My first self employed tax return, that much!!??

[Deleted User]

I have been calculating my income and outgoings for the tax year 2012 to 2013 which was my first year self employed working from home as a sole trader. I am within the 20% bracket and have to pay back part of my student loan along with NI Class 2 & 4.

scragend

Based on net taxable profits of 28k for the 2012/13 year, and assuming no other income and only the basic personal allowance :-

Income tax : (£28,000 - PA £8,105) x 20% = £3,979

Class 2 NI : you should be paying this weekly/monthly (currently £2.70 per week)

Class 4 NI : (£28,000 - £7,605) x 9% = £1,835.55

Student Loan : (£28,000 - £15,795) x 9% = £1,098.45

Total liability for 2012/13 = £6,913.

You will also have to pay half of that again on account, so the total amount due by 31 January 2014 will be £10,369.50.

Then you pay the other half (£3,456.50) by 31 July 2014.

In January 2015 you will have a balancing adjustment depending on your 2013/14 profits, plus your first payment on account for 14/15.

grey_gym_sock

the NI looks too high.

class 2 is £2.65 per week = £137.80 for a full year (and paid separately from the self-assessment payments, and not subject to payments on account)

class 4 is 9% on profits over £7,605, which is c. £1,800.

income tax looks about right.

[Deleted User]

Thank you!

It seems as though the NI Class 4 is being calculated based on gross profit without consideration for expenditure.

"balancing adjustment" - do you mean that for my tax return for 2013-2014 payments (Jan/July 2014) I will either have to pay more or get a rebate depending on what I submit for that year?

Laurajo_2

Have you had any other income in the year....employment etc?

Regshoe

[Deleted User] wrote:

"balancing adjustment" - do you mean that for my tax return for 2013-2014 payments (Jan/July 2014) I will either have to pay more or get a rebate depending on what I submit for that year?

Correct - you will also of course be paying 1/2 of the expected 2014-15 tax due. So if your income and expenditure remain consistent you would in future have 50% to pay each July and 50% each January (you can also set up a DD, or even make adhoc payments yourself if you want - it all just gets credited to your account, well if everything works properly of course...)

You can claim to reduce your payments on account for the next year if you expect to make profit - though if you do this and end up earning more than you anticipated you could end up paying some interest.