Al and Dilly felt a bit punch-drunk by the end of last week. What with Al’s wisdom tooth extraction – he was on jelly and ice-cream and chicken soup for a day or two there – the resulting bill and, cruellest of all, his tax demand.
If you are self-employed, you have to pay on anticipated earnings*. This balances out, as you don’t pay twice – the tax on the anticipated earnings for one year are, as it were, absorbed by what you paid the year before. However, when you start up a business, obviously you don’t know what the earnings are likely to be, so this is not done for the first couple of years. This time was the first occasion Al had had to pay on anticipated earnings. It just so happened that, nearly two years ago (that is, at the start of the tax year in question), Yagnub’s largest – though still small – supermarket moved a mile or so out of the town centre and, as a result, Al’s takings rocketed. Since then, he has done pretty well. However, it has meant that he had a vast tax bill, three-quarters of it to be paid now. The total works out at 43% of his year’s earnings. Since he is a basic-rate taxpayer, this means he was, in effect, taxed at double rate, with no tax-free allowance.
In addition, Dilly is not earning and is not receiving maternity pay. Right now, the shop wages and bills are being paid out of the week’s takings – that is, the eggs that are delivered and paid for on Tuesday are enough to cause a cash-flow problem.
They are remarkably cheerful, in the circumstances. At least, they say, they didn’t have to borrow the money. Just strip their savings account. And, right now, that was what it was there for.
*Bear in mind, as you read what follows, that I don’t quite understand it myself, so this is my interpretation of the rules.