Self Employed Taxes Tip
Being self employed has many benefits, but one of the biggest downers is having sort out your own taxes, or at least get your accountant to do so. Also because tax isn’t taken at the point of receiving payment, like ordinary employed workers you will have to be careful to leave a reserve of money or else you may be faced with a big tax bill and nothing to pay it with.
First of all be sure to understand how the different tax bands work and exactly how much tax will be incurred from your income. Then, more importantly, be sure to save this amount with every bit of income that comes in. For example if you expect to earn £20,000 then you should save around 20% of your earnings. If you earn £80,000 then you will need to save a higher percentage. You have to also take into account National Insurance Class 4 contributions too.
Secondly after a few years of being self employed my self I’ve found it better to file your tax return just as soon as possible (for most people that is in April each year). The reason for this is it gives you time to accrue extra money if you are short in how much you need to pay in tax. If you filed your tax return on the latest possible date then you have minimal time to get this extra money if you come up short and you could find yourself in a pickle.