Tax for the Self Employed

the182guy

Hi all,

I got made redundant in September 2008. From the 1st October 2008 I have been working self employed. By 1st April this year I will have earned about £7500 since becoming self employed.

Does anyone have any idea what sort of tax I will have to pay on those earnings? I have heard somewhere that earnings under £6000 are exempt from tax which leads me to believe there would not be much tax to pay on £7500.

I am registered with HMR&C and pay my National Insurance via a monthly direct debit.

Thanks in advance!

Horace

Hi

You might get a better response over on the Small Business & Charities Moneysaving part on this forum.

I have no idea how much tax you would have to pay on the remaining £1500 - perhaps you should phone the HMRC and ask them?

chrisbur

You only get the one tax allowance for the year currently £6035. This may vary with individuals if for example you have some benefit from your employment.
You need to add up all your taxable income for the tax year, earnings from employment, profits from self employment, taxable benefits eg jobseekers, interest on savings, and deduct the £6035 from this to give a taxable income. You will then be due tax at 20% on anything up to £34800 and 40% above that. From this you can deduct any tax you have already paid eg on savings or employment, and what is left will be what you will owe.
And there may well be a bit of class 4 NI as well but I cannot remember the figures for that off hand.

fengirl_2

Class 4 NIC is your profit, less 5435 x 8%

the182guy

Thanks all, I suppose I'll just have to wait for the bill in April.

With regards to HMRC I have to say I don't have much faith in them...

I was self employed a few years ago, paid all my taxes and NI at the time, 12 months later I received a bill for NI from the nice people at HMRC. I sent a letter explaining I had already paid everything off, to which I received a reply with no apology - only a credit note saying I am OWED £2.

Secondly, when I finished uni I got my first full time job, after 12 months or so I received a letter from HMRC notifying me I was on the wrong taxcode, had been paying far too much tax and that I am owed £500. Imagine if they hadn't spotted their mistake? I would have never known I was paying too much tax.

Thirdly, when I registered with them as self employed a few months ago they said they'd send me a bill for NI and the paperwork for me to setup a monthly direct debit for future NI payments - I received the bill but no DD forms.

I'd rather take advice from the Money Saving Experts here than phone HMRC and let one agent tell me something and have another tell me something else:rolleyes:

Happy_Girl_2

the182guy wrote: »

Thanks all, I suppose I'll just have to wait for the bill in April.

With regards to HMRC I have to say I don't have much faith in them...

I was self employed a few years ago, paid all my taxes and NI at the time, 12 months later I received a bill for NI from the nice people at HMRC. I sent a letter explaining I had already paid everything off, to which I received a reply with no apology - only a credit note saying I am OWED £2.

Secondly, when I finished uni I got my first full time job, after 12 months or so I received a letter from HMRC notifying me I was on the wrong taxcode, had been paying far too much tax and that I am owed £500. Imagine if they hadn't spotted their mistake? I would have never known I was paying too much tax.

Thirdly, when I registered with them as self employed a few months ago they said they'd send me a bill for NI and the paperwork for me to setup a monthly direct debit for future NI payments - I received the bill but no DD forms.

I'd rather take advice from the Money Saving Experts here than phone HMRC and let one agent tell me something and have another tell me something else:rolleyes:

If you only started with self employment in Oct 08, you won't get a bill in April. You will have to file a self assessment between April and Jan 2010, and the tax/ni will be due Jan 2010

In answer to your original question, you get one allowance of £6035 per year, or £502.92 per month. If you started in October, you will be entitled to 6 x £502.92 = £3,017.52 and will be taxed on the remaining profit

You will also have to pay class 4 NIC @ 8% of profit above £5,435

Don't forget, that as a self employed person, you are taxed on profit and not income, so start compiling all your legitimate expenses now to keep the tax/ni figure as low as you can.

the182guy

Thanks Happy Girl I will bear that in mind.