I need to confuse DD with tax payments on account.....is this right?

[KatyMac]

If you think you will earn £20,000 this year you will pay tax on everything over £11,850

So 20,000-11850=8150
8150*20%=1630 which is due in January 2019

Also due is January because the tax man is mean is 50% of that towards next years tax

So in January you owe 1630+815=2445
Then in July you owe 815 plus the amount your self assessment says less 1630)

In April you do your self assessment and it tells you home much tax you actually owe

& the following January you pay half of amount as tax

repeat as necessary

You're forgetting national insurance which is also due in January/July with the income tax.

But payments on account aren't "next years tax". By the time the end Jan payment is due, you've earned 10 months of profits, so paying half is still in arrears, and by the July, you're 4 months after the tax year end, so still in arrears, but just not as far behind as for the first year.

Any balance due for the year isn't paid in the July either - it's paid the following January with the first payment on account.

Ni is the next discussion tax first -

I think I got it wrong - she started this April so nothing is due until Jan 20 is it?

I'm planning on her running a tax bank account and putting it all in there for each job so it's ready to pay

Ni is 2.95 every week whether she is working or not plus 9% of all profit, isn't it?

But the payments on account are just tax?

Now they have given us personal tax accounts can we pay tax upfront (so get a job work out the tax and pay it; gEtting a refund/bill at the end of the year if we get it wrong?

You'll only do payment on account if you are a higher rate tax payer.

That's not true. I've never been a high rate tax payer and have always paid Money up front for on account

Why not get her to save 30% of everything she earns and put it into premium bonds? She will always have enough to pay her tax bill, then, and she might get lucky and win something, too.

She'll be self-employed, so she must keep receipts for everything that she's bought for work, and she won't pay tax on them.

You'll only do payment on account if you are a higher rate tax payer.
Untrue.
You do payment on account as soon as the annual bill goes over £1000

OP
How is she going to handle averaged over heads ?
Simpler just to download VT cashbook and kep an eye on her running balances
and get her to read my old "me page" about self employment
talkinpeace2.blogspot.com/2014/09/here-is-list-of-questions-i-most.html

She may well be old enough but maths is not her thing

I'll be running her accounts - I started nagging about receipts in Jan and last night we spreadsheets all her pre start up expenses

She will be paid very sporadically but I like the 30% idea - I'll have a look and see how that compares with reality

We have good industry specific info about what's allowable as expenses (although subsistence is a pain only allowed under certain circumstances and staying with friends over night is complicated/no allowances)

I'm not sure about averaged overheads - if they are what I think the are she has none yet

And let's be honest based on my projected cashflow forecast tax isn't going to be a massive worry for a while yet

If you think you will earn £20,000 this year you will pay tax on everything over £11,850

So 20,000-11850=8150
8150*20%=1630 which is due in January 2020
Plus £2.95 a week for a year = £153.40
Plus 9% of 8150=£733.50

Totalling 1516.90

Also due is January because the tax man is mean is 50% of that towards next years tax

So in January you owe 1630+132.65 +153.40+733.50 so 2649.65

Then in July you owe 815 plus the amount your self assessment says less 1630)

In April you do your self assessment and it tells you home much tax you actually owe

& the following January you pay half of amount as tax

repeat as necessary

She’s an adult. Leave her to get on with it. You think you are helping but honestly, you’re doing her no favours at all here.

I'll explain it - make sure she understands it and monitor

I'll help her create systems in place to make it work - she's just moved her bank accounts onto monzo which is working for her

One of her ex-bosses in the industry says every bloody year he gets half a dozen newbies turning up to argue their paye with him; they apparently don't have to pay tax yet, or even they think they will wait to pay tax when they are better off!

She knows she has to pay tax - I'm just making it real numbers

For a fledgling business woman she's doing OK - bit scatty with receipts but after entering them all yesterday swears she will get a receipt for 'everything'!!

I changed it - the year she pays is the year after her first full year and I added ni in

I'm really glad your young adults know this stuff instinctively and don't need it explaining

Ok so I thought my title was a bit lighthearted obv it's been taken seriously

Look tax is complicated I was trying out a passage of text and numbers to see if it worked/ was readable

I forgot the payments on account happen after your first year and I'd been going to deal with ni separately

But at least I know they exist

I'm ensuring systems are set up - tehy don't have to be mine - she's moved things onto monzo and is working out a way of keeping track of expenses on a system I don't understand - was it wrong of me to say she needed to keep receipts? I don't think so she understands basic profit and loss - they didn't cover that in school - she understands allowedable expenses vs business expenses that aren't allowable - also not covered in school - tax is the next bit - and if it comes down to it (possibly not) we will talk about capitol assets and depreciation - also not covered in school

Whilst I don't generate a particularly significant income from an on the side self employment, I opted to use QuickBooks Sole Trader software to keep track of things. It links to my bank account so I can instantly categorise payments as business or non business, I send invoices from it, it records my mileage which again I can categorise into personal or business (and then allocate against a client), I can add receipts by taking a picture of them on the app and so on. It provides me with running info on likely tax, and all the necessary detail to include on the tax return. Costs just over £7 per month.

I may not be correct, but I am fairly sure that you don't have to start paying tax on account until your liability exceeds circa £3k per year. I'm not an accountant though so can't say for sure, I would imagine there is something on the HMRC website that will give a better guide.

I do tax for lots of mature adults who are good at what they are good at and crap at keeping records

well done to you for making sure she starts off on the right foot

get her to read my "me page" - coffee and highlighters are good
its a bit out of date, but the principles are solid

I think you might be better booking her on a course to learn what she needs to know rather than taking over.

LOL
none of my tax clients have ever been on such a course
they ask me ;-)