Quitting my job in June. Want to work for myself. Need some tax and general advice.

[Messugga]

Please read the SARS site link I posted. They say they combine the taxable incomes. IE if the combined jobs earn you R350k per anum, SARS will tax you on the 350k bracket, not on the tax for say, 200k and 150k, seperately. So you will pay a higher tax earning that than your neighbours where the husband and wife team earn 200k and 150k respectively.

Please go read up on the definition of marginal tax rate. That's exactly what I'm saying.

 

[phiber]

Please read the SARS site link I posted. They say they combine the taxable incomes. IE if the combined jobs earn you R350k per anum, SARS will tax you on the 350k bracket, not on the tax for say, 200k and 150k, seperately. So you will pay a higher tax earning that than your neighbours where the husband and wife team earn 200k and 150k respectively.

Would you have expected otherwise?

 

[Other Pineapple Smurf]

Please read the SARS site link I posted. They say they combine the taxable incomes. IE if the combined jobs earn you R350k per anum, SARS will tax you on the 350k bracket, not on the tax for say, 200k and 150k, seperately. So you will pay a higher tax earning that than your neighbours where the husband and wife team earn 200k and 150k respectively.

One thing I've learn't is that majority of people do not understand how tax works. Don't waste your breath here.

 

[DominionZA]

One thing I've learn't is that majority of people do not understand how tax works. Don't waste your breath here.

And that is why people like me employ an accountant to take care of it. My focus is dev and clients. Don't have time to figure out all the tax laws. My accountant must do that for me and tell me what to do.

 

[vash87]

Unless the OP expect's his marginal tax rate to be over 28% I wouldn't register as a company.

Why not just run your business as a sole proprietor, keep things simple, no formalities? Limited liability doesn't seems essential to me.

I've worked with so many who are quick to register a company before considering the implications. I feel like sometimes people do as some kind of psychological commitment to having a go at running their own business. In many scenarios, it just makes things unnecessarily complicated.

 

[krycor]

Quitting my job in June. Want to work for myself. Need some tax and general a...

Something I've been wondering about.. If you do app dev on the side and have revenue coming in from there.. You do the declaration of income and get taxed.. But is that the best way or rather at what point is it no longer the best

 

[sutekj]

You have to do it that way. What you can do is to claim expenses back on your tax, which should bring your total taxable income down. This way you'll pay less tax. Not sure if you can do that as an individual or sole proprietor, or whether you need to register a company.

 

[Greig Whitton]

Unless the OP expect's his marginal tax rate to be over 28% I wouldn't register as a company.

He might, however, be able to register his company as a Small Business Corporation and be taxed at a rate lower than 28% depending on his taxable income.

Why not just run your business as a sole proprietor, keep things simple, no formalities? Limited liability doesn't seems essential to me.

Apart from limited liability, there are other important advantages to registering a company instead of trading as a sole prop. Key benefits include eligibility for financing (e.g. DTI grants) and, of course, building equity value. That said, I think most startups are generally better off trading as a sole prop and registering a company later if things take off.

 

[Greig Whitton]

You have to do it that way. What you can do is to claim expenses back on your tax, which should bring your total taxable income down. This way you'll pay less tax. Not sure if you can do that as an individual or sole proprietor, or whether you need to register a company.

In general, any taxpayer can claim expenses incurred during the course of generating taxable income. It doesn't matter if you are running a registered company, trading as a sole prop, or are a salaried employee with a secondary income stream.

 

[^^vampire^^]

Unless the OP expect's his marginal tax rate to be over 28% I wouldn't register as a company.

Why not just run your business as a sole proprietor, keep things simple, no formalities? Limited liability doesn't seems essential to me.

I've worked with so many who are quick to register a company before considering the implications. I feel like sometimes people do as some kind of psychological commitment to having a go at running their own business. In many scenarios, it just makes things unnecessarily complicated.

This ^

It's the equivalent of buying a tank just so you can learn to drive.

 

[Elax]

This all makes me wonder if everybody going on their own isn't saturating the market? Have had thoughts in this regard as well.

 

[vash87]

He might, however, be able to register his company as a Small Business Corporation and be taxed at a rate lower than 28% depending on his taxable income.

Unfortunately in this scenario, registering as a small business corporation is not an option. Section 12E(4) of the Income Tax Act stipulates that a SBC's investment income plus income from a 'personal service' must be less than 20% of all receipts plus capital gains. On top of that, the company may not be a personal service provider.

From these requirements it seems SBC's are aimed at manufacturing businesses. Web developing is seen as a personal service, so the OP would have no luck in this case.

 

[Greig Whitton]

Section 12E(4) of the Income Tax Act stipulates that a SBC's investment income plus income from a 'personal service' must be less than 20% of all receipts plus capital gains. On top of that, the company may not be a personal service provider.

True, but SARS' definition of "personal service" is ludicrously broad and has been successfully challenged in court.

If the intent is to provide web development services in an independent, personal capacity as a private practitioner then that would very likely constitute a "personal service". However, if the intent is to create a web development business that will lead to job creation, then there may very well be grounds for registering as a SBC.

 

[Sonic2k]

I definitely qualify as a SBC... stuff gets made here at home, I am definitely looking at putting machines in the garage.