The amount of tax you will pay as a self-employed person is dependent on how much money you’ve made and the ‘allowable expenses’ you’ve incurred in the course of your business.
Many business related expenses can be deducted from your income when you’re calculating your taxable profit.
The tax-free personal allowance and the tax bands are the same for both the self-employed and the employed. For the tax year 2019-20 you can make up to £12,500 before you need to pay tax (£11,850 for 2018-19). You’ll then pay the basic rate of income tax currently 20 per cent on income up to £50,000 (£46,350 for 2018-19). The higher rate of 40 per cent applies to income over £50,000, and on income over £150,000 you pay an additional rate of 45 per cent.
If you are going self-employed part-time whilst continuing to work for a company you’re both self-employed and employed, and you’ll pay tax through both PAYE and Self-Assessment.
You can also be self-employed but only working for one company, for example if you have just one client. In this case HMRC will be keen to make sure that you are not just calling yourself self-employed avoid paying National Insurance contributions and giving you employment rights. To count as self-employed you usually need to have choice over when and where you work and you’ll usually be paid when you issue invoices. Check the government website or speak to an accountant if you’re not sure.
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