| User | Thread poster: lauranicosia Taxes in the UK |
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lauranicosia
United Kingdom
English to Italian
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Hello there,
I started working as a freelance interpreter for an agency a few months ago. They don't deduct any taxes from my payments so is up to me to find out how to do my taxes reductions.
I already created my tax reference as a PAYE but I haven't been able to understand how much I have to deduct from my payments, when and how.
I would really appreciate some advice.
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Gilla Evans 
United Kingdom
Local time: 13:32
  Member (2009)
Spanish to English
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| | You will need to register as self-employed | Feb 7, 2011 |
You will have to tell the Inland Revenue that you are self-employed and register with them to pay your taxes that way, rather than through PAYE. If you have some other employment which is taxed through the PAYE system you will have to fill in a self-employed tax form as well.
My advice would be to visit your local tax office and explain your situation to them, and they will tell you what you have to do. They are usually pretty helpful.
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Tom in London
United Kingdom
Local time: 13:32
Member (2008)
Italian to English
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Gilla Evans wrote:
You will have to tell the Inland Revenue that you are self-employed and register with them to pay your taxes that way, rather than through PAYE. If you have some other employment which is taxed through the PAYE system you will have to fill in a self-employed tax form as well.
My advice would be to visit your local tax office and explain your situation to them, and they will tell you what you have to do. They are usually pretty helpful. |
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Better still, find a suitable accountant, who will do everything necessary. It's very important to get these things right, at the outset.
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Holger Laux
United Kingdom
Local time: 13:32
Member (2011)
English to German
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The tax year in the UK goes from 5 April to 4 April the following year. Afterwards, you have until 30 September to fill in your tax return on paper or until 31 January to do this online.
The first 5000 GBP of your annual earnings are tax-free (limit will be gradually extended to 10000 GBP within the next few years). Beyond this limit, it is safe to assume that 25% have to be spent on taxes and NI contributions (it may be less, but you are on the safe side with this figure).
A pitfall: In your first year, HMCR assumes that you will have the same level of earnings in the following year and asks you to pay taxes "on account". This can be quite hard because in this particular year you effectively pay taxes twice. However, if you have a good reason to object (such as that you had an exceptionally good year and do not expect to earn that much in the following one), they will usually accept it.
If you have a turnover (income without expenses) of more than 70000 GBP per year, you have to register for VAT, below this limit, you do not have to charge VAT.
Once you register, you will also receive quarterly bills for NI contributions, but they are only 2 GBP per week. However, if you want to boost your pension, you can make voluntary contributions, which I think are in the region of 200 GBP per months.
Hope you'll find this quick rundown useful.
Holger
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Louisa Fox
United Kingdom
Local time: 13:32
Member (2009)
German to English
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| | Payment on account | Feb 7, 2011 |
Depending on how much tax you end up paying HMRC may not always ask for payment on account. My tax and NI bill was less than £1000 this year due to a lot of deductions and they did not ask for a payment on account for next year. However, I believe they are still entitled to do so, and I do not know if there is a fixed amount above which they will always ask for payment on account.
With regards to NI you pay quarterly payments (although HMRC have just written to me telling me this is changing to 1 payment every six months) and additional NI with your tax bill. I believe the amount is 8% of your net turnover but there is a threshold of a certain amount per week and you only pay 8% on the amount over this.
If you plan to be working full time as a self employed freelancer, it is normally a very good idea to get yourself a good accountant. I do my own tax returns and even though I studied accounting as part of my law degree it is still quite complicated even with the help of a relative who is an accountant!
I would also recommend attending the free workshops offered by HMRC for the newly self employed. Contact your local HMRC office to find out, or I think Business Link can give you their details.
Hope this helps
Louisa
[Edited at 2011-02-07 18:02 GMT]
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lauranicosia
United Kingdom
English to Italian
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TOPIC STARTER | | Thanks to all | Feb 7, 2011 |
Thank you for your quick response.
I already registered as self employed, and I am paying my quarterly contributions but what I don't understand is how to deduce the taxes that I should pay from the incomes that I am getting. My agency says that they are not doing it so how I am supposed to do it?
thanks again
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Louisa Fox
United Kingdom
Local time: 13:32
Member (2009)
German to English
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| | Fill in a tax return | Feb 7, 2011 |
You will need to fill in a tax return - self assessment for the self employed for the financial year in question. For example in January I submitted my online self assessment for the April 09-March 10 financial year. This involves filling in such figures as turnover (ie the amount I received for translation activities) and expenses and capital allowances. To simplify, HMRC deduct your expenses and capital allowances from your turnover. This is the figure that is subject to tax and national insurance. They then work out how much tax and NI you owe taking your personal allowances into account (the amount you are allowed to earn each year tax free). They then ask you to pay this by 31 January following the financial year in question.
So, what self employed people are generally advised to do is save 1/4-1/3 of monies received for translation/interpretation work and save it for when the tax man tells you how much you owe.
I try and deduct this amount each month and put it in a savings account.
So, at the moment you do not need to 'deduct' any tax specifically, just save some of what you earn, fill out your tax return and then pay the tax man each January.
Hope this clarifies things.
Louisa
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Manuela Junghans
United Kingdom
Local time: 13:32
Member (2004)
English to German
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I agree with what most of the people here have already said.
Except that you should look for an accountant to do your tax return for you. I personally think that this isn´t really necessary as long as you don´t reach the threshold of approx. GBP 70,000, after which you´ll have to register for VAT (as Holger said already). Once this occurs I think an accountant would be advisable, however, otherwise I find it quite easy to file the tax return online.
You might want to have a look at the website of HMRC http://www.hmrc.gov.uk/index.htm where you should also find some useful information.
Good luck with your business.
Manuela
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Oliver Walter
United Kingdom
Local time: 13:32
Member (2005)
German to English
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Paul Stevens
United Kingdom
Local time: 13:32
Member (2003)
Spanish to English
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| | National Insurance contributions | Feb 8, 2011 |
I am slightly surprised to read that people are paying their "regular" NI contributions on a quarterly basis. I've always paid these montlhy and am still doing so. Am I the only one paying monthly or can they be paid on either basis? I certainly don't recall receiving any notification about quarterly payments.....
ETA: After some research, it seems that monthly payments by DD are still perfectly acceptable. However, as mentioned above, NI payments will shortly change to twice-yearly. See below for more info.:
http://www.hmrc.gov.uk/payinghmrc/class2nics.htm
[Edited at 2011-02-08 08:53 GMT]
[Edited at 2011-02-08 08:54 GMT]
[Edited at 2011-02-08 09:11 GMT]
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Alan Johnson
Germany
Local time: 14:32
German to English
| | Quarterly NIC | Feb 8, 2011 |
[quote]Paul Stevens wrote:
I am slightly surprised to read that people are paying their "regular" NI contributions on a quarterly basis. I've always paid these montlhy and am still doing so. Am I the only one paying monthly or can they be paid on either basis?
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I still pay contributions monthly, FWIW.
To the OP: I'm with Tom in London. Get yourself an accountant.
Have a nice day.
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Louisa Fox
United Kingdom
Local time: 13:32
Member (2009)
German to English
+ ...
| | Quarterly payments | Feb 8, 2011 |
Slightly off topic, but the reason I make quarterly payments is so that the money stays in my account for slightly longer, rather than in the tax man's pocket!
Louisa
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Seija Kerttula
United Kingdom
Local time: 13:32
Member (2005)
English to Finnish
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| | Income tax for pension payments | Feb 23, 2011 |
I wrote a question on the UK taxation (http://www.proz.com/forum/professional_development/108844-taxes_for_freelancers_in_uk_and_germany.html#1688663),
but it seems it has become drowned by more interesting topics. Basically, my concern is:
As self-employed, how can you you pay for your pension in the UK? In other countries you get a tax deduction (70%-100%) for pension payments which makes it possible to pay them. Here you have to pay income tax for your future pension (=your pension payments) already now, and if you are lucky, the "relief" may reach you when you retire at 66.
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