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What is income tax?

Income tax is a tax imposed on the income or profits made by individuals in any given tax year. While this is typically deducted at source for employees, self-employed persons pay income tax differently and may be taxed a different amount.

What is the current self-employed income tax rate?

Income tax rates for the 2019/20 tax year are as follows:

• Personal Allowance: Up to £12,500 (0%)
• Basic rate: £12,501 to £50,000 (20%)
• Higher rate: £50,001 to £150,000 (40%)
• Additional rate: over £150,000 (45%)

If you need more information on Personal Allowance and income tax rates for previous tax years, check out the following guides from HMRC:

• Personal Allowances
• Income tax rates and bands for previous tax years

Paying income tax as a self-employed person: What you need to know

Unlike employees, self-employed individuals don't pay income tax through PAYE-they're required to file an annual Self-Assessment tax return.

Most people file their returns online these days. The deadline for doing so is 31st January, while payments for your tax bill are due on 31st January after the end of the relevant tax year. That means that your 2018/19 tax year must be paid up by 31st January 2020.

If you're newly self-employed, you'll need to register for Self-Assessment. Keep in mind to stay within the deadline, as there are penalties for registering your Self-Assessment late. We explain more about key deadlines, as well as late filing and payment penalties in our Self-Assessment guide.

Resources:

• Income tax rates and Personal Allowances
• Checking your Income Tax for the current year
• Tax codes
• Self Assessment Tax Returns: A beginner's guide for the self-employed
• Understanding the P60: What is a P60 form, and what do you need to know?
• PAYE forms

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Working out the VAT

With our calculator, you can work out your VAT in just a few quick clicks.

If the price doesn't include VAT:

• Select the ‚ÄòAdd VAT' option
• Select the rate of VAT on the slider
• You'll obtain the gross price (inclusive of VAT) and the VAT element of the bill.

If the price includes VAT:

• Select the ‚ÄòExclude VAT' option
• Select the rate of VAT on the slider
• You'll obtain the pre-VAT price (exclusive of VAT) and the VAT element of the bill.

VAT basics: What you need to know

VAT, or Value Added Tax is a consumption tax that is applied to most goods and services. While the standard rate (20%) applies in most cases, there are items-such as children's car seats and sanitary products-that are charged at the reduced rate of 5%. Using the slider on our calculator, you'll be able to calculate the VAT and gross or net prices for different VAT rates. If you're unsure about the correct rate you should apply, refer to HMRC's resource on VAT rates.

Resources:

• How to deal with VAT if you are a small business
• Flat rate VAT Scheme: A beginner's guide for small business owners

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