Introducing the Self Employed Tax Calculator self employed tax calculator 1

Although you don’t have to pay your tax till the end of the year it’s advisable to work out what you owe and possibly pay some of your dues as you go or set aside some money. Don’t fall into the trap of thinking that by the time the payment becomes due you will be earning more and better able to find the money then. Often this is not this case and a Tax bill takes some finding when you have made no provision. End of sermon.

What do I have to Pay

As a self employed  person or Sole Trader you will have to pay income tax on your profits which are basically your own income and also some National Insurance payments. You will have to pay Class 2 NI which is a small weekly payment and in addition you may have to pay Class 4 NI based on your profit at the end of the year.

What Information do you need for the calculation

There are not many bits of information required but they can be quite a problem to find, especially if you have done some basic book keeping as you go through the year. Just a list of all income and expenditure will reduce the task considerably. I know how easy it is to get behind with these things but this usually leads to people putting off doing their tax returns and if you put it off for too long you can end up with a penalty ( fine if you like ). So what do you need.

Many thanks to Paul Banks for the Tax Calculator. You can find these and more free spreadsheets at his web site, just follow this link  and please leave him a donation so that he can continue to provide these excellent tolls for free.


 What you can claim as Expenses

The following is a short list of things that are normally accepted as expenses. To be certain or to check on any that may be unique to your type of business I recommend having a word with your accountant.

  • Payroll to employees or contractors including NI & Tax ( but not yours).
  • If you have premises – Rent, rates, utilities, insurance,
  • If you work from home – either  a portion of reasonable costs, if your home has seven rooms and you use one then you could claim one seventh of relevant bills. alternatively a simplified system was introduced from 6th April 2013 which allows you to claim the following amounts dependent on usage: 25 to 50 hours – £10.00/ month.  50 to 100 hours – £ 18.00/ month,  over 100 hours – £ 26/ month. In most cases it is better to workout your own based on use of one room as the Tax man came up with these and he’s not known for his over generosity.
  • If you are claiming based on your own calculations keep a record of how you arrived at the figure. I would warn against claiming a percentage of your mortgage because when you come to sell the house HMRC may be able to claim a percentage of any profit made is liable for capital gains tax.Again a visit to the accountant is needed.
  • telephone, post, internet,skype, website, insurance, advertising etc . Also any services such as cleaning, window cleaning waste disposal etc where applicable.
  • Motor expenses – usually claimed on a per mile of company business basis. Keep a record of all business travel  the miles involved and the company visited on a weekly or monthly record sheet.It’ll save you a lot of time and trouble later.

It pays to be Tight

When the HMRC do your tax calculations they count every penny and so you should return the favour. When I first started my business I bought all sorts of small things out of my own pocket and never collected receipts  or noted the cost. After a while I started accounting for every penny and it’s staggering how it mounts up.

Take as a simple example buying milk and coffee for work milk alone if you use two cartons per week at £ 0.75 each over a year that comes to £72.00. If you add the other things that we often forget to note such as postage stamps, newspapers or magazine bought for business content, coffee and light refreshments for clients biscuits for a meeting,cleaning material for the office, pens, writing pads, mobile phone top-ups, the list can go on and on. They are all legitimate business expenses and it pays to claim them on your petty cash or expenses.

Well I hope that the spreadsheets help and that you don’t find “Tax too Taxing” but if you do spare a thought for a Limited company with only the owner as an employee. Under the real time tax system he must enter every payment that he makes to himself when he does it and a zero return for any month where he doesn’t get paid. That’s one good argument against being Limited unless you have to, any way good luck and many happy returns ( Tax returns that is ).

Brian Gregory

Set Up and Grow – THE place for small Business Sole Traders & Self Employed Help        small business advice

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