The amount of tax that you pay will depend on how much of your money is leftover after you have paid your expenses, tax allowances and relief.
So if you’re wondering how to calculate your tax, you should know..
➡ Income tax starts at 20% on all of your income over £12,570 and 40% for income over £50,270.
➡ Class 2 national insurance is paid as a set amount weekly and is applied once you go over £6,515 and class 4 is worked out as 9% on your earnings of £9,569 and 2% on profits over £50,270.
HMRC will automatically calculate how much tax you owe when you are filling in your tax return online and will base it on the information you enter.
Tax and National Insurance thresholds change every year
And DON’T FORGET, NI rates are going up from this month!!
But I get it, tax returns can be stressful right? Here are my top tips for what to do if you are feeling overwhelmed with your tax return and don’t forget, you can always reach out to us for help:
✔ Get into good habits early on - keep accurate and up to date records of your income and expenditure as you move through the year. Do this when you first start your business!
✔ Complete your tax return as soon as you can - If you realise you are missing information that is needed for when you file your tax return, you can save the work you have already completed and return to it once you have gotten the information you need. When you file your tax return in good time, you will also find out how much tax you owe sooner!
✔ Don’t be late - Make sure you submit before the deadline. Any late submissions result in an immediate £100 penalty which will increase after 3 months. You can also be liable for interest on outstanding sums, so better get it in on time!
✔ Claim all expenses you are entitled to - These will be ‘offered’ to you as you move through the form online but it’s good to know which expenses you can claim for before you start filling out the form, especially if it’s your first time!
✔ Carry out monthly reconciliations - Compare your income and expenditure with business bank statements to ensure all of your records are correct. This will limit the amount of human errors identified so you can be sure that all figures are correct before sending it to HMRC.
Need help with your tax return? Send us an email or book a call with us!