Contact Point Accountancy on 0208 508 6477
Contact Point Accountancy on 0208 508 6477

Self Assessment

Every individual who is self-employed has to complete a self-assessment tax return whether they are a self-employed window cleaner to a mini cab driver to the owner of a large corporation.

 

Why stress yourself out with wondering if the items that you are claiming back as expenses are actually allowed under hmrc's guidance?  Why not come and have a free consultation with us where we can discuss everything through with you and if you choose to work with us we can complete your tax return on your behalf and provide you with a set of accounts within a small time frame.

 

The income tax rates for a self-employed person in the UK are the same as an employee’s with the rates from April 2017 being listed below:

  • Personal Allowance: £11,500
  • Basic Rate Tax Payer: 20% from £11,500 - £45,000
  • Higher Rate Tax Peyer: 40% from £45,001 - £150,000
  • Additional Rate Tax Payer: 45% from £150,001
  • If you earn over £100,000 HMRC also reduce your personal allowance by £1 for every £2 earned meaning that from April 2017 if you earn in excess of £123,000 you will have no personal allowance meaning that all basic rate bracket will drop by £11,500 meaning the higher rate bracket would start at £33,501 although the additional rate bracket does not change.

Self-Employed people still have to pay national insurance contributions although this is a lower rate compared to employed people the rates for this from April 2017 are listed below:

  • Class 2 National Insurance charged when over £6,025 is earned - £2.85 per week
  • Class 4 National Insurance charged between incomes of £8,164 ad £45,000) – 9%
  • Class 4 National Insurance charged for incomes over £45,001 – 2%

 

For Example:

Mr G earned a self-employed income of £55,000 and had £20,000 of allowable expenses his calculation would be as below

                                                Income: £55,000

                                                Expenses: £20,000

                                                Net Profit: £35,000

Therefore Mr G would not be a higher rate tax payer and would only need to pay basic rate taxation, class 2 and class 4 national insurance contributions, his tax calculation would is shown below:

  • Income Tax: - (£35,000 - £11,500) x 20% = £4,700
  • Class 2 National Insurance contributions – (£2.85 x 52 weeks) = £148.20
  • Class 4 National Insurance contributions – (£35,000 - £8,164) x 9% = £2,415.24

Mr G's total tax liability for the year (2017/2018) would be £7,263.44 of which HMRC will also ask for a 50% prepayment for the following tax year in both January (2019) of the year after and July (2019) therefore Mr G would need to pay £10,895.16 to HMRC by 31/01/2019 to avoid any late payment penalties.

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