Tax for Sole Traders in UK 2012/2013

The number 1 question that people ask when they are considering starting a Business as a Sole Trader is “How much tax will I pay?” quickly followed by “who do I need to inform and when?”
Let me answer second question first. It is every persons duty to inform HMRC when they commence trading. You can do this at Really easy to do. NI number, your details, when you commenced self employment. That is it!
When is up to you, the grapevine says within 3 months, HMRC website states you must inform them as soon as your circumstances change, at the latest by 5th October after the end of the current tax year! My advice would always be to contact HMRC earlier than later. Why I hear you screaming? Let us examine what it will cost you immediately. £2.65 per week for class 2 NI contributions. Full Stop! This gets you a contribution towards your pension.
Any further payment of NI or income tax is not due until October after the end of current tax year, if you want HMRC to calculate what you owe; or the end of January after tax year ended, if you want to calculate your own tax and NI. Remember you are only taxed on profit!
What are The tax rates for 2012/2013?
NI small earnings exemption is £5595. If you expect to earn a profit below this rate you can apply to be exempt from NI contributions. Unless you have 30 years of contributions I would pay it!
NI lower earnings starts at £7605 and once you hit this profit you are liable to pay a “tax” of 9% class 4 contribution. Above a profit of £42475 you pay an additional 2%.
Income tax is very straight forward.
Personal allowance is £8105
First £34,370 above £8,105 is taxed at 20%
After this 40% on all profits above £42,475.
If you are lucky enough to earn a profit over £150,000 you will pay 50% tax on the profit above this.
I hope this is useful? I am not a tax expert and you should always seek professional advice from HMRC and or Accountant. This is a steer to help you.
Call in to FYC Church Street, Blackpool if you need help with start up business advice. The telephone number is 01253477147. The Orvia Group can be contacted on 01772422242 and they offer help and support to new Business start ups across Lancashire.
Will give mor tips each day, son follow me on twitter @scubageoff or subscribe to my blogs


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