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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15944
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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. Another query. Let's say I have this situation. I am

Resolved Question:

. Another query. Let's say I have this situation.
I am in partnership but apart from that I also earn money
On self employed plus I am on paye full time. My annual income
From paye = 43k a year.
From partnership = 10k a year
From freelance = 2k a year.
How will they tax me ? Can I clam loses and avoid paying tax on Partnership/freelance income, or at least avoid paying some tax from Partnership/freelance?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

.

You should disclose your income from each source in your self-assessment tax return. If you make a loss from your freelance work or as a partner you can offset those losses against your other income same tax year or previous tax year or you can carry them forward against future profits from the same businesses. Take a look here on losses.

If you are making money from each source, then there isn't much you can do to avoid tax other than make pension contributions. There are other ways but they are really aimed at people with money they can afford to lose, eg Enterprise Investment Scheme, Seed EIS and Venture Capital Scheme.

If your partnership or self-employed profits grow significantly, you might consider setting up limited companies. The companies will pay corporation tax at 20% on their profits but you will only pay tax on income you draw from the company in salary and/or dividends. At higher profit levels, there are tax and NIC savings to be made. Try putting some figures into the calculator here.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.
Great level of details as always. So from these 12k I will end up paying 40% (£4800) then my profit is only £7200 correct?. Not great :).
How much profit would I need to setup limited company?
What are the usual fees that I need to cover if I had very small ltd. company?
In your opinion is it worth doing it in my case?.
Expert:  TonyTax replied 2 years ago.
If you have a personal income of £41,865 in the current tax year, you will pay tax at 40% on the excess. You'll also pay Class 4 NIC on partnership and self-employment profits.

As your current levels of non PAYE income, I wouldn't bother setting up a limited company. I'd be looking over £20,000 before setting one up.

Costs accounts, corporation tax returns and Companies House work will vary from one accountancy firm to another. Get a few quotes from local reputable firms.
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