What tax should self-employed people pay?

lsd79

What are the relevant taxes to anyone thinking of becoming self employed?

National Insurance?
Anything else?

HappyMJ

Set up a limited company and you'll be better off paying corporation tax rather than employers ni, employees ni and income tax. Which you'll have to anyway but they are minimal. Saves a fortune. Speak to an accountant or the tax office.

tyllwyd

Could you put your question in context? then people could give you a more useful answer.

I'm self employed as a sole trader, and I pay Class 2 & 4 NI, and income tax. If my turnover was high enough I'd pay VAT.

lsd79

Context: I'm starting up my own business, going live on April 13th.
I'm unsure what to charge as I'm struggling to understand the tax rules.
Industry standard is £15p/h but I want to confirm this will cover my tax costs before I advertise with this as my rate.

All advice gratefully accepted

Ste_C

HappyMJ wrote: »

Set up a limited company and you'll be better off paying corporation tax rather than employers ni, employees ni and income tax. Which you'll have to anyway but they are minimal. Saves a fortune. Speak to an accountant or the tax office.

I would strongly recommend against setting up a ltd company unless you have plenty of experience of running a business.

With respect to the OP, I don't think this is the case.

tyllwyd

About tax - well, you are only taxed on your profit, so 'covering your tax' costs won't be a problem. Are you going to be working as a sole trader or something else (such as partnership, limited company).

Assuming that you are a sole trader and paying tax through self-assessment, you pay £2 per week class 2 NI contributions. Then at the end of the year you pay income tax & class 4 national insurance. Income tax is calculated in the same way as if you were employed (so no tax up to the personal allowance, then basic rate, then higher rate), so the amount you will eventually have to pay will depend very much on how much you have earned.

If you want to get an idea of the figures, why not go to a salary calculator like listentotaxman and put in an estimate
(say, at £15 per hour, working 25 hours per week for 40 weeks in the year = £15,000, minus expenses, say, £500 - gives £14,500)
and that will give a summary of the tax & national insurance you would have to pay. That will give an idea of the percentage of the money you receive that you should be putting aside for tax as you go along.