VAT registration and making a living

[Stanios]

Hi all!

Every now and then (especially following a tax return) the though of VAT registration creeps into my mind. I can't comprehend essentially giving up 20% of my income which will just bring me in line with someone who is full time employed, but unlike me enjoying paid holidays sick pay and employment rights.

At the moment it looks like either make a conscious effort to stay under threshold or take a massive cut in earnings.

How have you guys coped with this stage?

 

[oz-plumber]

Go see an Accountant and get advice!!!

The system is what it is and you have to make adjustments to suit.
Also when you see your accountant, ask them the rough annual fees for doing you tax, that way you can allow for that in your hourly rate.

I'm over here and you're over there, we have the same system, but our main job is a Tax collector and our second job is something Plumbing related

 

[townfanjon]

Assuming I have read this correctly

You charge 20% on top , you dont pay it .
you collect it and pay it to the gov .

Sorry if I have miss read this post

 

[Stanios]

Assuming I have read this correctly

You charge 20% on top , you dont pay it .
you collect it and pay it to the gov .

Sorry if I have miss read this post

I am charging the same as plumber Kevin next door who is VAT registered. At the end of the month I keep all my money he has to give away 20% Sure he can charge 20% VAT on top of every job, I can also increase my prices by 20% to match but every month I keep all my bob he has to give 20% away.

 

[chris watkins]

But he isn't paying 20%. What he is paying is the difference between the 20% he has to charge on top of you, less the 20% he has had to pay out on all the materials & services he needs to complete this work.

 

[chris watkins]

He only pays the difference, so if your work is installation based & you uses lots of VAT based services he is likely to be better off than you especially if his clients are also VAT registered.

 

[Best]

Anyone vat registered can also claim back vat on tools, cost of van, parts and service for van and fuel and literally anything your business uses, - including stationary

 

[king of pipes]

I stay under by getting my customers to buy expensive goods boilers and bathroom packages I may loose out a little as they get my terms but hey ho we are all happy it works for me, being a sole trader I do feel the tax we pay is a bit much 20% + the 9% class 4 NI on your profit hurts abit anyone gone Ltd to reduce their tax contributions? Kop

 

[Harvest Fields]

I stay under by getting my customers to buy expensive goods boilers and bathroom packages I may loose out a little as they get my terms but hey ho we are all happy it works for me, being a sole trader I do feel the tax we pay is a bit much 20% + the 9% class 4 NI on your profit hurts abit anyone gone Ltd to reduce their tax contributions? Kop

Not yet. Only just gone VAT.

 

[firemant]

I stay under by getting my customers to buy expensive goods boilers and bathroom packages I may loose out a little as they get my terms but hey ho we are all happy it works for me, being a sole trader I do feel the tax we pay is a bit much 20% + the 9% class 4 NI on your profit hurts abit anyone gone Ltd to reduce their tax contributions? Kop

TBH, when I was SE (and my wife had a proper job), I was paying 40% tax. As previously meantioned, the additional 20% is effectively on the gross profit, so is nowhere near 20% on the bill. BUT, when I ht the VAT threshold, I DID charge the full 20%, so was actually better off. That may imply that I could have cherged more in the first place, but the invoices always showed the VAT, so the punters did not feel that I was overcharging. If you work for other VAT reg folk, it is a positive benefit.

Folk get hung up about VAT, but artificially restricting your business to avoid it is, IMO, a bit daft. I always avoided the messing about involved in customers buying the stuff. YOU should be making something from your terms, and if you upped your actual spend, those terms may get even better.