SELF EMPLOYMENT TAX
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Everyone who earns money in the UK must pay income tax, including businesses, contractors, and the self-employed. A person is self-employed if they run their business for themselves and take responsibility for its success or failure. Self-employed persons don’t have the employment rights and responsibilities of employees and they aren’t paid through PAYE. If you start working for yourself, you’re classed as a sole trader. This means you’re self-employed – even if you haven’t yet told HMRC.
There are five million self-employed people in the UK right now, contributing £305 billion to the national economy. There are plenty of reasons to go self-employed. Being self-employed you get to ‘be your own boss’ and work more flexibly. And depending on your industry, you may be able to command a much higher rate than the salary you’d be able to achieve as an employee.
If you’re self-employed, you’ll need to manage your own tax and file a return at the end of the tax year. The Office of Tax Simplification (OTS) has called for an urgent, digitally focused review of the self-employed tax system, calling it ‘too difficult to understand’. Until their suggestions are actioned, however, it’s worth getting on the front foot with your tax, as soon as you go self-employed.
How much tax you’ll pay as a self-employed person will depend on how much money you’ve made and the ‘allowable expenses’ you’ve incurred in the course of your business. Certain business-related expenses can be subtracted from your income when you’re calculating your taxable profit. The tax-free personal allowance and the tax bands are the same for self-employed and employed people.
Being self-employed when you are focusing on the increase and maintain the growth of your revenue, ZATRS as a professional accounting firm will take your burden of preparing and keeping books of accounts, handling tax matters, and other accountancy tasks. Why not call us today?