Need a straight answer: how much to put aside for tax?

skeen08

Hi everyone

I'm self-employed, and am doing regular work for a particular company. Of course, this means I need to handle my own taxes, which I've never had to do before.

I'll work out all of that juicy stuff later, or get an accountant, but for now, I need to know how much I should be putting aside.

If someone could encompass everything: income tax, national insurance, and anything else I might have to pay, I'd really appreciate it.

Even my fellow co-workers give conflicting answers - all I want is a figure.

I earn £1,200, paid every fortnight. I spend £50 a month on public transportation for work, and about £5 a day on lunch (probably less than that, on average).

I know you'll not be able to give me a 100%, accurate figure - that's okay, that's not what I'm looking for. If I owe an extra £1,000 at the end of the tax year or something - whatever, I'll figure it out, that doesn't bother me.

I just need to know around about what I should be setting aside every time I get paid.

Thank you!

newlywed

https://www.listentotaxman.com

Type in the figures and it will estimate Tax and NI for you. (Think someone here previously did mention that the NI isn't too accurate but should be a good starting point).

skeen08

newlywed wrote: »

www.listentotaxman.com

Type in the figures and it will estimate Tax and NI for you. (Think someone here previously did mention that the NI isn't too accurate but should be a good starting point).

Thanks. I already used that site, actually, but I've been told I don't need to pay that much NI. That site shows a big chunk taken out of my pay for NI, and if I can pay less, I'd definitely choose that route.

PasturesNew

I'd put aside a straight 20%. Nice round figure and it's bound to be enough for the tax bill.

However, as I read your posting you aren't self-employed at all. But are employed as defined by the men at Her Majesty's. If this is the case then if you don't pay your tax they will go after your employer for it.

There are rules to see if you are self-employed or employed. It isn't your employer's decision, nor yours. The Tax Office decide.

Here is the link to the list/test: http://www.workingforyourself.co.uk/selfemployed/default.htm

If you are self-employed and buy a daily public transport ticket you can reclaim these against yourself for expenses. But if you save money by buying a monthly ticket then you can't (I believe) because you'd get benefit from it on days you aren't working.

Also, lunches. Could be hit/miss if you can claim these back. Part of this is decided on your distance from your home when you are at work.

Here is an online Self Employed Registration Form if you've not told the tax office yet http://www.workingforyourself.co.uk/selfemployed/form.asp

PasturesNew

Just wondering: What sort of work is it?

If you say then other people with specific knowledge of what you can offset against tax might be able to list some valid expenses.

skeen08

PasturesNew wrote: »

I'd put aside a straight 20%. Nice round figure and it's bound to be enough for the tax bill.

However, as I read your posting you aren't self-employed at all. But are employed as defined by the men at Her Majesty's. If this is the case then if you don't pay your tax they will go after your employer for it.

There are rules to see if you are self-employed or employed. It isn't your employer's decision, nor yours. The Tax Office decide.

Here is the link to the list/test: http://www.workingforyourself.co.uk/selfemployed/default.htm

If you are self-employed and buy a daily public transport ticket you can reclaim these against yourself for expenses. But if you save money by buying a monthly ticket then you can't (I believe) because you'd get benefit from it on days you aren't working.

Also, lunches. Could be hit/miss if you can claim these back. Part of this is decided on your distance from your home when you are at work.

Here is an online Self Employed Registration Form if you've not told the tax office yet http://www.workingforyourself.co.uk/selfemployed/form.asp

Thank you! Though, now you've raised the question as to whether I'm technically employed, or self-employed.

All I know is, I invoice the person I work for, as do my co-workers, and I've been told to register as self-employed. I'm a web developer.

I guess this is something I'll have to come back to, but in any event, would you say that 20% is enough?

PasturesNew

skeen08 wrote: »

Thank you! Though, now you've raised the question as to whether I'm technically employed, or self-employed.

All I know is, I invoice the person I work for, as do my co-workers, and I've been told to register as self-employed. I'm a web developer.

I guess this is something I'll have to come back to, but in any event, would you say that 20% is enough?

If you are self-employed you can say "No, I don't fancy doing that job - oh and I'm having the whole of June off and August" and "in July I'll be working from home, quite happy to pop in for the breifing meetings though" then to do your work from midnight to 7am if you want.

Do you all sit there like "good little employees"?

What happens if your mobile phone rings and it's somebody else that wants some developing doing? Is it OK to pop out the back, take the call openly, return to your desk half an hour later, say "Right, off to lunch now" then make up the time later or bill him a bit less?

Would you get "told off" if you turned up late every morning for a week? Like a bad employee?

If you all feel like employees and the list on the HMRC site shows you're employed, then the employer is getting away with:
- paying you holiday pay
- having to provide other legal things they have to do for employees
- paying for payroll to be done
- squirming out of paying employer's National Insurance

Tell us how it is...

PasturesNew

20% is more than enough. Your yearly turnover is about £30k which is well under having to pay 40% tax. So you'd have enough in there to pay your National Insurance stamp and your yearly tax return.

Start here for your National Insurance payments: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/DG_4015904

skeen08

To be honest, it's half and half. It's an extremely relaxed environment - I pop out regularly, take lunch whenever I want, etc. I suppose I can say I'm going to take a few months off, I just won't get paid for it.

What we do, is work out the hours we've worked, and invoice for them.

And...no one has ever been "told off". It certainly isn't a regular office by any standards, and our boss is pretty much on our level. It's a small office, just 4 employees including myself, and discluding the head honcho.

PasturesNew

The other way to "get round it" and to be self-employed is to show that you have a number of clients. Not just the one.

So if you were to take on more/other work for people perhaps.

Stuff where if somebody doesn't like what you do or refuses to pay, then you wouldn't get paid.

Or, if you can knock up templates quickly, then, say, create a template a week and upload them for sale on a website such as freetemplates.com - where you get paid an amount every time one is sold.

Or find a similar site where you can do that. One that you are happy with their prices/terms etc.

And/or set up your own website and sell something. Sell a service you do. Sell your templates from there. All "evidence" you are self-employed and not a mock-employee.

Or just shrug and think "that's his problem then if I get caught he has to pay the tax and not me" just in case the relationship turns sour you've got that up your sleeve.

So, now you're alerted to the situation, what you do with the information is up to you.

skeen08

Thanks a lot for your help. Actually, I do take on other work - so, I guess I'm pretty much okay.

Now to finally look for an apartment!