Oh goody. More tax from today.
Here’s a breakdown of where the money goes, just in case you were thinking any of your mates who are entrepreneurs turning over £250K a year were rolling in it…
VAT @ 17.5% – £43,750
Rent & Rates – £10-15K
Customer Acquisition – £62,500 (based on £250K being made up of single £20 sales with £5 per customer spent on ads)
Materials – £62,500 (each thing they sell at £20 costs £5)
Fully loaded wages (inc NI etc) for basic employee – £20K
Accountant’s fees – £2K
Telecoms, web host etc etc – £2K
Other stuff – £2K (and there’s *loads* of other stuf)
Leftover so far: c. £40K
Corporation tax on profit is 20%, unless he whips all that out the business. If he does it as wages then he pays about 12.5% PAYE on top and has to take out his own NI, PAYE at the other end too, meaning a wage packet of about £25K-£28K and a business with no retained profit. These aren’t based on any particular business by the way, just illustrative – I’m always suprised how many people I talk to don’t get that turnover isn’t the same as money in your pocket…
So… if you’re thinking that dandy product idea will make you spare bucketloads of cash, think carefully again. If you want to make £25K a year of the sweetest, most enjoyable kick-ass money you’ll ever make in your life – dive right in!
