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Are You Within the Self-assessment Tax Return or PAYE System?
The definition of whether you are employed or on a self-assessment tax return for self-employed, as a first time worker in the UK, will make a difference to the amount you pay towards your UK tax return and National Insurance Contributions(NIC), as well as, the payment method. This article will educate first time workers on UK income tax procedures for self-employed and the employed.
First Time Workers Contributions Towards UK Income Tax
When you start work as an employee your employer will deduct income tax and NIC contributions from your pay. This system is called ‘Pay as You Earn’ (PAYE). Your employer and HMRC (HM Revenue and Customs) will supply you documents with deduction details.
Related Post: Top Tips for Filing your Self-Assessment Tax Form
Are You in the Self-employed UK Income Tax Category?
You will be categorised as a self-employed tax payer under the following criteria;
- You have agreed on the job, but send someone with the same skills to do the job. For example, a builder contracting another individual with same skills to complete the work
- You handle several customers at the same time. Example a freelance-writer on contract to provide written work. You decide on when and where you work, provided deadlines are met
- You supply tools needed for a job. Example providing pick-up trucks, scaffolding, special tools etc.
- You run a business and are solely responsible for its success or failure
Still not sure if you fall in the self-employed category? Talk to an accountant at Taxback for an evaluation. Once you are defined as self-employed you must do an online self-assessment tax return to see if you are eligible to pay tax.
Whether you are employed or self-employed, HMRC has various rules which define how much tax you pay. For instance, those on the PAYE system must first get their ‘Tax Code’ right to pay only due amounts in tax. Self-assessment tax evaluations too must be filled in correct to avoid over-paying or under-paying the latter resulting in hefty fines. If you are nervous about paying UK tax as a first time employee or self-employed individual in the UK, do talk to us and let’s get your tax matters in order.
Related Post: Step by step guide to completing the HMRC Self-Assessment Tax Return