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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

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I want to be self-employed, but don’t know where to begin when it comes to paying tax!

If you have the skills, knowledge or resources to fill a gap or provide a much needed service, then registering as self-employed might be the best thing for you to do at this moment in time.

But, self-employment isn’t always about lie-ins and working from the sofa. It comes with responsibility – especially when it comes to taxes!

Louis Howell, from Exponential Marketing, tells you everything you need to know and do when it comes to paying your taxes as a self-employed person.

What’s expected of me when it comes to doing my taxes if I’m self-employed?

Just a quick couple of terms you need to be aware of if you are going down this road: someone that is self-employed is classed as a sole trader and sole traders are expected to keep HMRC up to date with their self-employed activities by submitting a self-assessment tax return each year.

In this tax return you will need to:

• State all of the different self-employed activities you did in a given year.
• State all of the traditional PAYE employment you had in a given year.

You can have a normal job and be self-employed at the same time – taking on other work, projects and activities outside of your normal working hours. So don’t be too quick to quite the day job for that acting gig!

Dates for your diary:
• For self-employed individuals, your tax year (the year for which you track your income and expenditure) runs from April 6th through to April 5th of the following year.
• Your self-employed tax return for the year that has ended must be submitted by January 31st of the following year. For example, the tax year ending 05/04/2018 will need to be submitted by 31/01/2019. Unless you are submitting a return using a paper form, in which case the deadline is October 5th of the same year.
• You must pay all of your Self-Assessment tax and National Insurance by January 31st of the following year also. Exceptions to this do exist and are mentioned below.

The date for submitting your return and the date for paying your tax bill are the same. So… it would be wise to get your return filed early in case you are relying on the HMRC calculator to give you your full amount of tax to pay.

What do I need to have recorded and prepared to do my return successfully?

First of all, have no fear. The form you complete for your return is quite long – yes. The good thing though, is that if you lead a fairly simple life then you probably only need to fill in about 20-30% of the form and you can leave a lot of it blank #winning.

What you will need to hand though is:
• Your total income across each of your self-employed activities in that given tax year
• Itemised expenditure from across your different self-employed activities in that given tax year. You can provide this as a total figure but best practice is to split up your expenditure into categories like Travel, Goods for Sale, Phone and Office Expenses, Rent, Insurance, Utility bills etc.
• The total amount of money you donated to charity in a given year
• The total amount of money you repaid in Student Loan

You will also need:
• Your Login details for your Government Gateway Account – assuming you will file your return online.
• Your UTR (Unique Tax Reference) Number – issued when you registered as self-employed
• The PAYE Reference Number of your Employer at your normal job – this can be found on your payslip

Who and how can I get help or support with this if I need it?

Apps and Software (all under £10 p/m):

• HMRC App – the official app from HMRC is designed to help you get your head around your taxes and make full use of the calculator and various resources to aid with your filing.
• Receipt Bank – a mobile app that integrates with your chosen accounting software and makes it easy to input receipts, bills and invoices so you’ll stay on top of your expenses.
• Xero, Kashflow and Quickbooks – these different accounting softwares (and their apps) allow you to track all of your income, send invoices, chase outstanding payments and track your expenses for an easy tax bill calculation

Sites and Organisations:

• Tax Aid – A charity that offers free, confidential advice on tax to those on low incomes. Their helpline is open weekdays from 10am-12pm.
• Low Income Tax Reform Group – Provides tax and tax credit information. Their site has a great FAQ section and guides to help you.

So, I’m done now how do I pay my tax bill?

If you didn’t earn more than £11,500 then you will not have to pay tax. If you have got an amount to pay then you can choose to pay it in one go or pay this amount in parts throughout the tax year ending on the 5th April and the 31st January of the following year.

Payments can be made online via your Government Gateway account. Alternative payment options such as bank transfers, telephone payments and cheque are also available.

Louis Howell, Entrepreneur and Educator.

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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

Launch Chat

Chat to the Money Advice Service
Monday to Friday, 8am to 6pm
Saturday, 9am to 1pm.