One question I am asked quite often from prospective Kleeneze applicants and new distributors is:
How Do I Pay Tax On Kleeneze Income?
To provide a quick answer would be: you pay income tax on any profits you make over your annual tax allowance. How much income tax and National Insurance you pay also depends whether you have another income or not (e.g. from another business or job).
Here’s some general guidance:
- Once you have registered as self-employed, you will receive a starter pack from the Inland Revenue
- You will pay approx. £2.40 per week Class 2 National Insurance (N.I.) contributions. You also pay Class 4 National Insurance contributions as a percentage of your taxable profits
- Your income tax will be calculated on a self-assessment basis at the end of the tax year
- Unless time is very tight, you can do your own self-assessment, which can easily be done over a weekend. Alternatively, you can hire a book keeper / accountant
Income that is generated from a business or self-employment has a more favourable tax position than income received from employment as a salary. That is because in a business you pay yourself first and are then taxed. In a job, you are taxed and then paid.
Legitimate Business Expenses
Many of the things you already spend on can be counted towards your business expenses, thus decreasing your profits on paper and therefore your tax liabilities. These include:
- Car Mileage (you can claim up to 45p per mile)
- Mobile Phone
- Internet (ISP) charges
- Office Stationery
- Computer Hardware (e.g. printer cartridges, or even a PC or Laptop)
- Business Marketing materials e.g. catalogues, business cards
- Meals (if you have spent the night away from home)
- A proportion of your utility bills if you dedicate a room of your house to your business
There may also be business startup funding available from time to time, such as the Job Centre Plus Adviser Discretion Fund.
N.B. the above does constitute tax advice and is for information purposes only. I recommend you refer to the HMRC website or consult a local accountant for clarification.