[Milliemoo]

Hi,

If someone earns an income as an employee and pays income tax via PAYE, but also in the same tax year earns an income as a sole trader, how much income tax do they pay on the income earned as a sole trader?

I know they pay the same levels based on how much they earn, but is that calculated separately to the PAYE, or is the total income from both sources added together and the tax levels worked out that way?

It say "total taxable income" on the IRD site, so I'm thinking it all gets lumped together on the tax return at the end of the year. Just thought I'd check though.

Milliemoo

[Avalon]

Afraid it gets added on to your employed income on the tax return :(

Just make sure you are claiming all the expenses you are entitled to:raebanana

Also - just check whether you will have make advance payments (ie Quarterly) on the self employed income. Hopefully someone will be able to confiirm how that works - ive not had to do it myself, but I have had to do tax returns and saw it on the form.

[IanW99]

...
Also - just check whether you will have make advance payments (ie Quarterly) on the self employed income. Hopefully someone will be able to confiirm how that works - ive not had to do it myself, but I have had to do tax returns and saw it on the form.

If the amount that you owe the IRD in one tax year is more than NZ$2500 then the following year you have to start paying provisional tax.

This is basically paying what you owe in installments over the year instead of just at the end of the year.

Basically you take the amount owed, add on 5% and then divide it by 3, then you pay this amount at each installment (there are 3 installments). There are other options for provisional tax so best to work out the best one for you.

Ian

[Moorf]

I've just done my sole trader tax return. Last year I had to incorporate earnings that were already taxed - you should receive a Statement of Earnings for any income you've earned taxed this year - if you haven't received it then ask for a copy to be sent. You need this to fill in the tax return.

I will have to start paying tax in advance this year. I have done as Ian said - add 5% and divide by three. However, there are three options for this. If you don't think you'll earn any non-taxed sole trader income then you can opt to (E) Estimate your tax - you then need to forecast 3 payments based on what you think you'll earned as self employed this coming year.

If you have done work from home, make sure you're claiming for %'s of heating/power/mortgage interest based on a % of your size of office compared to your house....

It's a really easy form to fill in.

[Milliemoo]

Thanks guys,

I think it's only going to be a matter of a couple of months work as a sole trader for this tax year only, so fingers crossed, the tax return should be quite straight forward.

Another question..... OH has registered for GST. If a few months down the line he decides to buy a new lap top and computer 'for the business' and wants to claim the GST back, will it look odd that he'll be completing a GST return (opted for every 2 months) but might not necessarily of had any income that he charged GST on in that particular period ie: he'd be claiming GST back rather than offsetting it against any invoiced GST.

Milliemoo

[Nick88]

For three years our business had no income, just expenses, and we got GST refunds every two months. They will question big refunds, like when we claimed for the GST on the land we run the business from, but if it is just a couple of hundred dollars here and there they know you will make it up eventually. We eventually elected to have our GST done by our accountant, hopefully that will make the IRD less inclined to question it.

As Moorf said, claim for household expenses too. We claim 25% of our phone, and power bills.