does this sound correct? freelancer's take home money

[umscho]

This is what I got, do they really take away that much money??

"we'll consider the following deductions: Income Tax, National Insurance contributions (NICs), and assuming no additional expenses. Here's the breakdown:

1. Income Tax: As mentioned earlier, the income tax rates in the UK depend on your total annual income and tax bracket. However, since your income of £2,000 per month falls within the Personal Allowance (£12,570 for the tax year 2021/2022), you won't owe any income tax.
2. National Insurance Contributions (NICs): As a self-employed individual, you'll still need to pay Class 2 and Class 4 NICs. For simplicity, we'll calculate only the Class 4 NICs based on the rates for the 2021/2022 tax year (up to my knowledge cutoff). The Class 4 NICs rate is 9% on profits between £9,568 and £50,270.

Let's calculate the NICs for your monthly income of £2,000: Annual Income: £2,000 x 12 = £24,000 Class 4 NICs: (£24,000 - £9,568) x 9% = £1,374.48

1. Take-Home Money:
2. To calculate your take-home money, subtract the Class 4 NICs (£1,374.48) from your monthly income (£2,000):

Take-Home Money: £2,000 - £1,374.48 = £625.52 Therefore, based on these calculations, your estimated take-home money (after taxes and NICs) would be around £625.52 per month. Keep in mind that this is a rough estimation, and the actual figures may vary based on your specific circumstances and the current tax regulations. It's advisable to consult with an accountant or tax professional for accurate and personalized information regarding your take-home income."

I think the NI contribution calculated is your yearly NIC - should be divided by 12 - so £114.54 per month.

Ahhh that makes sense. Phew.
Thank you so much

That would leave you more like £1885 take home from £2K per month profit.

I am absolutely not an expert, but have been a freelancer and my answer is more in line with what I paid.

Why is £2k x 12 less than the personal tax allowance of £12k though

But look at the tax also, with pay of £2,000 / month you are over the threshold for tax so you will probably be liable for some income tax.

That doesn't make any sense to me, the £24k is above the £12k personal allowance that is tax free, so there would be income tax to pay on the £12k above the threshold?

Or was it 2k a month for less that six months of the 21/22 tax year?

But also 24,000 - 9,568 is 14,432. 9% of that is 1,298.88 not 1,374.48? If that tax rate is 9% on profits, it'll be 1,298 on the entire 24k (less the 9.5k allowance) not on each payment of 2k. So 1298.88/12 = 108.24 taken from each 2k payment?

It's not really making any sense to me I think all of the calculations in that text quote are wrong.

You are right, it should be within the 20% tax bracket.
The estimation I was given is all off.

Where did you get those instructions? Surely they’ve missed a step!

Let's calculate the NICs for your monthly income of £2,000:
Annual Income: £2,000 x 12 = £24,000
Class 4 NICs: (£24,000 - £9,568) x 9% = £1,374.48

1. Take-Home Money:
2. To calculate your take-home money, subtract the Class 4 NICs (£1,374.48) from your yearly income (£24,000) and divide by twelve

Take-Home Money: £24,000 - £1,374.48 = £22,625.52
£22625.52 / 12 = £1185.46

Who gave you that advice? Both parts are wrong!

I hope that advice wasnt from an accountant!

Yes I spotted that straight away.

Don't take this numptys word.

I use this calculator to keep an eye on things - it’s pretty spot on every year, and you can include expenses, student loans etc. too:

https://www.employedandselfemployed.co.uk/self-employed-tax-calculator

I can't believe someone wrote that and didn't realise it was wrong before they sent it. The bit about earning £2k pm, but £1300 being deducted is clearly nonsense.

Sadly I've seen worse from people claiming to be firms of "accountants"!

Trouble is it's not a protected term, so literally anyone can call themselves an accountant and run an accountancy practice and a lot of firms are basically just glorified book-keepers.