How To Pay Self-Assessment Tax

Have you ever wondered how to calculate your self-assessment tax return? Find our easy, self-assessment tax calculator guide below:

How Does Self Employment Tax Work?

Anyone who is self-employed has to pay tax on their profit from self-employment for each tax year.

Profit is calculated as income less “wholly, exclusively and necessarily” business costs.

A tax year runs from 6th April to the following 5th April each year.
A taxpayer has until 31 January following the end of the tax year to file their tax returns e.g. 2019/20 tax years runs 6.4.19 to 5.4.20 and a taxpayer has until 31 January 2021 to file their tax return for that year. Any tax due is due on 31 January 2021.

How Much Is Self-Employment Tax?

A taxpayer calculates their profit from self-employment and deducts their tax-free allowance to arrive at their taxable profit. A taxpayer then pays income tax on their profits as follows:

Up To £37,500: 20%

Between £37,501 and £150,000: 40%

Over £150,000: 45%

  How Much Can You Earn Whilst Self Employed Before Paying Tax?

Anyone in the UK has a tax free annual allowance of £12,500 (2019-20 and 2020/21) –this means that if your self-employment is your only source of income you do not pay tax on profit up to £12,500.

 How to Calculate Self Employment Tax?

The self-employed pay tax on their profit from self-employment for each tax year.

Profit is calculated as income less “wholly, exclusively and necessarily” business costs.

 How Much Tax Do I Pay If I Am Self Employed?

Calculate your profit from self-employment and deduct your tax-free allowance (standard annual allowance £12,500 2019/20 and 2020/21) to arrive at their taxable profit. You then pay income tax on your profit.

Want to learn more? Read how we can help the self-employed with their tax. For more guidance and assistance with submitting your self-employed tax return, contact Intellect Tax Accountants on 0121 794 2289.