INCOME Tax Answered
How do I register with the Inland Revenue?
This is quite simple, if you are a sole trader then you must ask the Inland Revenue for a booklet called 'Thinking of Working for Yourself', P/SE/1 - inside this booklet is a green form, CWF1, which you need to complete and send to the Inland Revenue NI Contributions Office, Self Employment Directorate, Longbenton, Newcastle on Tyne, NE98 1ZZ. (the address is printed on the form). This registers you as a self employed person with Inland Revenue. To download a copy of this Leaflet from the Inland Revenue Web Site please click the link below.
If you are in a partnership it is necessary for each partner to send off a copy of the form
If you are a Director of a Limited Company then you pay Tax and National Insurance as an employee of that Limited Company and therefore you need to ask Inland Revenue for a 'New Employers Pack' which gives you tax and NI charts so you can work out how much to deduct from your salary. In some areas Inland Revenue run short training seminars to show you how to calculate and complete the PAYE details. Contact your local Tax Office (see useful contacts)
What are the key dates for self assessment tax forms
You should receive a self assessment tax form on, or around, the 6th April following your business start up. This should be completed and returned before the 30th September the year you receive it. Inland Revenue will then work out your tax liability and send you a tax calculation. This is to be paid by the 31st January the following year. If you miss the September 30th date it is up to you to make your own tax calculation (or ask an accountant to do this - see useful contacts) and send back the form and tax by January 31st - if you fail to do this then you will be liable to £100 fine.
If I work for an employer as well as being self employed how do the Inland Revenue work out and collect tax.
This is quite simple. They add together your profit / loss from the self-employed business plus your gross pay from your employer. They then calculate a tax liability and then look at the amount of tax you have already paid through PAYE. This will leave an amount of tax to be paid (or a re-paid if you are deemed to have paid too much) this can be recovered / repaid by altering your tax code so you pay more / less tax through PAYE at work. This also is applied if you have worked for an employer for part of the tax year in which you started your business
How much should I set aside to pay Tax and Class 4 NI at the end of the year?
Inland Revenue issue a Ready Reckoner for each tax year based on the estimated weekly, or monthly, net profit of the business (in blue) and the amount to set aside (in red) to cover Tax and Class 4 NI (note this does not cover Class 2 NI) this is shown in the table below. The top 2 rows are for weekly net profits and the bottom 2 rows are for monthly net profit.