Self employed tax question

[Monstorious]

Ok so i have no idea where to begin.


I am going self-employed very soon and i am worried about the tax return a year down the line.

I don't want to file my tax return, and they turn around and say you owe us £3,000. How do i make sure i have the money saved for when i file my return?

Do i put away a % of every service/sale i complete.

For instance i complete a service for £25.00 do i now put away a % into a seperate bank account just for the tax return. If so what is the current tax % for the self employed and what should i put away per service to make sure i have enough money to cover my tax return?

Sorry if this is a little long winded i hope someone can make sense of it and clear it up for me.

 

[Mitchells Bristol]

Hello there

If the self-employment income is your only source of income, then the first £7,475 you earn will be tax free. If you are going to earn above this level I would suggest you put aside between 25% and 30% to cover tax liabilities.

Tax will be 20% and National Insurance 9%.

 

[Monstorious]

Hi thank you for the reply!

In this case my self-employment will not be my only income. I will be earning £3600/year in a job in which i am employed.

Could you advise me given these circumstances?

 

[Mitchells Bristol]

Just to complicate things!!

So your employment income will take up £3,600 of your tax free allowance.

This will leave £3,875 that you can earn tax free in your self-employment. Anything after this will be taxed at 20%, until you are earning around £40k.

The first £7,225 of self-employed income is free from National Insurance, and you pay 9% after that.

Hopefully this helps.

 

[Monstorious]

Certainly Clears things up.

So just to clarify. From the day i start trading to the end of the tax year, until i reach about £3800 i don't have to worry about putting a percentage of my sales/services away?

When i reach that £3800 thresh-hold i will need to save 30% basically of everything i do, sales, services etc.


Thank you again for your very kind help

 

[Mitchells Bristol]

Correct - that should more than cover any tax bill that crops up!

Note that it will be 30% of profit though. So if you have £25 income, but you have £5 expenses (travel etc) then you only need to put aside 30% of your profit of £20.

 

[Monstorious]

Absolute hero.

Don't know where else i could get advice like that for free.

Many thanks!!