A question I often get asked by newly self employed clients is "how much tax should I put away each month"? This week HM Revenue and Customs (HMRC) has released guidance for self-employed people waiting for their first tax bill.
When you start self-employment, you do not get your first tax bill for a while, which means that you need to start setting aside money to make sure you can afford to pay your bill.
As a result, HMRC has put together guidance on how much to set aside for tax and Class 4 National Insurance Contributions (NIC) based on estimated weekly and monthly profit figures.
The guidance below does not take into consideration Class 2 national insurance, which you will need to pay separately - around £2.50 a week for 2011-12.
Once you have completed your Self-assessment tax return you can work out the exact level of tax and/or Class 4 NIC due.
'Weekly Profit' 'Tax each week' 'Est monthly profit' 'Tax each month'
100 0 450 0
150 3 500 0
200 17 600 0
250 32 800 53
300 47 1000 112
350 61 1250 184
400 75 1500 257
500 104 2000 401
600 133 2500 546
700 162 3000 691
840 207 3656 905
However one thing to consider is that this table only states your profit figures and it is not based on your turnover. Thus you need to deduct your monthly expense from your monthly incomings to give you the profit and then you can use this table.
It is not a bad tool and I have already started to show new clients this who seem to be impressed.
If you are newly self employed please do not hesitate to get in touch - mitch@ljd.uk.com
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