Self Employed - Savings for Tax year

Babybubs

Hi,
I am newly self employed and have already had a document to complete regarding self assessment. In a bid to get ahead of the game I aim to save some money every month which will go towards my tax return. Is there a calculation that I could use to work out how much should be saved against how much you earn?
Also where is the best place currently to put this money?
I would appreciate any help or advice that you can give me.
Cheers

no-oneknowsme

Hi . You will need to save (roughly) 28% as this is how much you will be charged when you file your tax return.

You will be charged class 4 national insurance at 8% and tax is charged at 20%

Babybubs

Thank you for this, so 28% per month?

tyllwyd

It does depend a lot on how much you think your profit will be in the year. (Assuming that you don't have any other income) you have a personal allowance of £7,475 this tax year before you start paying income tax. So the percentage you need to put aside will be very different if you make £8000 compared to if you make £30000. What sort of figure are you aiming for?

Also, you pay tax on your profit - so that's the money that comes in, minus your expenses. Do you have money coming in at approximately the same level every month, or do it is paid in big lumps at odd intervals? Do you have significant expenses? It would probably help people give advice if you explained what type of business you do.

chrismac1

Mmm. Given that the 20% starts at 7,475 and the 8% at 7,225 then 28% of profits is a bit over the odds.

no-oneknowsme

chrismac1 wrote: »

Mmm. Given that the 20% starts at 7,475 and the 8% at 7,225 then 28% of profits is a bit over the odds.

I was assuming that the OP new that they had an untaxable personal amount of £7.475 before they even started paying tax !

So...you disagree that anything over this needs to be taxed at 20% then? Is my answer incorrect?

Babybubs

I do internet marketing & web work so my income varies depending on jobs throughout the month, my expenses vary also dependent really on fuel and where the client is located. I can base my savings on 28% of my income, i am very naive when it comes to tax and this has been very helpful thank you very much! :T

Tebheag

Hi I did a little spreadsheet showing my income for month my expenses and tax free allowance then i subtracted them and did 28% of that which i saved for tax, also remember that you need to pay extra with the first year which goes towards the next tax year.