Consequences of becoming self employed end of tax year

CLAPTON

I still can't understand your PAYE tax and NI

assuming you earned 1263 per month for 8 months (i.e. April thru November) then your gross salary would be £10,104

so tax ought to be

20% of (10,104 - 8x 675) = 940 in total or £117 per month

NI should have been 12% of (1263 - 632) = £76 per month or 606 in total


when did you stop working at your PAYE job?

do you have a P45? what are the numbers on it?

nomunnofun

CLAPTON wrote: »

I still can't understand your PAYE tax and NI

assuming you earned 1263 per month for 8 months (i.e. April thru November) then your gross salary would be £10,104

so tax ought to be

20% of (10,104 - 8x 675) = 940 in total or £117 per month

NI should have been 12% of (1263 - 632) = £76 per month or 606 in total


when did you stop working at your PAYE job?

do you have a P45? what are the numbers on it?

Have to agree. However, earlier posts mentioned January and the figures would then not be too far off the mark. Perhaps op last worked in November and finally left work in January?

Mary222

CLAPTON wrote: »

I still can't understand your PAYE tax and NI

assuming you earned 1263 per month for 8 months (i.e. April thru November) then your gross salary would be £10,104

so tax ought to be

20% of (10,104 - 8x 675) = 940 in total or £117 per month

NI should have been 12% of (1263 - 632) = £76 per month or 606 in total


when did you stop working at your PAYE job?

do you have a P45? what are the numbers on it?

Hi Clapton

Stopped the PAYE work at the very beggining of December.

I have dug up some estimated figures from past notes. And it does differ slightly to what I had originally said.

For each of those eight months, I earned £1301. I noted that I paid about 183 in taxes. However, that figure does include the NI 2 contributions.

Sorry for the confusion & thanks for the help

John_Pierpoint

If you had a very highly paid skill such as a dentist. You could make a lot of money if you started work on 6th April 2012 and submitted your return for year ending 5th April 2013 on the 31st January 2014.

So by the time the first tax is due the tax man has been at risk that the taxpayer has spent all the money or skipped the country for up to 21 months.

So the system will demand not only the tax for your first year but more tax on account. There after you will be expected to pay tax every January and July and settle up for the differences when your tax return is eventually received.

The on-line system of doing your tax return has several advantages:

* It can be done in stages and stored as many times as you like, this means you can do each part of your life as the figures come available.

* If you make mistakes, they probably will be picked up, there and then.

* I find the best way is to fill in the start and the end of the return, ie the bits where you say who you are and where you explain where you would like your refund sent (you wish;)). Just put something like £1 in the bits you are not yet ready to do. When you ask for that to be validated, you will get lots of errors and a message saying you are (say) 8% completed, but you have proved that you can do it. Then you can chip at it using the real figures.

* You can work out most of the difficulties yourself by playing "what if" games with the system, without wasting ages trying to phone a help line or waiting for a reply to a letter.

* Above all you remain in control all the way through to the point where you pay your tax using your debit card - there is no "black hole" where you are thinking for weeks "Did my return get lost in the post?"

Self employment with low level profits can be as simple as gross income minus my expense figure equals taxable profit.

If you keep the business figures clear of getting mixed in with your private personal savings income and personal expenditure all should be well.

The other controversy you will start to bump into, depending on the nature of you business, is the difference between accrual accounting and cash accounting.
http://www.accountingweb.co.uk/article/hmrc-puts-out-simplified-tax-accounting-document/525937

Ah I see you already have:rotfl:

Mary222 wrote: »

Just a basic question that I cannot find an answer to!

When doing self employment assessment - do you pay tax on monies earned in the tax year or monies received.

For example, say if i earned money on the 1st April, but did not receive it until the 20th, do i pay tax on that in the current tax year, or the one after.

Thanks so much!

Personally I would stick with having a nice file of invoices and reporting those as you gross billings - you are then on the route to being able to maintain your self employed status and possible incorporation when you need the advantages of company taxation..