Here at BOXD, we know all too well that being self employed brings its own set of challenges when managing your business finances. Unlike when people are employed and their taxes are deducted through PAYE, self-employed workers pay their taxes every year based on their profits.
Keeping on top of this is an important part of being a self employed worker so you don’t get caught out by an unexpected and large tax bill every January. To help you with this, BOXD users are provided with an estimate of taxes due in order to help you put a proportion of your earnings to one side every month.
- Your Income Tax and class 4 National Insurance are based on the information entered into BOXD and are an estimate to help you budget for the financial year. Any financial information not entered in the app will not be calculated.
- The exact amount due to HMRC will be calculated by your accountant or when you submit your self-assessment tax return. Some balance sheet entries such as capital gains and student loan repayment can impact your final tax calculation.
- HMRC can sometimes ask for a payment on account to cover subsequent tax bills. These would be due on the 31st of January and also 31st of July. See the HMRC website or ask your accountant for more information.
To calculate your tax estimates, we base this on the following information in the app.
We take into account the tax free allowance (also known as personal allowance), and also the bands which impact the rate of tax due.
For income tax, these are:
20% for annual profits between £12,570 and £50,000
40% for annual profits of £50,001 and over
For Class 4 national insurance these are:
9% of annual profits over £9,569
Class 2 National insurance is a standard £3.05 per week for all working individuals.
There can be many elements that can impact your final tax bill. If in doubt, please ask for help to ensure you don’t have any nasty surprises. Most have had to learn the hard way when getting that dreaded bill at the end of January! But worry no more when you use BOXD.