What taxes do you pay as a freelancer?

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What taxes do you pay as a freelancer?

When working on a freelance basis, organising your tax payments is a difficult process.

This entails understanding the taxes that you pay, the right time to pay them and just how much you owe. Without knowing all of this, you run the risk of a larger bill at a later date. In this article, we look at some of the taxes you pay as a freelancer and some details about paying them.

What taxes do I pay?

When working as a freelancer, there are two different options available to you. These are:

• Sole Trader: You only pay personal taxes. This accounts for 60% of small businesses in the UK.
• Limited Company: In a limited company you work as an employee in your own company. Limited companies pay both business tax and personal tax.

On your personal income in both cases, you pay 20% tax on any take-home earnings that you receive as a wage from the company between £12,570 and £50,270, with rates increasing on a sliding scale from that point. Depending on the nature of your company, different businesses have different tax rates. These taxes include corporation tax and VAT.

How do sole traders work out their tax bill?

Sole traders go through the self-assessment process. Freelancers have until October 5th after the end of a tax year to register or risk paying penalties. Over time, HMRC sets people up with accounts through which they file their tax returns.

The government checks the amount of tax that people pay, checking over expenses and self-assessment forms. Sending your tax returns accurately and in a timely manner means that you pay the right amount of tax without risking any further cost as a result of penalties and fines.

Can I simplify the process?

Consider a freelance accountant. A freelance accountant is an expert with experience in filing tax returns and understanding the financial side of a freelancer’s career. Using an effective accountant means that you pay the right tax at the right time.

If you’re looking for a freelance accountant you can trust, in Manchester and beyond, get in touch with the SQK Accountancy team today to learn more about our great services.

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