If you are registered as self-employed, it’s a good idea to put aside some money for your tax bill. Getting into the habit of doing this will help you to plan ahead and prevent nasty surprises.
How to put aside money for tax?
A very general rule of thumb is to keep back a third of what you earn.
This is only a very general rule, as there are a number of other factors to bear in mind:
- Everyone has a personal allowance, i.e., an amount of tax free income. Click here for 2013-2014 personal allowance rates (opens in a new window, Gov.uk).
- You are allowed to claim tax reliefs and allowances on certain items. Click here for details (opens in a new window, Gov.uk)
- You are taxed on the profits that you make (i.e., your gross income less tax reliefs/allowances).
- Your tax is also dependent on the income tax bands that you fall in, for example, if your income is above £100,000. Click here for further details https://www.gov.uk/income-tax-rates (opens new window, Gov.uk)
There is a very handy “Simplied Expenses Checker” on the Gov.uk website here: https://www.gov.uk/simplified-expenses-checker
But note this checker is only suitable if you are a sole trader or a business partnership and should only be used to give you a general guideline. You should always seek the advice of an accountant for your financial affairs.
HMRC reports that every year, the last minute rush to complete self-assessments on-line results in costly mistakes and items forgotten altogether.
If you need to discuss anything regarding self assessment , give us a call on 0203 475 8850 , for an initial consultation.