Employed and Self-Employed Tax Calculator
No matter whether you are employed or self-employed, it can be tricky to calculate your taxes and take-home pay. Especially if you are a combination of both. Check out this handy guide to find out how much tax you should be paying.
How to Calculate Your Taxes When Self-Employed
The easiest way to calculate your taxes when you are self-employed is to use a self-employed tax calculator, such as this one. The calculator will do all the difficult work for
you, and supply you with a rough breakdown of your take-home income, and the amount that you pay in tax.
In order to use a self-employed tax calculator, you will need to enter some details about your business. These will include your annual sales (a.k.a. Your self-employed turnover), and your allowable expenses. Simply add these numbers into the calculator, and press “calculate”.
From there, you will be provided with an estimate of your take-home income after expenses, NI contributions, and income tax.
What is Employed vs Self-Employed?
The key difference between being employed and self-employed is who you report to. When you are employed, then you are being paid to work for an employer. This employer could be an individual, but more often, it is a company.
In contrast, when you are self-employed, you generally work for yourself, whether this be as a business owner, freelancer, or independent contractor. Instead of getting a salary, when you are self-employed, your earnings will come directly from the business.
It is possible to be both employed and self-employed simultaneously. This is common for people who have a side hustle, where they make money independently of their full-time job, through freelancing or a small business.
Do You Pay More Tax If You Have a Side Hustle?
In the modern day, an increasing number of people are setting up their own side alongside their 9-5 job. But, contrary to popular belief, you do have to pay tax on your side hustle. This
is because your side hustle will be self-employed income, and so it is taxable. However, you won’t pay more taxes, instead, your taxes will be based on your total income.
In the UK, there is a tax-free allowance for the self-employed. This was introduced to support “self-starters” with small businesses centred on hobbies. This tax-free allowance is £1,000,
so you can earn £1,000 being self-employed before you have to pay any tax.
Once you exceed this £1,000 allowance, you will need to begin paying taxes on your self-employed income. You can easily do this by completing a self-assessment tax return.
However, it is also important to note that as a self-employed individual, you will be required to pay class 4 National Insurance. While this is officially known as a type of national insurance, it is more like a tax as you do not receive any benefits for paying this money. Class 4 National Insurance is paid at a rate of 10.25% for profits between £9,880 and £50,270. On profits higher than this, the rate will be 3.25%. This payment is completely separate to your self-employed annual national insurance contribution of £163.80.
How Are My Taxes Calculated If I’m Employed and Self-Employed?
Taxes, when you are both employed and self-employed, aren’t as confusing as they might seem. Your taxes from your employed income will be taxed at source through PAYE before you receive your salary.
The only real difference is that you will need to submit a self-assessment tax return to declare the rest of your income and pay the taxes required for your self-employed income. Essentially, you will just pay your taxes in two parts.
FAQs
How Is My Self-Employed Tax Calculated?
Your self-employed taxes can be calculated using a self-employed tax calculator, such as this one.
How Much Do You Earn Self-Employed Before Tax?
In the UK, the tax-free allowance for those that are self-employed is currently £1,000. You will also have access to a personal allowance of £12,570 which is available for up to £100,000 of taxable income across multiple sources in a single year. So, if you are only self-employed, you could potentially earn up to £13,570 before tax.
What Percent Do You Pay If You Are Self-Employed?
The basic tax rate in the UK is standardised. So no matter whether you are employed or self-employed, you will pay 20% tax on your earnings.
Do Self-Employed Pay Less Tax?
No, self-employed people do not pay less tax than employed people. This rumour is not true, as the basic tax rate is the same for both employed and self-employed people.