Figuring out your taxes as a freelancer or self employed worker in the UK can be a hassle. Make it easier to see the tax you owe – and your take home pay – using our free self employed tax calculator.
You can also cut costs and keep more for yourself when invoicing international clients, with a Wise business account.
Self employed and freelance workers file and pay UK taxes using a self assessment tax return. The main taxes to know about are income tax and National Insurance. However, other forms of tax may also apply if you’re a business owner, including VAT, dividend tax and corporation tax.
It’s worth noting that the tax regimes can vary between England and Northern Ireland, Wales, and Scotland. The tax brackets are also reviewed and may change annually – take professional advice if you’re unsure of your obligations.
Calculate your UK income tax and National Insurance with our self employed tax calculator. Or get an idea of your tax liabilities yourself using the following steps:
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.
Here’s how to use the self employed income tax calculator:
Under HMRC rules, there are some allowable business expenses you can deduct from your income to reduce your tax bill. These include office supplies, office rent, business travel costs, and so on. If you work from home, or have assets – like a vehicle – you use for both personal and business purposes, you may be able to deduct a portion of this cost, too. However, strict rules apply, so reading up on what is and is not allowed is essential.
As a business owner you’re used to cutting out unnecessary costs to maximise your profits. One smart way to do this if you’re dealing with suppliers, customers and staff overseas, is to get a Wise business account. Open your multi-currency account online, and hold, send and spend 50+ currencies. No hidden costs, no hassle and currency exchange at the real mid-market rate every time.
If you don’t pay your UK taxes on time, you may be subject to legal action including penalty fees. Check out the tax filing and payment dates, which can vary according to how you submit your self assessment form, to make sure you’re on time.
If you’re self employed in the UK you’ll need to register for tax self assessment with HMRC. You’ll be able to check whether you have to make a Payment on Account – a partial tax payment installment during the tax year – or pay in arrears according to your income level. Deadlines can change over time. For the 2019/20 tax year, you’d need to register for self assessment by 5 October 2020, and pay your taxes in full by 31 January 2021.
The easiest way to calculate your self employment taxes is to use our handy calculator. You’ll be able to enter your gross income and business expenses to get your estimated tax and National Insurance payments, as well as see your remaining monthly take home pay after tax.
Self employment taxes are paid to HMRC. The easiest way to do this is through a bank transfer, although you can also set up a direct debit or make a payment in a branch of a major bank. Check the UK government website for full details and options which may suit you.
To check if you’ve paid the correct amount of tax, you’ll need to contact HMRC directly. You can call, write, email or even use social media to get general support and help.
