HOW DOES SELF EMPLOYMENT TAX WORK IN THE UK?
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- Опубліковано 3 жов 2024
- Wondering how tax works as a Sole Trader? In this video Dan gives you all the key points.
Dan cover questions including as:
When do I pay my tax as a self employed person
How does tax work as a Sole Proprietor
Limited company vs sole trader (uk)
Do I have to pay national insurance
How do I pay national insurance as self employed
When do I pay national insurance as a sole trader
..... and more!
#selfemployed #Startup #HMRC
If you need help with registering, or have further questions - please get in touch below.
You can see more about what we get up to on the following:
LinkedIn (Dan): / danheelan
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Web: www.heelanasso...
Call: 02392 240040
Email: info@heelanassociates.co.uk
It was really interesting. However, I wish you would explain how to calculate it as well.
Calculating the tax? That one would be a long video! Did you have a specific example you were interested in.
@@HeelanAssociates I would like that long video to be posted as I need to learn that as I am about to become self employed and need to do my own taxes
@@HeelanAssociates did post that long video can i have the link pls
Best to the point , most informative video Iv watched on UA-cam about tax
Glad it was helpful! Thanks for the kind words.
It’s so confusing, like why does this tax stuff even exist??? 😩😩
Yes it’s very complex; they add more and more each year!
Because the government are thieves
So that you stay fucked up
Thanks for the simple video! This will be my first year having to pay tax as self employed, I’m barely 18 so it’s quite a lot for me to take in.
Yes we feel really this sort of info should be taught in more depth / earlier (or at all!) in the education system. Glad it was helpful!
Did my dude just say 22,000 pages! Wooooo. Thanks for the great info too boss!
Yup 22,000 and growing! Only reason it hasn’t go bigger this past year really is brexit and covid!
Pretty useful thanks so much! I'm seeing most of your videos cause I'm starting as a sole trader now. You have amazing thumbnails images for each videos haha love it!
Ha thanks, our graphic designer is a great right? :- )
Wish they'd teach this at schools.
Same! It’s a really issue particularly in the modern world with many people building side ‘hustles’.
Thanks for the video Dan...easy to digest and well explained
Glad you enjoyed!
Thank you ..been searching for something like this. Very helpful;
Glad it helped!
Hi, i was wondering, if you start being self-employed from January 2021, will you be free from paying tax until April 2021 if you are earning lower than 12, 000 or does it go from January 2021 to January 2022?
Generally you'd want to 'cut off' your accounting year inline with the tax year at 5th April 2021, and do tax return before 31st Jan 2022. Tax would be due then also. You pay national insurance at a lower amount than tax, which as you say is £12,500 a year.
So you'd have a short year from Jan - 5th April 2021, then full year 6th April 21 - 5th April 22 onwards.
I can’t even put into words how helpful these videos are. Thank you 🙌🏼
Glad you like them! Always pleased to hear they helped.
Thank you for taking time to explain this simply - it's much appreciated
Glad it helped!
Hello sir
I have to inform HRMC that change of self-employed company.
I use WORK for self-employed in parcel delivered I have stop 2 months and join to different company..so I have to inform HRMC?
If you are self employed then you only work for yourself. Who your clients / customers are hmrc don’t need to know as far as a tax return is concerned.
@@HeelanAssociates thanks u so much sir
I’ve done a lot of extra work in film the last few months but I’ve probably made less than 2K and spent over £500 in travel, accommodation and food on the go. I doubt I’d have to pay anything as I’ve made next to nothing but kinda scared I’m gonna get some letter from HRMC telling me I owe them haha
You may get a letter from HMRC if they believe you are trading, in order to do a tax return.
Do you have other income?
I know soon i'll be self employed or at least be trying to earn some money on my own alongside a normal job to help me stay a float but with you saying saving 25% a month, where could that go? I realise I have a litteral savings account with 2%-3% anual APR, if that 25% was in there, I realise I'd be making like £2-£10 anually surly through money that threoretically is tax money, that to me sounds rather weird and borderline illegal, is that something you can do?
You get to enjoy the funds until you have to hand it over, so it’s common to make the best use of that! So if you have the provision put aside for tax you can put it in an interest bearing savings account for example as you mention.
Can anyone help me? I came back to the UK and became a tax citizen in late May 2023. I'm so confused on when I should pay my first tax... By January 2025 for 2023/24?
If Self-Employed and trading in May 23, yes 23/24 tax return, due by usually 31 01 25
hey dan, thanks for video, i m doing job right now and my annual salary is 36000 £ and i get 27855 £ in bank with deduction of nation insurance and income tax ....that is ok for me .....but
i want to also start freelancing with job. for example,if freelancing income 12000 £ per financial year than how to paid nation insurance and income tax ....
i have double income 36000£ form job and 12000£ form freelancing total 48000 £.....please inform me ,thanks
Its all done inside a tax return, have a watch of this one: ua-cam.com/video/v3T46yqqdcQ/v-deo.html&lc=Ugw-yqeT-hT0-kXn5wx4AaABAg
Im self employed but i lease the van i use from the courier company i work for. At a weekly cost of £250 per week. Can i claim the cost of leasing it?
If you are incurring business travel costs as this suggests, it’s likely you could claim some or all of the cost as a reduction to your profits.
Hi I am 18 full time college std, is tht possible being full time student and self employed at the same time? And will
It affect my future university loan?
Yup totally possible. Check with student finance, but going back a few years ago it wouldn’t of affected the finance.
Question: if I have a part time job that brings in under 12,500k a year that pays no tax and have a side hustle that brings in around 6-8k, do I pay tax on the side hustle?
This may help MULTIPLE INCOMES - HOW DOES THE TAX WORK?
ua-cam.com/video/QKeH4TrBfeo/v-deo.html
Thanks for these videos
Glad you enjoy!
I'm confused as to if I need to register although haven't started jet, and feel that I will earn less than 12,500 a year depending on what I'm doing it seems I wouldn't make that kinda money, do I still need to file it?. Also if I work not as self employed do I still need to register even if I'm working for someone else?. I'm confused about the dates too. Is 31st January when I pay or is it between the 31st Jan to 5th April. I heard something about the 5th October?. Sorry for all these questions
October is an old deadline due to paper returns - no one really does this now.
If you are self employed, our advice generally is to register as soon as you become self employed.
If you are employed (your boss takes the tax and national insurance off you), you don't need to do a tax return for just this.
You also pay national insurance before tax, so should still register for a tax return to deal with this if you are earning more than £1000.
Generally you are taxed between 6th April and 5th of April the next year, with the return and tax due by 31st January the following year.
Hope this helps.
Hi I’m about to start working as a labourer for a private guy/ company not really a company but I’m working for him.
And he said get a UTR number as a self employed labourer, and an accountant.
so I applied for one then he said I’ll pay your 20% tax every week so you recieve £400 to your bank account every week.
I’m just a bit confused about this if you could help me please
thank-you!
Try this one! www.heelanassociates.co.uk/i-am-a-subcontractor-how-does-cis-construction-industry-scheme-affect-me/
You will file a tax return and possibly be due a tax repayment depends on what you earn.
Accounting profit = pay - expenditures
12.5k profit free
13.5k - 50k - 40% tax
50k on ward , 45% tax
It’s 20% in (roughly) the second of your brackets, then 40%, then 45% at £150k+
@@HeelanAssociates thanks for the correction x
Hi there, when you start to earn money from UA-cam, start to have sponsored videos and posts, what is the best way to register as self employed? When you can get tax return when you buy equipment such as camera, laptop etc, or need to travel for work etc? How does it work? As an "influencer" ?
Thanks
Influencer is a trade same as anything else, so the general rules apply. Have a look here for some initial thoughts: ua-cam.com/video/iBWR3vrxgow/v-deo.html
very good and clear communication. I would like to speak to one of your team
Hi Sergio,
You can contact us on 02392 240040, info@heelanassociates.co.uk
We look forward to speaking to you.
So if I’ve just gained £1005 on eBay from selling do I have to now start paying taxes ?
If that’s **profit** after expenses, then yes. Otherwise consider this: SELF EMPLOYED - YOUR FIRST £1000 IS TAX FREE!
ua-cam.com/video/J8j1GAZRAT0/v-deo.html
22 thousand pages of tax, therein lies the issue with the modern world. Make it so hard to do it right that you won't know when they're ripping you off
Ye it's not the greatest system, but without the complexities the loop holes would be pretty big. Still waiting on a think-tank to work out a better system!
Hi I am a dog Walker and trainer and I am wanting to pay my tax bill can someone help? I also need some advice. Thanks
Hi jack if you are looking for support with returns, advice etc drop us an email info @ heelanassociates.co.uk and our team can arrange a call to discuss your circumstances.
i like how u explain it but im someone who learns by SEEING , is there any chance of a video with a spreadsheet that explains this ?
We can certainly can look to add to future vids! Better accountants than media people, so still learning what works!
Thanks for much for feedback.
Bitcoin is just like the dollar,it’s backed by nothing more than confidence .
Could see that
Hi Dan, I am self employed for many years and doing my tax returns with no issues. I have recently graduated from a college and would like to open "another" business as a sole trader. How do I register this within HMRC? I would like to open a business bank account and they ask for reg. no.. How do I do the tax return then? Together or each activity separately?
One tax return, you just fill out multiple pages in the self employment section if they are different.
Oddly you don’t have to do an extra reg if you already registered, you can just give the bank your ‘UTR’ number.
@@HeelanAssociates Oh, that's great. Thank you so much for your answer. You have made my life easier.👍🏻
I really need a accountant I have no clue as I’m just starting off and never learned about it and way to confused
We know a few..... info@heelanassociates.co.uk
So after you earn £85k in a year you also pay vat on top? 😢
Depends how you look at it. If you are working with vat registered business as your clients or customers you are unaffected - you are just collecting tax on before of the government, and if anything you are better off.
The more difficult problem is if your customers are the public and then it can feel like another tax.
Thanks for the video. I'm a little confused on what's actually taxable. I'm starting a small buisness where I manufacture products and sell them. I initially want to go the sole trader route. Now I understand the principle of deductibles, but if I make a widget for £2 and sell it for £5, am I taxed on the full £5? To me the profit is the difference but I havnt found any information that says the hmrc recognises manufacturing costs as deductable yet the term used is profit???
You are correct, only the £3.
Any expense (in theory) that’s wholly and exclusively for the use of business is deductible against your profits before they are taxed.
This guide might give you some further ideas about what is tax-deductible www.heelanassociates.co.uk/setting-up-self-employed-or-sole-trader/
Hi Dan how do I report Drawings, within the expenses and income
In your records? You wouldn’t, they sit outside the income / expenses. In accounting terms they are often referred to as ‘equity’.
Hi, great video, and thanks for answering all these questions! I have one also. For example, if I make 50,000 pounds profit, does the first 12,000 not get taxes, and then the other tax rates are taxed at separate percentages based on each income level?
Or is the tax amount taxed on the entire amount depending on how much you make? So I would only be taxed on the 38,000 above the 12,000, or would I be taxed on the entire 50,000? Thanks, and I hope this is not too confusing the way I wrote it.
You are taxed in slices really. So if you had 50k self employed income with no other income, and could have a personal allowance, you get (roughly) £12.5 of it tax free, next 37.7k at the ‘basic’ rate. So in your example all of it will be in basic rate.
If if you 60k profit only the bit above the numbers mentioned would be taxed in the higher rate.
@@HeelanAssociates Thanks!
Is it Students can work self employement?
No reason why not.
Hi, a company may want to hire me but for me to be self-employed, i have been told they can do my tax and NI at 22% pm or i can do it. I have calculated it as:- 18,240....over the year i will pay £1,134 income tax and £1,040.64 National Insurance. .My monthly income before tax is £1.520. My tax income pay is £1338.78. Are these figures correct? Also is the 22% correct from them?
Hi there, we haven't checked your figures, but it's likely you would pay less tax and national insurance combined as self employed.
The issue though is are you actually employed or not? It's not really a 'pick and choose' style event - you are either employed, and therefore normal PAYE taxes apply, or your self employed and therefore those taxes apply.
Bit difficult to go in the details in a comment, but remember you will miss out on holiday pay and possibly pension contributions if you are not treated as employed when you should be.
@@HeelanAssociates Thank you for your reply but its 2 months too late and a lot has changed in that time.
@@sandancer45 Apologies, we try to reply to every comment in good time but somehow missed yours initially!
@@HeelanAssociates No problem, it wasn't mean to be but thanks anyway.
Thanks for the helpful video. How would you define profit if you're a self employed driver ? could that be money after expenses such as food, cost of vehicle ? and how would I prove this ?
Yes profit would be after tax deductible expenses.
So **example**
Money you charged for your services (sales/turnover): £15,000
Vehicle costs -£5000
Stationary - £100
Travel - £400
Accountant - £500
Insurance - £1000
= £8000 profit
Hi , due to my turnover being a lot lower this year I have decided to do my own self assessment. With the help of your videos I have found it an easy task . However, the part that confuses me , is when filling out the expense box for wages . It states not to include your own wages . My tax due is calculated for me on my profits , using the cash basis method . So where are my tax/ni contributions calculated on my drawings? which I take each week in order to pay my personal expenses.
It can seem odd, but as a sole trader you are taxed on your 'taxable profits', rather than your drawings. Often they can match, but just as often not.
Example you could have no drawings (as you didn't need them), but you'd still be taxed on the profit you'd make.
Hi Thank you for your video. It's very helpful! I still got a question -
I have submitted my 2022-23 self-assessment and been told I have to pay not only the 22-23 tax bill but also the 23-24 tax bill upfront. My question is, I was only self-employed between June 2022 to April 2023, after which I was employed by a company. I won't be self-employed in the near future as well. Can I just pay for the 22-23 tax bill? If I can't, can I ask for a refund next year? Many thanks!!
You can ask them to adjust your payments on account down if you think they are wrong/not needed but you need to be sure or interest gets charged.
Or probably even better for the more accurate answer, as it’s about to be end of tax year, do next years tax return now. You will know then if any more is due or they may owe you!
When you were talking about earning 50K you should look at being a limited company are you talking about 50k before tax or after?
Circa £40-£45k PROFIT ignoring tax is a good level at time of writing.
Just stumbled on your page and instantly hit subscribe!!
I’m current employed PAYE 45/50k per year. I’m wanting to start my own business in the summer 2024 just as a side job. Id be very happy with 10/15k from my own company.
Do you have any videos relating to my new situation regarding tax and which best business type to follow?
Welcome aboard! This one may help BEING EMPLOYED AND HAVING A BUSINESS AT THE SAME TIME (LTD CO)
ua-cam.com/video/VATU3Q7p-7E/v-deo.html
Question. Is this 2 upfront payments included on summary of next tax year calculations? For example : I done my tax return and it shows I had to pay 14k till 31jan but year before I paid this 2 upfront payment for this year- so do I still have to pay 14k or they will deduct previous payments?
It’s hard to say as it depends how your software is working. But in theory yes payments should come off tax bill due, what’s known as the ‘balancing payment’.
So for simplicity sake, lets say myself joe bloggs has a part time job which pays £625 per month and i also have my own small buisness as a sole trader which also earns £625 per month
does this mean on my tax return i have to include my part time job income? which would be bang on 12500 per year meaning no tax just national insurance after the £9500 threshold. However in the even i earn 15000 in the year £2500 is taxable.
Would i not be paying tax twice? as my part time job already takes away my tax money
It basically all goes into the same return. Have you seen this video? ua-cam.com/video/v3T46yqqdcQ/v-deo.html
Thanks for this Dan - can you clarify something really basic for me? If my business makes £20k profit in a tax year, but I don't draw anything from it, are the tax & NI you talk about due to HMRC, or are these only payable if I draw above the allowance thresholds?
Sadly one of the downsides to sole trader is that the tax bill is linked to 'profit on paper', and how much you draw is irrelevant.
I am a employed right now. I have accumulated 6000£ credit card dept in the last 2 years and I am wondering if payments towards CC are tax deductible. Would it be worth for me to move from employed to self employed and the tax I am paying right now around £300-£400 to go for my CC payments, because right now when I draw the line I am getting almost nothing or even in negative balance every month?
We aren't entirely sure we understand your situation, but to answer some of the points generally:
Credit card payments aren't tax deductible, unless they relate to expenses incurred wholly and exclusively for your business.
From what we think you describing, you aren't in business currently / expenses were not incurred in the business, so would not get any tax benefit from paying this card debt.
Love the videos great help thank you.
I cant wrap my head around this could you help me?
I sell motorcycles and I am using the cash basis, say I bought 20k worth of motorcycles and only managed to sell 15k worth in that tax year. What do I then put in the tax return? Am I 5k in losses for that tax year?
The cash basis means you don't adjust for unsold stock, so if you spent £20k on stock of bikes in the year, £20k is the expense figure you would use.
Hi,
I am involved with an investment company and manage on behalf of friends and family their accounts within that company, I am not a broker or a trader merely someone who manages the accounts and of course my own account. The company on our behalf uses a broker division which is regulated properly and we receive returns weekly, I spend a lot of time withdrawing funds and then upgrading accounts within the various accounts and within the company guidelines. As our accounts grow eventually taking profit will need to be assessed for taxation purposes, from my point of view can I become a sole trader and therefore declare the work that I do. Also could you help and explain the tax implications regarding future income from investments, and how an individual could manage their responsibilities.
Sorry this seems complicated...it is a little
Kind regards
John
Hi John,
Thanks for taking the time to get in touch!
Sounds like a busy role :- )
If we've understood correctly, your providing a sort of management service to the investment company, to which you will eventually charge a fee?
If so, then yes sounds like something in general you could reg as a sole trader business, but please take this as a general statement not specific advice, as we don't know your full situation.
Great intro video - thanks. Two quick questions. As someone going into consultancy do I have to register with a UTR before I start my contract - or can I do it after? Also, is it best to find a fixed fee accountant, and how much would these cost (for a relatively straightforward salary type consultancy). Thanks Dan!
No unless there is a practical reason (like for some reason your client needs tax information) you can register ‘asap’ after starting.
Re accountant, this vid is still relevant HOW MUCH DOES AN ACCOUNTANT COST IN 2020?
ua-cam.com/video/C4K0MiOsIrU/v-deo.html
Can u make video for Uber and just eat self employed people in details plz
What elements would you like to see covered?
@@HeelanAssociates what comes under expanse in detail to do self assessment.
Thank you everything was explained perfectly, would you be able to advise, if you are making items as a hobby and selling on Etsy is there an amount you can earn before you have to register as a business, I have heard amounts like £850 per year
This one is for you ua-cam.com/video/J8j1GAZRAT0/v-deo.html&t
Thank you very much for these videos! They are extremely helpful! I have a question. If I had a job that was part time and earned less than the £12,000 (or whatever the tax allowance is atm) and I had a side hustle that was beginning to bring in more than £1000 (the trading allowance) BUT the income from both the side hustle and part time job were less than the tax allowance, what taxes would I be paying on the side hustle?
Do I start paying when my part time income + side hustle in comings passes the tax allowance?
Its like a stack of books. Stack part time job first, then self employed income on top. It both combined under personal allowance no tax - although remember National insurance threshold is lower so you start paying NI at a lower amount than the personal allowance.
Usurpation yuy is yy
@@HeelanAssociates yyytyyyytyyyyyyyzyyyyy
Hi Dan my partner looking to go self employed stating August what’s my first step re tax and national insurance? Do I have to notify the tax people ?
Thanks
Hi Lynda, screenshots in the vid are out of date but the process is basically the same in this one: HOW TO BECOME SELF EMPLOYED IN 2021 (UK)
ua-cam.com/video/sE6kB1ID4PE/v-deo.html
So if a yearly salary as self employed comes to an average of £45k, you’d only get taxed on £32,5k cause £12,5k is tax free? Just doing some calculations for future preparation
Presuming you have no other income that’s broadly correct yes (presuming you mean profits as self employed person rather than salary).
It was a really helpful video Now I can say I have dot how this works and can read through more than before to watch. Thank you Sir.
Regards. Alessandro
Glad it was useful Alessandro!
@@HeelanAssociates Very. Thanks again
Thank you so much for the helpful videos. I’ve only just gone self employed in the last month so I’m still trying to wrap my head around everything.
I am very confused as to when or what I should be paying tax and NI wise because I’ve gone self employed so late into the year I’m not sure if I will be made to pay tax in this coming January or January 2024. It would be great if the .gov sites would layout what needs to be done and when clearly but as always it’s all one big mess that no one can understand.
Think I’m gonna write another blog and a video on this subject, as we cover in in various content but realised I’ve nothing to easily link for you.
I’d expect you won’t have a tax return to do for 31/1/23 unless you’ve had one last year. The usual thing would be you’d get a tax return issued after 6/4/23 for submission and payment 31/1/24.
Your first year would be short, ~October 22-5th April 2023
This is me too.
Struggling to understand if I need to register for self assessment before January 31st.
Hey I worked as a fire marshal and I only worked 2 months so I just made £1000 between 2 months. Would I need to pay any taxes ?
If that's your only self employed income for the tax year, no as you could use the 'trading allowance' - have a look at this one ua-cam.com/video/J8j1GAZRAT0/v-deo.html
I wondered if in your first year of a side hustle is better to put as 'any other income which ' incudes 'freelance work' ? what are the advantages and disadvantages of putting it as self employed ?
It depends on the exact situation, but in 99% of cases we see self employed pages would be the place. Plus you might want to access the 'trading allowance' so would need to use those pages.
Hey thanks for the video. I’m thinking to go self employed. Do I need an accountant? How much should I be paying him?
We have a video on this! ua-cam.com/video/C4K0MiOsIrU/v-deo.html
But the answer is no you don't NEED one, but you don't NEED a barber either... :- )
I have never been self employed, but I have a letter off HMRC demanding £402 pounds! I don’t understand why this is happening...
Have you rung them to find out why? It could be to do with your employment. Webchat can be a good way to do this.
Thanks for the video! Quick question; I’ve just become self employed this month, when will I need to complete my first tax return by?
It's likely by default you will do a 21/22 return, so your period for self employment would go from December 21 - 5th April 2022. Return (and any tax) due by 31st Jan 2023(!).
P.S Don't leave it to the last min ;- )
Lovely video. Could you please expand on why a sole trader should think about a limited company once they earn a certain amout. Thank you
Glad you enjoy Ross - have you seen this one? SHOULD I BE A LIMITED COMPANY?
ua-cam.com/video/QBXEq931h98/v-deo.html
Do you still need to pay tax if you earn less than £1,000 in a year?
If that’s all your income not usually, as most people can earn around £12.5k without paying tax. Plus for the self employment bit you can use a ‘trading allowance’ to effectively wipe out the £1000 profit.
@@HeelanAssociates also do you still have to go through the process of filing your taxes and national insurance even if you’ve made below 12,570? (Self employed on universal credit)
Thanks
Can you tell me whether the turnover is the payment actually received having deducted CIS tax or before tax is deducted?
Before :)
My case is slightly different to a normal self employed person. I work full time as an employed worker for Royal Mail, however I do facebook gaming streaming on a night and it means I'm classed as both. Would there be anything I have to do differently?
Hopefully we answered this on your other comment
I'm not a native english speaker, so I need to slow down the video to understand. But nice, thank you
This is true, to help, almost although every video is available in blog format at www.heelanassociates.co.uk/blog/
30 thousand ayear should be free of tax
That would be awesome.
Great video. It really helped me understand the process.
I am a tennis coach and I'm employed on a self employed basis. So I'm still a little bit confused on to how to do all of this. I've just moved to the UK from December 30th 2021 and have just received my first salary payment, 26th January 2022. Now, by the sounds of it, I'll have to put 25% away for tax purposes - does this also include the national insurance payment? I need to figure out how to pay this tax every month - or do I just save it all till the self assessment period?
How much do you charge to help me with the submission/accountancy part? Thanks
Hi Neill,
As a self employed person I'd always say be careful using words like 'employed', 'salary' as they are usually used in an employment relationship and the tax & rights associated with that are are very different 😀
The 25% is just a rough provision for both NI/Tax, but it's very rough.
You'd do a tax return after 6th April 2022 for the period when you started in Dec 21 - 5th April 2022. This would give you an exact tax bill, due to be paid by 31st January 2023.
In terms of how we help, if you get in touch with our team they can arrange call to learn about your situation and run you through how we might support it. We'd love a chat.
As a freelance interpreter can I put my clothes, food, car, petrol in expenses? Thanks
Have you seen these:
Expense Basics: ua-cam.com/video/iBWR3vrxgow/v-deo.html
Motor: ua-cam.com/video/PPnzNvLp3k8/v-deo.html
What if i drive a normal car to get to work , can i put it on the rebate ?
If you are incurring motor costs as part of being self employmed, then yes they *might* be tax deductible. Have a read here www.heelanassociates.co.uk/self-employed-motor-expenses-basics/
Is that mean that if you dont earn no more then 12.570£ a year you dont pay any tax ?
If that’s your only income that’s correct.
Hi Dan, i'm currently employed an pay tax through PAYE. however I have been offered a job as a freelancer where I would then become self employed starting jan 3rd 2022. Would I pay tax in jan 2023 only based on what I earn from Jan 2022 - April 2022 and then in jan 2024 pay tax based on April 2022 to march 2023 plus half upfront fro april 2023 to march 2024? Is that right?
Minor date/days aside yes you are correct!
Whether you have to pay the half up front (payments on account) depends on your total earnings/sources for the year.
@@HeelanAssociates ok great thanks for the info!
I am just starting a self-employed internet business. I am a bit confused with this. Do I save 25% of my profit? or do I save 25% of my whole income? Thank you for your videos.
If you can work the profit out, profit is best. Its a provision either way, but definitely profit is preferred.
@@HeelanAssociates Ok mate, thank you for getting back to me :)
Thank you for the video! it is very helpfull :) In my case I am a full time employee and I want to open a solo trade. I have a NIN and paying through my full time job. Do i have to apply for a second NIN and pay extra in the end of the tax year?
Any extra tax and NI is sorted in the tax return you will need to do.
Hi , firstly thank you so much for your videos you are super helpful! My partner is starting as a sole trader. But we don't really understand when he needs to register. In the hmrc page says the deadline is tomorrow and send the self-assessment by 31st january but I take it that's for financial year 2021/2022? If starting now, can he register and do the first self assessment with the records 2022/2023 by 31st of January? Many thanks again for your help!
This post from our instagram may help instagram.com/p/CkOmhbhh6vD/?igshid=MDJmNzVkMjY=
Thank you so much sorry for the late reply!
If you are doing this as a second job/side hussle does that change any of it much?
We got you covered: ua-cam.com/video/v3T46yqqdcQ/v-deo.htmlsi=bLaA-NsZ9QpzGgwH
Binging all your content now, thank you for making these. I work in the film industry and have normally been paid as PAYE where tax and NI deductions are done for me by production, but this year I have started doing invoicing jobs (alongside the PAYE work) where I have to sort my own tax - do I need to register as self employed in order to submit a self assessment in this case?
In short, it's likely. Have you seen this one? ua-cam.com/video/v3T46yqqdcQ/v-deo.html&t
What about are expenditures? Other than van we can claim? What about food?
There isn’t a list as such, but our guide here may help: www.heelanassociates.co.uk/setting-up-self-employed-or-sole-trader/
Very helpful. My job agent suggested me to join as self employed. What is a the advantage with PAYE? Purhaps I can claim more business / work related expences? Do I need to pay any VAT?
What form to fill when filling the tax? Is it a online tool? Do you recomend self lodgement ?
Thanks heaps
Hi Don,
This is probably too wide a question to answer here in a comment as it's so dependant on your situation.
What I would say, is if you have a 'job', have a 'boss', told what to do, where to do it etc, like a normal employed person, in most cases it's not a choice - you should be PAYE and be employed.
We do see situations where people are being told they are self employed, where they clearly aren't. This isn't in your interest as the person being paid, as you loose entitlement to pension and holiday pay (to name two).
Hope thats some help!
@@HeelanAssociates thank you. Yes I was aware about the pension pay holiday and sick pay etc.
Can you please let me know if self contribute to my pension Is its taxed? Or any tax releif ?
Thanks for the video. I'm doing something called profit first. I have 2 separate bank accounts one for saving tax as you said 25% and my profit %. How do i record these amounts for my accountant on my spreadsheet. Do I still class that as my drawings and record the amount I have transferred from my business account to my profit and tax accounts as drawings? i hope that makes sense.
I’d check in with the accountant as they may have a preference.
If it’s not actually leaving your account to your personal for living, you’d argue it’s not drawings and actually just business funds still in your accounts.
You’d just keep a note of both account balances in your spreadsheet and record transfers between the two - all depends on how good your spreadsheet is!
As a sole trader the most important thing for the tax return is the income abs expenses, but if you are having accounts done the drawings figure and bank balances will matter.
thanks for such a great explanation! so helpful! was wondering if you could clarify something for me, I'm a student and want to register as self employed as a little side hustle along side my studies, if for example I take £5000 in this tax year would that income be tax free and national insurance free? thanks again :)
If you had no other taxable income, yes would likely be NI and tax free.
Hi Dan, hoping you can help. I am to start working for a company as a sales agent and worried about that tax side of the business. Due to how the business works, i will not receive commission from sales until into the first 10/12 months of trading. All i will receive are my expenses on traveliing, mobile. To cover my home and buisness overheads i will use our joint savings. Do i inform the tax man or not mention the savings ?
Hi Andy, to confirm is this defo related to self employment?
@@HeelanAssociates Hi Dan.....Yes related to self employment .......As i say i will not receive any turnover in the first 10/12 months of being a sole trader.....To get me through the first year of trading i will be using our joint savings to cover Home spending and Business overheads.........Do i inform the tax man or not mention the savings......?
If I’m in the under £50,000 bracket, and I’m part time self employed but also in full time work.. is my personal allowance in my self employed work separate to my full time job ?
This may help BEING SELF EMPLOYED AND EMPLOYED AT THE SAME TIME
ua-cam.com/video/v3T46yqqdcQ/v-deo.html
How do you work out profit for a product you sell? Do u include vat in this calculation?
Generally something like
Sale price - what it cost to make it = profit.
If you are VAT registered generally ignore VAT, if not, keep vat you incur an your costs in there.
Hi Dan I have 2 questions...
1. Since self employment in the arts always ebbs and flows....say you got paid for royalties or licensing from your art say...50k in one year but that was a one off...will they expect the 40% plus an additional upfront fee even though the next year you will probably make hardly anything (which is possible in artistic fields)?
2. Is each self employed application for overall works or individual "businesses." For example, I'd like to open an Etsy shop...one for print on demand items such as tshirts and a separate one to sell prints of my photography? Will I need to register each one and the expenses separately? Thanks
Quick answers:
1) yes sadly will want the 40% in that year if you earn over ~£50k.
2) yes 1 reg but if multiple diff business you fill out different pages in the tax return
@@HeelanAssociates Thank you very helpful! I hope you'll do a video covering tax and import tax when doing international shipping with ecommerce and print on demand. I would like to do dropshipping but I'm concerned about the different tax rules in different countries and who is liable to pay what.Thank you!
Great video. If we buy a car, is depreciation about 1000 pounds per year? And we can deduct this from our self employed taxable income?
No, depending how you account for your car in terms of expenses depends on how you treat the cost of the car/depreciation.
HMRC's version of depreciation is know as 'capital allowances'. Have a read here for starters, although this is asked so often I think we need to do a video....
www.heelanassociates.co.uk/self-employed-motor-expenses-basics/
@@HeelanAssociates Thanks! Very helpful!
If I’m using a ISA to invest then do I need to write a self assessment?
In short, no.
If your employed by someone and they tell you your still self employed. Can they tax you immediately or is it just when you hit the £1250 limit?
It’s more a matter of fact. You are either employed and they tax you by the PAYe rules or you are self employed and you sort your tax out (unless you are the construction industry where they will likely deduct from you).
How to profits work if you reinvest your money? Let's say if you earn £5000 profit in a month, take out £1500 and reinvest £3500, do you pay tax on just the £1500 or the whole £5000?
You pay tax on the profits. So unless the ‘investment’ is in something tax deductible for your trade (say some new computer equipment), it wouldn’t reduce the tax bill.
Few clarification too. If I have a dependant chikd under 18 does that impact of refund?
If there is rental property income will that be included in the same tax caculation? But can I claim property maintainance expences , agent fees, rates, etc
All income just gets captured on one return, so one personal tax bill, or one refund, based on the taxable income.
Some benefits aren't taxable so don't go on the return.
Unsure if that answers the question!
Hello! What if I am from EU and I decided to stay. I am self-employed and trying to get my national insurance as well at the moment, but due to Covid it is impossible. How do I pay for it if I do not have NI?
And, stupid question, but worth asking: do I pay tax at all, if I am from outside of the UK, staying in the UK, and at the same moment working for a company abroad?
It is all done on your tax return, so you have got quite a bit of time. For example if you registered for self employment now, you would likely have until 31st January 2022 to pay it....
The question around 'tax residency' status is a very complex issue, but you may find if you are spending a lot of the year here, you will be caught for tax here.
If you need a specific answer on your situation it's worth getting a service from a tax accountant on that, as there are quite a few rules around that and it varies so much depending on circumstance.
@@HeelanAssociates thank you very much!
Great video, thanks for that. One question: lets assume that I started as sole trader on 15-Apr-2020, then close the business on 15-Dec-2020 (de-register as sole trader if thats possible). Then pay tax after Apr-2021 e.g. 31-Jan-2022. Would I still need to pay upfront (50% in 31-Jan-2022 and 50% in Jul-2022) eventhough I know I was out of business forever on 15-Dec-2020 ?
In most cases no. You can actually adjust the ‘payments on account’ (the ‘upfront’ bit). You can even adjust them to zero. The downside is if you get it wrong they charge you interest on what you should of paid.
Obviously if no tax would be due, then will be fine!
Thank you, that makes perfect sense 👍
So if a sole trader makes big money, but then spends so much that there's only £1K left in savings, does that mean zero tax?
Depends what you mean, if you mean they spend the money in that same tax year, in their business on costs that are tax deductible, like materials, advertising etc, then there would be no tax. If they just spent it on themselves, sadly still a tax bill :- )
Thank you Dan. So just to be absolutely sure I've understood..we need to save approx 25% of our total income into the business before expenses etc Sorry, I was touched with the very-slow-to-learn- stick !
This is a provision not an exact science so don’t worry too much about detail, but 25% of the *profit* (calculate this before any money you draw / your ‘wages’).
@@HeelanAssociates thank you so much - I'll remember that as 'profit before pay.' Helpful! 🤩
@@HeelanAssociates I'm a little confused - do i save for the normal tax (20%) and then put the extra 5% away for savings (for the chunks of the tax bill) or is it 20% for tax and then an extra 25% on profit? Hope this makes sense, thank you!
Just to confirm if I make 25k I only pay tax on 13k, however like u say there is another chunk for next years that I’ll need to save?
In rough terms yes
What in do taxi
Could you expand?
This may be a daft question - but to be self employed do you need to be registered as a business? I think this is the case but was wondering if you could be self employed contractor having your invoices paid to your bank account and then you pay your income tax bill.
That’s actually how self assessment works. You get paid and pay your tax personally as a self employed person.
To get that tax return you effectively register as a self employed business person with hmrc.
@@HeelanAssociates Thank you! To be fair I emailed Heelan today for advice :D
If you're invoicing a client as a sole trader would they pay any tax before they pay or does the sole contractor cover everything with the income tax and the NI?
what if you are retried and still pay tax
Could you expand the question for me?
As self employed do I add my pension earning say I’ve earned 20,000 to enclude it