What Taxes Would I Have To Pay If I Run My Own Business From Home?

Sun, Feb 14, 2010

Does anyone know what taxes I would have to pay if I am running an internet based shop from home. Do I have to register for VAT as soon as I start to sell? How much national insurance would I have to pay? I expect to be selling items of around $25k P.A of which at least 50% will be profit.

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4 Responses to “What Taxes Would I Have To Pay If I Run My Own Business From Home?”

Mahal Says:
14. February 2010 at 10:48 pm

This is for US business law. You might want to tell us what state you live in:
Here are the normal ones that apply to most states. (If there are any other guru’s out there, please add to the list):
Income tax (federal)
Income tax (state and local, if any)
Sales tax (if you sell retail and collect it)
Exise tax (usually includes sales tax collection + a host of other specific taxes for certain industries)
Federal ID number (only if you have employees and deduct taxes)
State business license
Local business license (if required)
If you have employees:
FICA (employer’s portion, IRS form 941)
Medicare (employer’s portion, IRS form 941)
Federal withholding (transfer of employees share, IRS form 941)
FUTA (unemployment tax, IRS form 940)
SUTA (unemployment tax, state form)
Workers’ compensation (employment insurance, state form)
Other insurance beyond this is your choice if you’re running a sole proprietorship. General liability insurance for a business is always recommended.
Value added tax varies state by state. If you have one in your state, you are usually registered for it already as soon as you get your state license.
(Always keep your future earnings estimates conservative. Always guess low.)

la.bruja Says:
14. February 2010 at 10:48 pm

I think you have some allowances for start-up in the first year. Don’t forget to claim part of your rent/gas/electricity/phone etc on your tax return. You are entitled to a proportion of all bills when running a business from home.

Steve B Says:
14. February 2010 at 10:48 pm

See links below (for UK Business)
To succeed you will be working 10 hour days 7 days a week for the first few years … and anyone who is too lazy to type ‘UK Business Tax’ into Google stands no chance of running a successful Business …

linkyspl Says:
14. February 2010 at 10:48 pm

you would need to register as self employed with the inland revenue. which you can do over the phone. you would then start paying national insurance contributions of £2 per week.
at the end of the tax year you will then get a tax return to complete. you will need to keep records of all sales you have made (i,e, your turnover) and also a record of all expenses. you will then subtract the expenses from the turnover to find your profit. your tax and national insurance is then calculated on this value.
you will also be entitled like everybody else to personal tax allowances where you don’t need to pay tax. (your tax code).
so given your example of earning £25000 per annum.
let’s say your expenses are half. your profit would be £12500 which is what you would be taxed on.
you can earn this year £5000 (rough figures) without paying tax, so then you would be charged tax on 12500-5000 = 7500.
you can then earn 2000 (rough) and only pay 10% . so that’s £200
you would then be charged on the remainder, which is 7500-2000 = 5500
this would be at 22% which is £1210
So total tax of £1410
phew – i know that’s a lot of info, but if you would like more help send me a message.

Mahal Says:
14. February 2010 at 10:48 pm
This is for US business law. You might want to tell us what state you live in:
Here are the normal ones that apply to most states. (If there are any other guru’s out there, please add to the list):
Income tax (federal)
Income tax (state and local, if any)
Sales tax (if you sell retail and collect it)
Exise tax (usually includes sales tax collection + a host of other specific taxes for certain industries)
Federal ID number (only if you have employees and deduct taxes)
State business license
Local business license (if required)
If you have employees:
FICA (employer’s portion, IRS form 941)
Medicare (employer’s portion, IRS form 941)
Federal withholding (transfer of employees share, IRS form 941)
FUTA (unemployment tax, IRS form 940)
SUTA (unemployment tax, state form)
Workers’ compensation (employment insurance, state form)
Other insurance beyond this is your choice if you’re running a sole proprietorship. General liability insurance for a business is always recommended.
Value added tax varies state by state. If you have one in your state, you are usually registered for it already as soon as you get your state license.
(Always keep your future earnings estimates conservative. Always guess low.)
la.bruja Says:
14. February 2010 at 10:48 pm
I think you have some allowances for start-up in the first year. Don’t forget to claim part of your rent/gas/electricity/phone etc on your tax return. You are entitled to a proportion of all bills when running a business from home.
Steve B Says:
14. February 2010 at 10:48 pm
See links below (for UK Business)
To succeed you will be working 10 hour days 7 days a week for the first few years … and anyone who is too lazy to type ‘UK Business Tax’ into Google stands no chance of running a successful Business …
linkyspl Says:
14. February 2010 at 10:48 pm
you would need to register as self employed with the inland revenue. which you can do over the phone. you would then start paying national insurance contributions of £2 per week.
at the end of the tax year you will then get a tax return to complete. you will need to keep records of all sales you have made (i,e, your turnover) and also a record of all expenses. you will then subtract the expenses from the turnover to find your profit. your tax and national insurance is then calculated on this value.
you will also be entitled like everybody else to personal tax allowances where you don’t need to pay tax. (your tax code).
so given your example of earning £25000 per annum.
let’s say your expenses are half. your profit would be £12500 which is what you would be taxed on.
you can earn this year £5000 (rough figures) without paying tax, so then you would be charged tax on 12500-5000 = 7500.
you can then earn 2000 (rough) and only pay 10% . so that’s £200
you would then be charged on the remainder, which is 7500-2000 = 5500
this would be at 22% which is £1210
So total tax of £1410
phew – i know that’s a lot of info, but if you would like more help send me a message.

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