If you are ever thinking about working on your own for yourself, the one thing you will need to consider is how you will pay your taxes. When you are employed by a company, they will take the tax off your wages for you and you don’t have to think about it at all, however, as a self-employed worker, you will have the responsibility to do it yourself.
If you work with a contractor umbrella, you will need to think of applying for PAYE. It means to pay as you earn, and it is a form of tax which allows you to input what you have earned during the tax year and it will make the deductions for you as a bill for you to pay. PAYE is a form of tax which you need to sort out for yourself and it is something which you need to really research before you get going with it all. Here is how it works and how you can pay your taxes this year if you are self-employed.
Everyone has a tax code depending on the wage they earn. Usually, this code will be calculated without you even ring anything and it will all be sorted out for you, but with PAYE, you need to share how much you earn and in turn, this will be calculated for you by HMRC. Once this tax code has been calculated, the amount of tax you have to pay will be decided for you.
Applying for it
When you visit your government website, you will need to go to the tax section and apply for self-assessment tax. This means that you will have to fill in an application which talks about you and your income, and then you will need to calculate any expenses you have which deduct from your net profit for the year. Once you have filled out the form you will have your tax calculated for you and you will have to think about when you will pay the money and how.
Paying for tax
When it comes to paying for your tax, you need to bear in mind that tax isn’t cheap. To prepare for paying your tax the best thing you can do is save up for the entire year and let that accumulate in a savings account. This will allow you to have a bulk value of money ready and waiting when it comes to paying your bill. You can pay it all at once if you want to, but as a rule, you have a year to pay it off and you can pay it smaller increments to make it more manageable.
Your national insurance is separate from your tax so you need to ensure that you calcite for this separately. This is something that you may need to call the government to discuss and they will arrange a separate bill for this aside from your regular tax costs for the year.