How do I make sure I put enough aside to pay my tax bill?
If you are operating as a limited company, then there are very specific limited company tax rules. However, if you are operating as a sole trader then it’s all rather more flexible. You will need to pay tax twice a year, on 31st January and 31st July via what is known as ‘payments on account’, and your accountant will be able to advise you on this.
At the end of the tax year (5th April) you will need to provide your accountant with a full set of income and expenditure figures. From these, they will be able to work out your tax liability and will tell you what your payments on account will be for the following year. You will still need to fill in a normal personal tax return. The timescales for completion of your tax return are the same as for an individual – but the sooner you do it after 5th April, the sooner you will have an exact tax liability figure for the following year.
As a general rule of thumb, if you put 30% of everything you earn to one side, this should cover you for tax and national insurance, but you will be able to adjust this over time as you get a feel for your likely tax bills. Don’t however make the mistake of not putting anything aside, as you will be in for a nasty shock when the bill comes in!
Get the latest contractor news and offers delivered directly to your inbox
We’d like to keep you updated by email. We will never share or sell your data with anyone without your permission