Please can someone who is good at Maths and Tax come and have a look at my figures?

[AntoinetteCosway]

This is my second stupid question of the day re. freelancing, so apologies in advance.

Between April and August 2013 I was employed by a school and also did some exam marking (tax taken at source).

Total income in that time was £8,670.98 and total tax paid through PAYE was £946.55.

(946.55/20)x100 = £4782.75.

Personal allowance is 10k.

So I have paid already, this year, enough tax to cover total earnings up to £14,782.75.

Does that sound right? It makes sense to me but I want to be 100% sure I've understood it all correctly.

I've been putting away 20% of my self employed earnings since September and it's just occurred to me that I'm exremely unlikely to earn significantly more than £14,782.75 by April. Sep-Dec I will have earned £3208 self-employed, and if I earn the same next term that will put my total earnings for the tax year at around £15k by April.

So can I raid my online savings account?!

So, you've got around £600 in savings? And your estimated income is around 15,000. Tax on that would be around £1000 and as you have already paid nearly that amnount, then I would say yes you hgave a bit to play with.

However, have you factored NI contributions or pension contributions into that?

OK, yey!

NI I'm paying 6 monthly and I don't think is too much - have to pay £18 shortly for the period between starting self employment and the November date they work it out (precise, I know!) and then will have to pay again in April. Not sure how much that will be but will check.

I paid into my Teachers' Pension while employed by schools but haven't been paying into once since becoming self employed. We're fairly skint and it's at the bottom of my priority list for this year, though I know 65 year old me will curse 30 year old me for saying that. DH has a good one through work and I've got 8 years of payments in mine, plus will be going back to full time school work at some point. (I think.)

Gulp. Should I be taking out a private pension?

Just checked - £2.70 a week so for the next half of the year that will be £70.2.

So perhaps I should keep £200 of what I've currently put aside for Nat Ins and as a buffer?

That would be class 2 NI but what about class 4 NI?

OK, had not thought about Class 4. Just read this on the website:

'The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9% on annual profits between £7,755 and £41,450 (2013-14) and 2% on any profit over that amount.'

So are my annual profits my self-employed earnings (minus expenses) or my total income, including what I earned when employed by the school?

Given your self employed income there shouldn't be any class 4 NI payable.

Well usually it's the trial of both but presumably they also ni'd you at source like the tax? Do you have a payslip or p45 to check?

Total not trial

Class 4 is only on your self employed income as you pay class 1 on employed income

Thanks

OK, thanks all. So, just so I'm totally sure, I only have to pay Class 4 if I earn more than £7,755 through self employment before April? And then as soon as I hit that figure I have to pay 9% on it?

I'm not great on tax and def not a tax adviser - but if you register for self-assessment with hmrc you can put your actual figures into their website in your tax return .. you don't have to submit it and they won't see what you're putting in. The self-assessment software on the website also works out your NI due as well. It ends up working out about the same as PAYE + employee's NI that you would have paid if receving the same amount of income from an employer.. hope that makes sense!

You pay class 1 NI on your employed earnings.

If you are self employed, you pay class 2, (the regular payments) and class 4 on your self employed income.

You pay tax on your total income - both employed and self-employed - but in your case, you have had some tax deducted at source for the current year. Bear in mind you also need to pay tax on the deposit interest from your savings account, and any other investment income.

You probably won't have earned enough to pay any class 4 NI.

I would say, that depending on the level of allowable expenses, you are likely to get a refund of some of the tax paid (unless the two lots of £3028 already have expenses deducted).

Also, bear in mind that the tax for the year ended 5 April 2014 is due for payment on 31 Jan 2015, so you will have time to prepare for any shortfall, particularly if you do your tax return calculations reasonably promptly after the year end.

Oh that's really good to know - I was wondering about playing with the form but was scared I'd mess it up by entering inexact figures and then not being able to change them.

Can anyone confirm what I put about Class 4 in my last post? I'm pretty certain it's correct but just want to be 100% as it would make quite a big difference. Earn £7k pay 0 Class 4, earn £7755 pay £697.95...

It makes me wonder whether I should hang onto what I've put in my savings account just on the off chance I do earn over that. I'm pretty sure my SE earnings will be around the £6k mark but there's no way to really know in advance is there...

Ah Sanity, refund is my favourite word!!

You pay 9% class 4 NI on what you earn over the limit not on the whole amount :)

Based on expenses so far, I'm expecting my expenses for the year to be about £350.

Miranda thank you, that's brilliant.

OK, I swear this is the last question. (You lot are amazing by the way. You should write the HMRC website.)

Working purely with hypothetical figures, if in 2014-2015 (i.e. when all this PAYE stuff is done and dusted) if I earn £10k...

I would pay £0 tax, £140 Class 2 Nat Ins, and 9% on 2245 (10,000-7755) which is £202.05. Total would be £342.05.

Obviously I hope I'll earn more than £10k, but I think £3k per term is realistic for tutoring. The summer term might be more lucrative - fingers crossed.

Do remember that you need to make a payment on account of half what you pay in January both in January and July so you roughly pay 1.5 times your liability the first January you submit and then the half in July. Then the next January you either pay more to make it up to what you owe in the January or would get some back. Then half again in the July.

Hope that makes some sense - would be better with some figures which I'll try and do if you'd like when I am sitting down on a train :)

Miranda thank you for explaining though I'll admit that is Greek to me!

I find the gov.uk website much clearer than HMRC for tax and NI stuff!

Self employed NI chart

General income tax stuff

Self employed tax relief

Thanks, those are really useful. Just seen I was wrong about the personal allowance-it's not £10k, it's £9440!