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Where Taxpayers and Advisers Meet

Am i stupid or are my parents correct.

Mr Randall
Posts:1
Joined:Sat Jan 29, 2022 12:23 am
Am i stupid or are my parents correct.

Postby Mr Randall » Sat Jan 29, 2022 12:50 am

I'l try to keep this simple. So, my dad owns a small landscaping business and sets aside money throughout the year to pay his tax bill. I assume, in a nut shell, this is how most people do it. Now he thinks that by using this money to pay for things like expensive machinery etc that it wont go to the tax man. Like it becomes free or something. Im trying to tell him that all he is doing is reducing his profits. He seems to see it as £300 spent on equipment = £300 that doenst go to the tax man. I see it as £300 profit reduction, so when you consider say for exmaple £20,000 profit over the year, a £300 reduction isnt really going to make much difference to your tax bill. Granted every little helps. Please can anyone advise me on this as im very new to all things tax. Please tell me if im wrong, which i very well could be! Or we both could be wrong which would send me into hyterics :lol:

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Am i stupid or are my parents correct.

Postby robbob » Sat Jan 29, 2022 9:50 am

You are right your parental unit is a heed the ball.

I will tell you a story

Billy earns £300 on top of this other trade income - he doesnt want to give the taxman a penny he doesnt have too so spends £300 on a new drill he doesnt need - Billy has nowt left. But the taxman doesnt get a penny of his income

Bob aint that silly - he earns £300 on top of his other income - he doesnt really need a new drill so he puts his 29% to one side for the taxman (marginal rate for sole traders) and transfers the rest £213 to he saturday afternoon drinking kitty.

Billy and Bob meet up down the pub saturday afternoon Billy shows Bob his new Drill - Bob goes thats ffin great mate - i must be doing something wrong as i cant afford a new drill like that. Billy goes if ffin fantastic mate - whats even better is the taxman paid for it!. Happy days says Bob now get your round in please Billy. Bob and Billy and no longer drinking buddies as Billy had no money to buy his round. Luckily for Bob after Billy left Sue and Rita turned up and Bob had plenty of money to treat the girls to some fun - so it ended up as Rita Bob and Sue too , when they made the movie of their exploits poor billy was also left out of the cast.

Does your parenrtal unit really want to be Billy no mates?

Note top tax tip temporarily if Billy setup limited company he would still have enough cash left after his £300 spend to buy 10 pints in my local after buying his new drill. (not yours) strange but true thanks to the super deduction (6% cashback to you and me)


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