the taxman is quite happy to except that you’ve run at a loss in your first year which on paper you would’ve done had you paid for the wagon up front plus the fact it should save you a fair bit in interest on the finance.
alternatively you could send it all to me as a consultancy fee, you’ll still be potless but my misses will be over the moon
An answer that put a large smile on my face, Paul!!
Billy Big Rigger would be soooooooo popular with your Missus
Totally agree with paying off the finance, as long as there’s no penalty.
But will this reduce the profit your showing? Usually this would be in the balance sheet, with only the interest shown in your p/l account?
And taking more in wages/drawings won’t affect your tax bill?
Might be worth going limited — bit more paperwork, paye and heavier accountants bill, but a company doesn’t pay tax if you keep the profit under £10K (but need to change O’Licence, Vat etc).
Might be stating the obvious — have you expensed it right up? Private mileage, pay the wife for secretarial services, home office, go heavy on depreciation etc? And if you need any work done on the truck, get it done now!
I hope you have not forgotten to depreciate everything and if you have any left over don’t forget to pay for all the office rent, rates electric, phone and also the bonus to your other half for giving you the support in your first year.
Nice to hear you did ok in the first year which is normally the toughest heres wishing you and all the other O/D’s a great New Year
“Billy big rigger” has told me to pass on many thanks for the advice and “kind offers”.
He has decided as the next few months are looking quite busy to hang on until the summer and review things and maybe Volvo will “up” the HP on the FH610 to beat the Scania R620/Merc Actros “black” and then he will buy one for CASH
