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Where Taxpayers and Advisers Meet

1st time tax return as self employed

Joined:Mon Apr 12, 2021 9:37 am
1st time tax return as self employed

Postby gregzilla » Mon Apr 12, 2021 10:08 am

Hi, I work full time but last April I also started working freelance as a side hustle. Just going to very simply break down my situation. I pay tax class 2 by direct debit and national employment contributions are sourced from my full time work salary. I have funds put aside for any end of year tax class 4 contributions.

Let's say each month I earned £500 as self-employed.
Paid £30 tax class 2 each month.
Paid myself £350 each month.
Let's say business expenses for the tax year is £1000 (computer equipment)

So, would:

Turnover be 12x£500 = £6,000
Gross profit be £6,000-£1,000 (expenses) = £5,000
Net profit be £6,000 - £1,000 (expenses) - £360 (class 2) = £4,640*
OR Net profit, same as above but also deduct my salary - £4,640 - £4,200 = £440

* And this figure is what the tax office will use to determine how much I owe (tax class 4) after submitting my return?

BTW, I'm based in the Isle of Man, if that makes any difference. The self employed tax rate in IOM is 0% for up to £7,176, and 8% for over that amount.

Sorry for the very basic questions here, I kind of know what to expect but would be good to have someone confirm for me. Thanks

Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: 1st time tax return as self employed

Postby pawncob » Mon Apr 12, 2021 4:47 pm

NICs are not deductible aginst profits.
Drawings are not deductible against profits, they are on account of profits.
With a pinch of salt take what I say, but don't exceed your RDA

Return to “Income Tax”