hello.ive just gone self employed for the 1st time and heard u didnt have to pay tax for the 1st year?????
You may be confusing this with the employer secondary holiday which is available to businesses, for the first year of an amount of £5000.00per employee.
With income tax you do not pay tax on the first £7475 of income/profit, once you have exceeded this amount you deduct the personnel allowance of £7475.00 from your profit which leaves you with profit that is liable for tax.
Don't forget you also pay class 4 national insurance on your profits, you can also apply for an exemption certificate if profits are lower than £5315.00 for class 2 national insurance, that is if you want to be exempt!.
For more information please post, hope this helps,
Jigsaw Bookkeeping Services
Hello as a self employed sole trader...?
you will not have pay tax in your first year, but will pay tax on the amount of profit you make in that year ( if any) Once you have filled in your tax return and your profit and loss expenses have been agreed with HMRC..... A YEAR IN HAND IF YOU LIKE
if you phone your nearest tax office and make an appointment they will be more than happy to sit with you and explain all, it is not at all complicated but you must be vigilant and keep your books up to date
if you fail to fill in the tax return by the scheduled date you will be fined £100.00 plus interest on any tax outstanding
Best of luck regards
Phil Lightweight Movers
Assuming you started as self employed at the beginning of May your first year will end in April 2012 and your first tax payment, if you have any to pay, will be due in January 2013 some 21 months away! but, and there always is one, in January 2013 not only will you need to settle up for the first year; you will have to pay half of that figure up front for the second year i.e. 18 months worth of tax in one hit!
Not surprisingly the 18 month bill comes as a bit of a shock for those who do not think about it from the start and those who really do think the first year is tax free. If you cannot afford to or do not want to take professional advice on how to mitigate this burden then make sure that from an early stage you put monies away to meet the tax bill.
Yes you will need to pay tax in your first year of trading, even though you will only pay tax in january 2013 but you still pay tax in relation to your first years trading.
The best thing to do if you think you may pay tax for your first year is to update your accounts regularly, say every 1/4 then you can budget your tax liability.
Payments on account are made if your tax liability is £1,000.00 or more, if this is the case in january 2013 you will need to pay this before or on the 31/01/2013, for the 2012/13 tax year you will pay half the liability from the 2011/12 tax year in jan 2014 and in july 2014 if higher will pay a balancing payment in jan 2015 together with the first payment regarding 2013/14.
You pay tax based on the the net profit after the tax free allowance(current year is 7475). You will be paying tax if the profit is above 7475.
I always put 20% of my income away into savings as soon as I get paid. That way I know that my tax bill is always going to be covered and, when my tax bill is paid, I will have money leftover. My little bonus for the year. It doesn't suit everybody, but if I didn't put it away - I'd spend it and end up in trouble.