Here we have a new bright, shiny tool from HMRC to help the self-employed estimate how much their tax bill is going to be.
If you go to the link here; https://www.gov.uk/self-employed-tax-calculator & you’ll be able to start the process.
It will take you through to the gov.uk website which is preset for the tax year 2023-2024. It will estimate how much Class 2 National Insurance you need to pay, how much Class 4 National Insurance, and also how much Income Tax you’ll need to pay.
Click the big start now green button. It will ask you what country you live in and press continue.
Then it asks for your estimated profit, either on a weekly or a monthly basis. Most people wouldn’t have a clue what their monthly profit is going to be so have a guesstimate at what your yearly profit is. Profit is your fee income, less your allowable expenses. If you then divide by 12, that will then give you your average monthly profit.
Select Monthly and press Continue. Enter the figure you first thought of as your estimated monthly profit, and click continue again. It would have been ideal to have a yearly profit, but we can’t have everything.
This tool will work out a calculation on a weekly, monthly, or yearly amount. Ideally you just need the yearly amount. It will tell you what your Class 2 national insurance will be for the year, your Class 4 national insurance, and your income tax, and it will give you a total.
But don’t be fooled by this.
This system does not tell you anything about the payment on account you have already made because it’s not asking you to enter any of your personal details to be able to pull that information. Plus, it is not telling you that you have a payment on account to make if the amount you owe in income tax and Class 4 national insurance is above 1,000 pounds. So treat this carefully.
The tool works for people that are self-employed only. If you have any other income, eg property rental profit, PAYE, bank interest, it does not include any of that.
It is a good tool to give you an idea of what you may need to pay on this years self employed profit, but please remember, no payment on account is taken into account, and no other income outside self-employment is considered so don’t yell at your Accountant if they come up with widely conflicting figures!
