- You must tell the HM revenue and customs that you are self-employed by filling in a self assessment form. (Link Register online for Self Assessment and National Insurance contributions)
In 2012, a person can earn up to £7,475 and not be taxed. This is quite a large amount for a person to earn in there first few years of professional illustration. Tis allows you to earn £622.92 a month or £143.75 a week without being taxed.
Working out Tax
Being self-employed, tax has to be worked out by the individual.
Basic Rate 20% £0-£35,000
Higher rate 40% £35,001-£150,000
The way tax is worked out is rather simple. You the the gross income for your year and minas the £7,475 of the tax free earnings. So if the gross income was £40,000, minas the the tax free income which comes to £32,525 which falls under the basic rate of 20%. So the £33,525 is taxed by 20% which is £6,505 (divide the figure by 100 and times it by the %)
To pay this tax
A tax return has to be completed each year to pay your tax. You will be given a 10 digit tax reference called a Unique Taxpayers Reference. A letter is sent around April each year as a reminder to fill out a tax return. the tax return can be sent both paper based or online. The online tax return has some advantages as it is quicker.
The deadline for paper tax return, it must get to there by midnight on the 31 of October. If the deadline is miss, the tax form will need to be returned online.
Sending you tax return online it must get to the HMRC by midnight on 31 January. The Penalty for late returns is £100 and more penalties can be issued the later it is left.
Reflection
I think an easy was to get around this ideas of collecting your own tax is with every commission, remove 20% and put into a bank account. This keeps the tax separate and together if tax needs to be paid that finical year. If the money is not need as the £7,475 has not been meet, the money in the account comes back to you.
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