Quick question regarding tax

[Frazer1981]

Hi all

Just got a quick question regarding tax on an invoice. Just to clarify Im not VAT registered.

On my invoices i list materials and labour. My question is, is my tax added purely on the labour on my invoices?

Ie:
Materials £100
Labour £50
Tax @ 20% (on labour) £10

Total due £160

Or should it be:
Materials £100
Labour £50
Tax @ 20% £30

Total due £180

Thanks in advance and apologies for the examples etc but i just need to clarify if my tax is purely on labour or both materials and labour

 

[Chuck]

Neither. If you are not VAT registered you don't add 'tax' to your invoices (in England). So

Materials £100
Labour £50

Total due £150

There's nothing to stop you charging £60 for labour, of course. The fact that you paid VAT on the materials becomes irrelevant when you resell them. The tax you pay, i.e. NI and income tax, is between you, your accountant and HMRC.

Don't try guessing at this stuff, or relying on something some bloke on a forum tells you. Mistakes are easily made, will catch up with you eventually and can be costly. Sign up for a 'set up your own small business course' at your local college and find an accountant who specialises in sole traders and small businesses to help you get set up properly and keep you on the right tracks.

 

[leesparkykent]

Are you invoicing under CIS (subbying to another plumber/builder) if so they should be stopping tax at source. If it CIS then yes you are correct.....you deduct 20% on your labour and should be made clear on your invoice.

 

[Frazer1981]

Are you invoicing under CIS (subbying to another plumber/builder) if so they should be stopping tax at source. If it CIS then yes you are correct...you deduct 20% on your labour and should be made clear on your invoice.

I am currently doing a mix, i do 3 days a week subbying and i am XIS so they deduct 20% at source.

The other 2 days a week is all my own stuff so do my own invoices etc for them. I spoke to my accountant and have had advice etc i just had the quick question regarding the tax and you have answered that so thankyou!

 

[Frazer1981]

Neither. If you are not VAT registered you don't add 'tax' to your invoices (in England). So

Materials £100
Labour £50

Total due £150

There's nothing to stop you charging £60 for labour, of course. The fact that you paid VAT on the materials becomes irrelevant when you resell them. The tax you pay, i.e. NI and income tax, is between you, your accountant and HMRC.

Don't try guessing at this stuff, or relying on something some bloke on a forum tells you. Mistakes are easily made, will catch up with you eventually and can be costly. Sign up for a 'set up your own small business course' at your local college and find an accountant who specialises in sole traders and small businesses to help you get set up properly and keep you on the right tracks.

Hi, i appeciate your response. The comment you made about the tax i pay being between me, hmrc and my account is correct but surely either way its currently 20% of profit made?? They wont decide between them its going to be anythibg other than 20% surely??

 

[Chalked]

If it's a private customer you would invoice £150
If it's a CIS customer you would still invoice £150 but do a breakdown at the bottom of your invoice, like this.
Materials. £100
Labour. 50.0
CIS. £10.00
Total to pay on this invoice. £140.

That's how much you will get paid the client will deduct the £10 and send it off to hmrc and make sure they give you a monthly statement. Showing your deductions

 

[Chalked]

Hi all

Just got a quick question regarding tax on an invoice. Just to clarify Im not VAT registered.

On my invoices i list materials and labour. My question is, is my tax added purely on the labour on my invoices?

Ie:
Materials £100
Labour £50
Tax @ 20% (on labour) £10

Total due £160

Or should it be:
Materials £100
Labour £50
Tax @ 20% £30

Total due £180

Thanks in advance and apologies for the examples etc but i just need to clarify if my tax is purely on labour or both materials and labour

Only vat is added to an invoice. If you added 20% to £50 you would have made more profit!
Tax does not need to be shown on private invoices. Just involve it and let your accountant sort it at year end.

 

[snowhead]

They wont decide between them its going to be anything other than 20% surely??

It will be if your personal earnings are over £33500 this year.
Then anything over that will be at 40%

 

[Stow Heat]

Hi all

Just got a quick question regarding tax on an invoice. Just to clarify Im not VAT registered.

On my invoices i list materials and labour. My question is, is my tax added purely on the labour on my invoices?

Ie:
Materials £100
Labour £50
Tax @ 20% (on labour) £10

Total due £160

Or should it be:
Materials £100
Labour £50
Tax @ 20% £30

Total due £180

Thanks in advance and apologies for the examples etc but i just need to clarify if my tax is purely on labour or both materials and labour