Newly self employed

Kirstymc89

Hi I am looking for a bit of advice I have just went self employed as a hair stylist renting a chair. Please bear with me as this may sound very naive but I really don’t have a clue,  I do have an appointment with an accountant next week but I really don’t understand the tax/national insurance as I was employed beforehand. So I went self employed in June working full time does this mean come April 2022 I’m going to get hit with a massive tax/national insurance bill? And if so do you need to pay it all in one fo or can you make payments I’m so confused and starting to panic thanks in advance 

tacpot12

Hi, I wouldn't worry too much, you might have some tax and NI to pay, but the amount will depend on how much you have actually earned above your personal allowance.

You might find that you need to save up a bit more from now until your tax is actually due to be paid, which will be 31st January 2023. However, you need to be aware that based on your self-assessment income return for the 2021-22 tax year, HMRC will ask you to make two payments in advance for your tax bill in the 2022-2023 tax year. They call this making payments "on account" and they will ask for 50% by 31st January 2023 and 50% by 31st July 2023. So you will find that you have to pay about 150% of the tax for the 2021-22 tax year on 31st Jan 2023, because you are pre-paying 50% of what your tax bill is likely to be for the 2022-23 tax year. You will pay the other 50% in July 2023, and submit a tax return by October 2023 if you are sending in paper form or 31st January 2024 if you are doing it online. I would recommend doing your self-assessment returns online. 

So you should ask your accountant to estimate what your tax payments due on 31st Janaury 2023 and 31st July 2023 will be and them make sure you are saving some money at a rate that will allow you to make these payment easily when they are due. I would expect that you would have to save about 20% of your income each month for your tax bill. 

I would also recommend that you visit the Small Business Toolbox channel on YouTube. Andy McCelland has some really good videos on how to get setup and how to keep on the right side of HMRC. You should probably watch his video entitled "How to become self employed in the UK" first. Andy is a self-employed handyman, but he also teaches drums as a sideline, so he has experience to running two businesses. Not all his advice will be relevant to your situation, but some will be vital for you.  

Marcon

Have a look at this, which is pretty clear and helpful: https://www.gov.uk/working-for-yourself

This is also extremely helpful, regardless of your level of earnings: https://www.litrg.org.uk/tax-guides/self-employment

Kirstymc89

tacpot12 said:

Hi, I wouldn't worry too much, you might have some tax and NI to pay, but the amount will depend on how much you have actually earned above your personal allowance.

You might find that you need to save up a bit more from now until your tax is actually due to be paid, which will be 31st January 2023. However, you need to be aware that based on your self-assessment income return for the 2021-22 tax year, HMRC will ask you to make two payments in advance for your tax bill in the 2022-2023 tax year. They call this making payments "on account" and they will ask for 50% by 31st January 2023 and 50% by 31st July 2023. So you will find that you have to pay about 150% of the tax for the 2021-22 tax year on 31st Jan 2023, because you are pre-paying 50% of what your tax bill is likely to be for the 2022-23 tax year. You will pay the other 50% in July 2023, and submit a tax return by October 2023 if you are sending in paper form or 31st January 2024 if you are doing it online. I would recommend doing your self-assessment returns online. 

So you should ask your accountant to estimate what your tax payments due on 31st Janaury 2023 and 31st July 2023 will be and them make sure you are saving some money at a rate that will allow you to make these payment easily when they are due. I would expect that you would have to save about 20% of your income each month for your tax bill. 

I would also recommend that you visit the Small Business Toolbox channel on YouTube. Andy McCelland has some really good videos on how to get setup and how to keep on the right side of HMRC. You should probably watch his video entitled "How to become self employed in the UK" first. Andy is a self-employed handyman, but he also teaches drums as a sideline, so he has experience to running two businesses. Not all his advice will be relevant to your situation, but some will be vital for you.  

Thanks so much that’s very helpful much appreciated 

Kirstymc89

Marcon said:

Have a look at this, which is pretty clear and helpful: https://www.gov.uk/working-for-yourself

This is also extremely helpful, regardless of your level of earnings: https://www.litrg.org.uk/tax-guides/self-employment

Thank you