I am recently self employed. how and when do i pay tax and national insurance?

i have just been self employed in the last six weeks. i receive payments direct into my bank account and receive invoices

Hi

There are several different timings for payments, which makes like a little complicated!

Firstly, all self employed people have to register with HMRC within 3 months of starting up - call 08459 15 45 15 to do so.

Unless you expect your income to be under 拢4825 in the 2008/9 tax year you will have to pay Class 2 National Insurance every week (拢2.30 since 6/4/08. 拢2.20 the year before). The tax man likes you to pay this by direct debit but it can be done by cheque.

Then at the end of each tax year you fill in a tax return. If you fill in the paper copy this has to be in by 31 October following the end of the tax year at the latest. If you fill it in online, the deadline is 31 January following the end of the tax year. - so for the tax year 6/4/08 to 5/4/09, the filing deadlines ate 31 October 2009 or 31 January 2010.

However if you ant the tax man to calculate your tax for you, then you have to file your return by 30 September following the end of the tax year.

You then pay tax on your profit (adjusted for non-allowable items, and various different allowances the tax man gives you such as capital allowances - and the rules for these are changing this year). As well as the tax bill, you also pay Class 4 National Insurance which is profit based. (8% on profits between 拢5435 and 拢40040, 1% on profits above that).

The tax/class 4 national insurance is due by 31 January following the end of the tax year. So, for tax year 2008/9 you would have to pay this bill by 31 January 2010.

There is a complication if your tax bill ends up at over 拢1000 (拢500 in earlier years). The government realises that it will have given you quite an extended period of interest free credit - given that an employed person would have been paying their tax from April 2008, and you are not having to pay anything until Januaty 2010! So in these instances he asks for something called "payments on account".

Basically the tax man says - what was your tax bill for 2008/9? Right. I'll assume you are going to earn the same in 2009/10. So please give me a tax payment 'on account' which I can then offset against your 2009/10 tax bill when it is worked out. This tax payment is paid half on 31 January 2010 and half on 31 July 2010.

Then, when you work out the 2009/10 tax bill, you deduct the two payments on account and see if anything is left over. If so, you have to pay that excess by 31 January 2011, together with a "payment on account" of half your tax bill for the following tax year. And so life goes on.

Once your business has settled down, and you are earning more or less the same amount every year, you end up paying your Class 2 NIC every week/month, and your income tax/class 4 NIC twice a year - half on 31 January and half on 31 July.

Clear as mud ;-)

Regards

David Nicoll
"the accountant with attitude"

see an accountant I use auther downer he is A1 with people in your sit his number is 014622711/4145060 he did the biz for me

All self employed people must be registered with the Inland Revenue within 3 months of commencing.

Once registered the IR will provide you with all the necessary info concerning how and when and where you need to pay the tax and nat ins.