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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Just to make the numbers easy, my self-employment earnings

Customer Question

Just to make the numbers easy, my self-employment earnings for 2014-15 are going to be £19,000.
This is my first year in business.
From what I've read, because of the amount I've earned, I will need to pay 50% of my tax bill forward in advance.
Is that correct?
If so could you give an brief example on the above amount (20% tax band) of how much I will need to pay forward along with when this is actually going to be owed/paid.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Leave this with me while I do some calculations.
Customer: replied 3 years ago.

Not a problem at all. I appreciate it.

Customer: replied 3 years ago.

P.S - I have no deductions etc so the above is the total owed.

Expert:  TonyTax replied 3 years ago.

Hi again.

If you have a taxable profit in 2014/15 of £19,000, the first £10,000 will be tax free (the personal allowance) and you will pay tax at 20% on £9,000 (£1,800.00). The Class 4 NIC charge will be £993.96 (£19,000 - £7,956 x 9%). The Class 2 NIC liability will be £143.00 (£2.75 x 52). The total tax and NIC liability for 2014/15 will be £2,936.96 and this will be payable in full on 31 January 2016.

For 2015/16, you will need to make a payment on account of £1,468.48 (50% of the 2014/15 liability) on each of 31 January 2016 and 31 July 2016. If you think your 2015/16 earnings will be less than those for 2014/15, you can reduce the payments on account to a more appropriate level. If your 2015/16 earnings are more than those for 2014/15, you will have a balance to pay on 31 January 2017. Then, it starts all over again.

Take a look here for more information on how the payments on account system works.

I hope this helps but let me know if you have any further questions.