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Kristian Charles Williams

Kristian Charles Williams

Sep 25, 2021

Basic Income Tax Guide for Freelancers and the Self-Employed

A simple guide to understanding HMRC tax for freelancers and the Self-Employed.

Income Tax for Freelancers and the Self Employed. What do you need to know?

It's always a good time to start understanding what your tax situation is, regardless of where you find yourself in the tax year. Just like PAYE when you're working for an employer - Freelancers and the self-employed must pay tax every year via a Self Assessment.

TAXO'D TOP TIP - Remember. 1. freelancers are solely responsible for paying their taxes. 2. Self-employed people are solely responsible for paying their taxes. So, unlike PAYE employed people .... you freelancers have to be more 'in the know' when it comes to income tax.

Uncertainty on personal income tax for freelancers and the self-employed is a large sticking point for people thinking about taking the leap and working for themselves. If you have just started working for yourself, or are thinking about 'taking the leap'  - TAXO'D have put together this post to offer you guidance on everything you need to know with regards to income tax for the self-employed and income tax for freelancers.

Freelancing? Registering with HMRC as Self Employed.

Firstly, If you have never filed a self-assessment with HMRC you’ll need to register with HMRC as self-employed and (to avoid paying a penalty) you will need to do this by the 5th October in your second year of trading. Registering for Self-assessment and Class 2 National Insurance (NIC) is straight forward Register for Self Assessment and National Insurance as soon as possible.

How do I get a Unique Taxpayer Reference Number? (UTR)

Register online for your UTR using the form CWF1.  Your Unique Taxpayer Reference (UTR) number will then arrive to you in the post, subsequently followed by further correspondence containing your activation details. With these in hand, you can start filing your returns and paying tax and National Insurance.

What is my Personal Allowance?

Personal Allowance is the amount of tax-free income you’re entitled to receive each tax year before you start getting taxed on your income. The Personal Allowance for the 2020/21 tax year was £12,500 and it is looking to remain the same for the 2020/21 tax year subject to Uncle Rishi's budget.

TAXO'D blog - Income Tax for Freelancers.

Like most things, your Personal Allowance will be affected by inflation, so it is a good idea to check the official HMRC website. for updates and amendments.

What is my income tax rate?

Income tax is the tax you pay on anything you have earned above and beyond your Personal Allowance. This is dependent on how much of your total income is above your Personal Allowance. Additionally, how much of that income then falls within each tax band.

Income Tax Bands and Rates

The Income Tax rates and tax bands for Wales, England and Northern Ireland for the 2020/21 tax year are:

Income Tax Rates & Bands for UK + N. Ireland

The Income Tax rates and tax bands for Scotland for the 2020/21 tax year are:

Income Tax Rates & Bands for Scotland

Do I need to complete a tax return?

If you earn over £1,000 in a tax year (known as the Trading Allowance), you will need to complete a tax return. To do this, you’ll need to register with HMRC and have a UTR number (see above)

On filing your tax return, HMRC will happily furnish you with your tax bill. You can pay this through the HMRC portal, by BACS or a TT (as a bank transfer) or keep it old school and do it by post.

How TAXO'D tax return app can help with all of your digital tax recording and tax filing.

Keeping on top of your taxes does not have to be a time-consuming, daunting or troublesome experience. If you’re struggling to complete your tax return or you simply don't have the inclination let us do it for you.

TAXO'D is a salary tax calculator. You record as you go (on your phone or your computer) day by day, throughout the tax year. As the weeks unfold and you are actively recording your income and expenses. With TAXO'D personal tax app - you will see in real-time displays the tax and National Insurance that you owe. With TAXO'D tax return software know exactly what tax you owe and when you owe it. Simple. TAXO'D mobile tax tool does away with the need for an accountant, saving you further money and time.

If you are earning money independently and responsible for your own taxes then sign up today. And find out why TAXO'D is the best self assessment software for freelancers and contractors.

Tax Sucks! Spend less time and money on it with TAXO'D tax filing app

Disclaimer: This is simply a guide and should not be treated as tax advice. Contact HMRC directly if you need tax advice.

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TAXO'D blog Author

Kristian Charles Williams

Head of Growth, Partnerships & Mugician

A freelance human and one that resides in creative industries. For the best part I have been an independent musician and a (not-so-independent) composer.

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TAXO'D.  Beautiful, simple, award-winning, end-to-end accounting solution for freelancers. Record as you go. Know what you owe. Tax return, done. TAXO'D.  Beautiful, simple, award-winning, end-to-end accounting solution for freelancers. Record as you go. Know what you owe. Tax return, done. TAXO'D.  Beautiful, simple, award-winning, end-to-end accounting solution for freelancers. Record as you go. Know what you owe. Tax return, done.
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