Working out profits and paying tax

Working out your profits

When you have all the information about your income and expenses you can prepare you business accounts and work out your profits.

If you have an accountant, your accountant will prepare your business accounts and make any adjustments to the business accounts to comply with the tax rules.

If you do not have an accountant, you will need to work out your business income and expenses and then put these figures onto your tax return. You will normally need to group your expenses together before putting them on the tax return. Most small businesses will need to show only three figures on the tax return – total business income, total business expenses, and profit (or loss). You will need to show any adjustments to your figures, for example for private use of business goods or services, or capital expenditure, in the appropriate boxes.

Paying your tax

For the first year you are self-employed, there could be a long delay before you pay any tax, but, when it arrives, the bill is likely to be large and could cover 18 months’ profits.