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Getting started with Self-employment and Income Tax

 

This Article covers common questions about self-employment and Income tax:

 

When does the Tax year run from and to?

What is a UTR number?

What types of National Insurance do self-employed people need to pay?

What is a business expense?

What is Tax relief and how does it work?

What does it mean if I have remissions with HMRC?

What are payments on account?

 

When does the Tax year run from and to?

The Tax year starts on the 6th of April and ends on the following 5th of April.

 

What is a UTR number?

A UTR number is a Unique Taxpayer Reference number. It is 10 digits long and you are given one by HMRC when you register for self-employment.

 

What types of National Insurance do self-employed people need to pay?

Class 2 and 4.

 

What is a business expense?

A business expense is an expense incurred wholly and exclusively for the purposes of the business/trade.

 

What is Tax relief and how does it work?

Tax relief means that you pay less Tax to account for money that you have spent on business expenses. Your income is reduced by the amount of expenses that you claim, therefore reducing the amount of Tax you pay.

 

What does it mean if I have remissions with HMRC?

It means that you have a prior year’s debt with HMRC (Normally more than 4 to 5 years ago) that has never been repaid. HMRC have stopped actively pursuing the debt, however if monies become available on your account (e.g. a refund from a tax return) it is highly likely that this will be taken to cover the debt.

 

What are payments on account?

Payments on account is a Tax payment made twice a year by self-employed people who are likely to have a Tax bill, in order to spread the cost of the year's income Tax owed. It is calculated by looking at your previous year's tax bill, and is due in two installments. The payment on account can be thought of as a way of paying off some of your tax bill in advance

 

 
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