The way tax works can vary depending on employment
status and where in the world you are.
If you’re a freelancer or self employed worker in the UK, you may pay your
taxes in arrears, once you’ve submitted your tax filing for the year with
HMRC. Or, depending on the amount you earn, you may need to make a Payment
on Account. This is a partial payment installment, based on the tax you paid
in the prior year. In some circumstances you can also set up an advance
payment system directly with HMRC.
Of course, even if you pay in arrears you might choose to estimate your
annual tax bill in advance, and save your tax separate from your day to day
finances, to be sure you’ve got the money you need to pay later. You can use
our income tax calculator to figure out how much you’ll need.
In the US, you may pay estimated taxes – especially if you’re a sole proprietor or a company owner. In this case, you’ll need to calculate your likely tax, and submit a regular payment, with an annual process to balance the books and refund any extra paid.