Self employed income tax calculator?

buckers_wv

I've been self employed since November 2007 and am about to withdraw my first wage. I have 2 business bank accounts, the second of which I'm going to save my tax in. Are there any online calculators that can work out how much tax I need to set aside, or does anyone know the exact levels and breaks for this year?

Cheers,

Chris.

Zebedee69

buckers_wv wrote: »

I have 2 business bank accounts, the second of which I'm going to save my tax in. Are there any online calculators that can work out how much tax I need to set aside, or does anyone know the exact levels and breaks for this year?

Cant think of any calculators..... Id rather do my SA by hand anyway as I trust my brain 100% lmao! Only other tip id give you is put your tax money in a high interest savings account during the year. It costs to run a business bank account eventually so it will cost you rather than pay you to save the money. If your lucky your tax money will grow and cover any shortfall (and there are always shortfalls ha ha) in your tax calculations. You might even get a nice meal out of it..... See it doesnt have to be taxing lmao!

fengirl_2

Don't forget that you will pay tax on your profit, not your drawings. You therefore need to be keeping an eye on your profit margins and putting away about 30% of that to cover tax and NIC's.

tyllwyd

Are your affairs simple enough that a salary calculator would be good enough to give you an idea of your tax? If you search for 'income tax calculator' or 'salary calculator' you should find a few options. But obviously it would only work for your profit, as the OP said.

buckers_wv

Thanks for that info.

One thing complicating matters for me right now is that I dont know how much I'll be drawing over the year. It could vary between £20 and £40k.

I'll probably be drawing as little as possible this year, so assuming that once all expenses are taken out I'll be in the 22% tax bracket, should I just cover myself by setting aside 25% (excluding NI) of anything I make?

Good idea about a high interest savings account. Though I can then get taxed on any interest I make, right? The cheek.

Chris.

buckers_wv

PS does can the savings account be a personal one or does it have to be business? Sorry if thats a stupid question - the rates seem higher on some personal ones.

tyllwyd

If the money is your earnings that you have taken out of the business and you are putting aside to save for your personal income tax bill, I don't see why it should need to be a business account. And if you don't have a cash isa, you could look into that.

If you put aside 25% you shouldn't be too far out. Remember that you don't pay tax on the first £5000 or so, and at the moment we've still got a 10% band for the next £2000 approx, so if you put aside 25% from the start you are a bit ahead of the game. Then as you get closer to the 40% tax bracket, you could up what you save.

http://www.hmrc.gov.uk/rates/it.htm

ioscorpio

http://www.listentotaxman.com/index.php

tyllwyd

Oh, and another thing - it is way out of my knowledge, but if you are looking at making a substantial profit, it might be a good idea to talk to an accountant to see if it would be worth becoming a limited company?

Debt_Free_Chick

Do NOT use an income tax calculator for those who are employed as you will be taxed differently.

If you started SE in November 2007, then you will have submitted a tax return (self assessment ...? and online ...?) and you should see your tax bill there. You should have paid your tax for 2007/08 and 2008/09 by now. In January, you should have paid the first instalment, on account, for this year.

You should be able to estimate your profit for this year by now, as well - assuming your accounting year runs alongside the tax year (as there's only a week left in the current tax year).

You should be able to get a good estimate of the tax you need to pay for the current tax year, based on your profit to date. If you deduct the first instalment that you paid in January, the balance is due in July. Then, half the total for last year is due next January together with any balancing payment for this year. These are the tax figures you need to work with.

When you draw money from your profit, it affects "nothing". It doesn't go through the P&L, doesn't need any tax deducting and doesn't need to be recorded, unless you keep a balance sheet.

Holding back 30% from your drawings is not sufficient. You need to hold back roughly 30% from your profit. If you can run your P&L on a monthly basis, it's easier to do this.

Mac_Sami

I've used http://www.selfemploymentcalculator.com, which for my last year's figures was spot on.

I don't think it calculates tax if you're a higher rate taxpayer i.e. earning above certain income tax / NI amounts, but for everything else it seems to do the job.