Perhaps a stupid question

[creatabledesign]

As I am only really starting out on my own (while holding a full time job), what sort of percentage should I be putting aside for taxes?

Do I need to be putting it aside on each payment made from a client or on the overall total at the end of the year? I am just creating spreadsheets at the minute for keeping payments and things up to date and wanted to clarify these things first.

I really appreciate any help I can get.

Thanks in advance,

 

[Paul Norman]

This is not a stupid question. It is an important one.

At any given point it is sensible to know what your cumulative tax liability is, and to have the cash set aside to settle it. When payment time comes you get little leeway, and really, you do not need it.

The percentage will depend on what you allowable costs are, however. You will have to pay tax on your profits, at the basic rate of tax (assuming you are self employed)

Personally, I advise producing a monthly profit and loss account for yourself, and working out the tax from there. Especially if you are likely to hit the higher tax band (not so hard, these days!)

I really would advise engaging an accountant, too. I use an accountant for each of my businesses, and it brings a major peace of mind.

 

[creatabledesign]

Hi Paul,

Thanks for coming back to me, I appreciate it.

Basically, my current situation is that I work a full time job during the week 9-5 and all other hours I am self employed much to the dismay of my Fiancee.

So the way I understand what you mentioned, I would be better off calculating my taxes on a monthly basis? Essentially last year I made a loss of 400 pounds because I had to buy equipment so therefore I assume I do not need to pay any taxes on that.

I was thinking about approaching an accountant but at these early stages I am wondering whether it is going to be financially viable for me to do so?

Thanks again for the help.

 

[kontracta_com]

I'd recommend getting in an accountant too. There is a vested interest in my profession I know but at least in the first year you can badger him or her with questions, get them to help you set up a profit and loss spreadsheet and potentially even get a 'back of the cigarette packet' style formula for your P&L spreadsheets from them that works out rough tax liability estimates. From year two onwards you are on your feet a little more and can then decide what services you want from your accountant (if any).

In terms of what I tell my clients who ask, I'm afraid I always tell them 'it depends' (nothing like a good bit of fence sitting) - if pushed I ask them to send things through every quarter so I can monitor what tax rate they're on.

 

[Piqueperfumes]

You really need an accountant - we started off very small on an auction site but opted for an accountant straight away. His costs are moderate and he is really good. We (actually Karen, I'm useless at accountancy type stuff!) ring him whenever we have a query and two years running he has obtained a tax rebate for us which, I don't think we would have spotted ourselves. This more than covered his costs.
Cheers, Phil

 

[creatabledesign]

Sounds like I need to find myself an accountant. I do have a family member that handles another business within the family however I am unsure whether to get an independant in now or not.

At rough guess what do you think an accountant is going to cost each quarter potentially. Baring in mind, I am a single 1 man band freelance web designer.

Thank you all for the kind help you have given me.

 

[Eagle]

You should be setting aside 30-35% of your income at least (caters for NI contributions as well).

 

[creatabledesign]

You should be setting aside 30-35% of your income at least (caters for NI contributions as well).

But surely, my full time job counters what I have to pay as I already pay a lot of national insurance and I pay NI quarterly currently being Self Employed on top?

Sorry I am not really with it with regards to the finance side of my business lol.

 

[Eagle]

But surely, my full time job counters what I have to pay

Don't worry about the tax/NI side of your employment - that should be sorted for you at source.

It doesn't seem like you'll pay anywhere near that but doubtless you will.

I'd also strongly suggest you hire and seek the advice of an accountant.

 

[creatabledesign]

Don't worry about the tax/NI side of your employment - that should be sorted for you at source.

It doesn't seem like you'll pay anywhere near that but doubtless you will.

I'd also strongly suggest you hire and seek the advice of an accountant.

Ok, so I think it's time I started looking into one then

Thanks for all the help/support to everyone here.

 

[MyAccountantOnline]

At rough guess what do you think an accountant is going to cost each quarter potentially. Baring in mind, I am a single 1 man band freelance web designer.

Costs will vary hugely depending on the accountant you use, and what you actually want the accountant to do.

If you want to see what my firms fees are they are on my website.

Their are a few other accountants on this site that advertise their fees openly.

If you'd rather have a local accountant who you see face to face most will give you a free intial consultation and discuss fees with you. Do make sure you get a fixed fee agreement to avoid any nasty surprises with fees.

 

[creatabledesign]

Hey Nicola,

Thanks for clearing that up for me. It's a bonus that you are also in Wiltshire, I will take a look over your website and see if it's something that I can do at the minute.

Thanks again.

 

[MyAccountantOnline]

Hey Nicola,

Thanks for clearing that up for me. It's a bonus that you are also in Wiltshire, I will take a look over your website and see if it's something that I can do at the minute.

Thanks again.

No problem - I'd be very happy to help. Please feel free to email me in the morning if you have any queries/questions.

 

[Eagle]

At rough guess what do you think an accountant is going to cost each quarter potentially.

£200-£300 per year, tops.