jono300

iTrader: (8)

Guys around the start off august this year I got a job as a taxi driver on a self employed basis, working around 40-50 hours a week dayshift I am taking home around £220-240 a week, having never been self employed before am slighty confused on what sort off cash I should be putting away each week to budget for next aprils tax return ??

before getting the above job I was on income support , had worked for last company for some 13 years before being made redundant.

have registered with the NI and tax depts and already paid my first 3 months NI contributions, paying £2.50 a week NI . did hear that you could earn up to £8000 if you were self employed before you were taxed ?? any idea what I should be putting away each week ??

john banks

Fife has an excellent business gateway with free courses and advice on starting up your own business. They are funded by the taxes you will be paying, so make use of them!

jono300

iTrader: (8)

Okay great sounds fine but was just really interested to here from others who possibly knew what sort off tax I would be looking to pay on this sort off figure on a self employed basis ?

zip106

You do realise you should be sending in a self assessment to HMRC and paying any tax due?
As in before Jan 31st 2013.
(Even if no tax to pay you still need to send the form)

Not sure how it affects you as you started in August, though.

zip106

Almost impossible to say - you need to deduct running costs from your turnover.

jonc

This might help give you an idea:
http://iknowtax.com/2013/

Terminator X

iTrader: (7)

It's complicated fella so get an accountant to help you

Roughly though if you "pay" yourself as PAYE then you get £8100 tax free per year = £675 per month or £156 per week - tax is 20% above that so you need to keep £17 or so per week for the tax bill. If you don't "pay" yourself then it's varied and complex hence the accountant suggestion! As an example I add VAT to everything I charge so whilst I get paid VAT I have to give it back every 3 months. The amount of tax I pay depends on outgoings vs income ... I only pay that once every 12 months.

TX.

billythekid

Around the £800 mark for a full year based on £12k a year.

Are you sure they are not deducting any tax?

How many hours a week are you working for £240?

billythekid

Sorry saw that 40-50 hours.

MDS_WRX

iTrader: (1)

I always go on the rough figure of putting away 20% to cover any tax bills. I think you've also got around 6 months to notify HMRC that you've started as self-employed and you'll have to fill in a yearly tax form. Have a look on their website, the process is relatively straight-forward.

john banks

On your personal allowance you will not pay income tax. After that you will pay income tax in tiers depending on how much you earn and the prevailing rates for that tax year. There are various online calculators that will do it for you, just google them as that is all I would do to find you one. If you earn £240 a week over 50 weeks that is £12000, subtract your personal allowance from that and then you pay tax on the rest. http://www.hmrc.gov.uk/rates/taxes-ni.htm

After April 2013 you should start preparing your tax return (HMRC should give you a notice) and then have to pay the tax due by Jan 31st 2014, not 2013 as above, as by Jan 2013 you haven't completed the first tax year.

john banks

You should also keep track of your legitimate business expenses. Are you paying out to run the car?

billythekid

Just to clarify, you will need to complete a 12/13 tax return at around this time next year. So October 2013.

Are they supplying a car and fuel etc? I am guessing they are at those rates.

If you are looking to do your own work - i.e with your own car, then I would suggest forming a LTD company and then invoice the taxi firm you "work" for. Watch out for IR35...

Its a bit of a complex issue - as stated, but at £12k a year I would not go into the realms of a LTD co becuase even a "cheap" accountant will charge you £600+ just to do a years returns which is currently a big % of your profits - although their fees are deductable.... so if you start to earn a bit more it might well be worth it.

billythekid

We are cross positng on this but I think you are getting the idea!

zip106

Yes, I meant 2014.

jono300

iTrader: (8)

Excellent really do appreciatte the advice guys thank you. so wont be a lot then ??!! if I am allowed to earn £8100 before tax and I am earning around £12000 I will only be paying tax on around £3900 yep ??

billythekid

At a basic level - yes.

billythekid

So for 12/13 you probably wont have any tax to pay on that income, assuming there was no other income or any prior was taken from source as from August 12 to March 13 your income will be £7.6k.

You will still need to do a tax return though for 12/13.

In 13/14 you will have to pay some tax, if earnings stay as they are that will be IRO £800.

bustaMOVEs

iTrader: (31)

There is a max net profit after expenses before you pay tax, so if your expenses covers to get the net profit below the limit then you are ok, speak to your accountant and they will sort it for you as I reckon with your expenses I.e fuel, food, mobile phone, equipment for your job and so on, you can claim quite a lot of expenses that you don't know about to bring the net profit down.

David Lock

The on-line tax thing is pretty straightforward - the first one gives you a headache but after that easy peasy.

As above but I wouldn't waste money on an accountant. You can get advice on what you can legitimately claim as expenses but don't fiddle it too much or you could be in trouble. The tax office can be quite helpful on this but your best bet is to ask someone who does the same work. You need to keep a good record of income. dl

bustaMOVEs

iTrader: (31)

Agree but for a low income earner it's only about £200 for accountant for somebody that's new to this and they will add all the expenses themselfs, when I fist went self employed I had no clue and tbh couldn't be bothered nor had time to check all this just found it easier to use a chartered accountant at a cost of £200 and added all sorts of expenses, fuel,insurance,road tax, phone bills,food, equipment, uninforms, etc etc.
P.s was a self employed courier then.

cster

That £2.50/week is only for class 2 NI contributions.
You will also have to pay class 4 NI at 8% on profits over £7225.
As your basic rate is 20% over £7475, you would do best to put aside 30% of your income above these amounts ie roughly above £140 per week. On £230 a week this equals putting aside roughly £25/week on top of the £2.50 class 2 contribution.
You can probably work this all out yourself, but it would be easier to get an accountant to do it, especially if you want to max out your allowances.
After the first year, you can give him the boot.

billythekid

Oops yep NIC on 12k is a smidge under £400.

We still dont know if he uses his own car etc... which I doubt it at £240 a week as it would not even pay the fuel and insurance for your average joe baxi.

jono300

iTrader: (8)

Yep sorry guys should have said as obviously already guessed car, fuel radio hire etc is all paid for by taxi company.

so okay as I say already pay £2.50 per week Ni contributins for which I have just paid my first lot- 3 month period. you saying given the figures given to you I will have to start paying roughly £27.50 a week ?? ( £25 - class 4 Ni / £2.50 - class 2 Ni )

if so will have to phone them up as not sure when I will have to pay this extra class 4 Ni as did advise them at the time that I would be earning around this £12000 figure and that £2.50 per week is what I was advised I would have to pay ??

cster

That is correct from my experience. That money is due when your income is above the lower profits limit for NI. as per - http://www.hmrc.gov.uk/rates/nic.htm
Here are the same figures for tax - http://www.hmrc.gov.uk/rates/it.htm
You can see that next year will be a little more generous.
I believe that you can pick the starting date for your tax year (see accountant about this) and in doing so you may well be able to pay no tax on your first year ie. if it in effect runs for nine months.
They used to make you pay tax for one year on what you earnt the previous year. I don't know if this is still the case, but if it is, then the date you select as the start of your tax year becomes even more important if you expect your income to increase on a yearly basis. If not, it makes less matter.
What ever you do, do not take advice from them (HRMC) on any of these matters - as they are just a bunch of w4ankers.
Your tax/NI will be due twice yearly in late Jan and late July based on what you earnt the previous year.
From my experience, I would phone up an accountant who deals with this and see what you can weedle out of them
Good luck

Oldun

You really need to get the correct info from a local accountant, they can cost a few £ but they can save you more £ than you would think possible.
Go on recommendations, ask other taxi drivers who they use.
It's all very well getting advice from forum members, but you must get sound local advice.

ScoobyWon't

There is free online tax software at Crunch where you can enter all of your expenses, income, wages etc and it works out your liabilities for the year in real-time.

It's free to use as a Solo (free) account holder, though they will try to sell you an upgrade to a paid account, but for that, they woudl do all of your tax returns for you.

I've been using their free software and I'm rather impressed with it. Much easier than constantly updating a spreadsheet, plus when I'm ready to upgrade, they will double check everything and make it as efficient as possible.