Budgeting for tax: A breakdown of what you need to pay
There's not just income tax. What else should you look out for?
Published: June 25, 2001 Updated: October 3, 2013
We, of course, do not just pay income tax there are several other taxes to consider:
- National Insurance. Everyone, except the very lowest wage earners, has to pay National Insurance Contributions. As a self-employed person, you can pay a basic amount quarterly or monthly by direct debit.
- You will also have to pay a top-up amount, depending on your income, along with your tax bill. For the year 1999-2000 and as a self-employed person, you will generally pay a Class 4 rate of 6% (max £1,108.02) on profits of between £7,530 to £26,000.
- Car Benefits. If the company owns your car, you will also face taxation on the car benefits. These vary according to engine size, fuel type and business mileage annually.
- Employee Benefits. If you work from home but operate as a company, you will also face tax on some employee benefits. Working from home, this list is most likely to include such benefits as a cheap loan from the company or relocation expenses if you move your office (and home).
- Capital gains. This is something to watch out for if you use a part of your property solely for business use, e.g. a garage that becomes an office. When you sell the property, there could be a capital gain on that section of the sale which could be taxable. It depends on the level of profit for that element, how long it has been an asset etc.
- Savings. Most savings accounts are taxed at source. There are a few exceptions which are usually established as the account is opened – if you are over 65 or if the account holder is a minor. But the tax office will still want to know about all these interest earnings, likewise with any profits made from share dealings. Again keep records of everything and remember to include it all on the tax return.