Payment on account -self employed

Rtj123

I’m a self employed handyman/ gardener 
my previous earnings have been around 7/8k per year meaning I have no tax to pay but I have volunteered to pay national insurance every year.

I have grown my little business slightly this last tax year (April 21 to April 22) and have made a annual pre tax income of just over 13k. Meaning I need to pay income and national insurance?


im confused to what the ‘payment on account’ means. With my 13k income is this something I will need to pay towards this coming year? 

Will the self assessment portal tell me I need to do payment on account if I am needed?

also, I assume I will only pay income tax and national insurance on anything above the personal allowance (roughly £12750) so how much roughly will I need to pay on my 13k profit?

Any help appreciated 

Jeremy535897

For 2021/22, assuming no other income and a profit of exactly £13,000, your tax would be £13,000 - £12,570 = £430@20%= £86 (assuming you live in England or Wales). Your class 2 NIC will be £158.60 and your class 4 NIC will be £13,000- £9,568= £3,432@9%=£308.88, so your 2021/22 tax and NIC payable on 31 January 2023 would be £553.48. This figure is below the level at which you would be required to make payments on account for 2022/23.

serpico100

Rtj123 said:

I have grown my little business slightly this last tax year (April 21 to April 22) and have made a annual pre tax income of just over 13k. Meaning I need to pay income and national insurance?

Please bear in mind that income tax is based on profit not income. I’m assuming that in the course of your business you have allowable expenses ( travel costs, small tools, materials etc ) If so, it is likely that your profit will be below your personal allowance and as such, no income tax will be payable

DullGreyGuy

Rtj123 said:

im confused to what the ‘payment on account’ means. With my 13k income is this something I will need to pay towards this coming year?

If you make reasonable profits meaning you pay more than £1k in taxes then HMRC will ask for payment on account. This means you pay 50% of your anticipated taxes in January and July. When you do your annual tax return the accurate figure will be calculated and so you'll pay the shortfall or get credited with a refund depending on how your profits moved to the prior year. 

This reduces the exposure HMRC has to non-payers and for some that are bad at planning... helps them avoid missing payments.

Based on the information you've provided you are below the levels required to make payment on account so wont be an issue.