The Business of Freelancing: How to be a Self Employed Superhero

An introduction to three key areas of UK self employment: tax, insurance and pensions. Ideal for students and/or anyone planning a start-up in the UK.

Transcript

1. © Matthew C. Draycott І 2012 The Business of Freelancing
2. Freelances are usually self employed
3. Freelance = Self Employed Self Employed = Great Power Freelances are usually self employed Self employment means power…
4. Freelances are usually self employed Self employment means power… …But power means responsibility.
5. Key Information You Need:
6. Key Information You Need: - Income
7. Key Information You Need: - Income - Taxes
8. Key Information You Need: - Income - Taxes - Insurances
9. Key Information You Need: - Income - Taxes - Insurances - Pensions
10. What is Income?
11. Earnings from employment
12. Earnings from employment Earnings from self-employment
13. Earnings from employment Earnings from self-employment Most pensions
14. Earnings from employment Earnings from self-employment Most pensions Interest on most savings
15. Earnings from employment Earnings from self-employment Most pensions Interest on most savings Dividends from shares
16. Earnings from employment Earnings from self-employment Most pensions Interest on most savings Dividends from shares Rent paid to you
17. Earnings from employment Earnings from self-employment Most pensions Interest on most savings Dividends from shares Rent paid to you Money paid to you from a trust
18. Why is this important?
19. You need to Register with HMRC Within 3 months of receiving your first income.
20. www.hmrc.gov.uk/sa/register You need to Register with HMRC Within 3 months of receiving your first income.
21. Now your responsible…
22. Now your responsible… …That means Tax.
23. UK Tax Year April 6th – April 5th
24. UK Tax Year April 6th – April 5th You should submit your return by: 30th September after Tax Year.
25. UK Tax Year April 6th – April 5th You should submit your return by: 30th September after Tax Year. You must submit it by: 31st of January or get fined!
26. UK Tax Year April 6th – April 5th You should submit your return by: 30th September after Tax Year. You must submit it by: 31st of January or get fined! Pay your tax bill on 31st of January …or get fined!
27. 3 kinds of Tax… Income NI: Class 2 NI: Class 4
28. Income Tax: this tax year (2012-13) the basic Personal Allowance is?
29. Income Tax: this tax year (2012-13) the basic Personal Allowance is: £8,105… Not Taxable
30. Income Tax: this tax year (2012-13) the basic Personal Allowance is £8,105… Not Taxable £8,105 - £34,370: 20%
31. Income Tax: this tax year (2012-13) the basic Personal Allowance is: £8,105… Not Taxable £8,105 - £34,370: 20% £ 34,371-£150,00: 40%
32. Income Tax: this tax year (2012-13) the basic Personal Allowance is: £8,105… Not Taxable £8,105 - £34,370: 20% £ 34,371-£150,00: 40% Over £150,000: 50%
33. NI: Class 2 Flat rate £2.65 a week... if your earnings are below £5,595 per year (2012-13) you might not need to pay.
34. NI: Class 4 You pay 9% on annual profits £7,605 - £42,475 (2012-13) and 2% on any profit over that amount.
35. An Example… Tony Income £35,000 Expenses £3000 Student Loan Yes
36. Income Tax £35000 - £3000 (Expenses) - £8105 (P. Allowance) = £23895 – 20% (£4779.00) Class 4 NI £35000 - £3000 (Expenses) =£32000 (Profit) - £7605 (Class 4 NI Lower Limit) =£24395 – 9% (£2195.55 ) Student Loan £35000 - £3000 (Expenses) =£32000 (Profit) - £15000 (Loan Lower Limit) £17000 – 9% (£1530 )
37. Total Tax Bill: £8504
38. Total Tax Bill: £8504 Sounds a lot? …it’s no more than anyone employed will pay… given expenses it’s actually less!
39. Save about 30% of your Income for the Tax bill. Total Tax Bill: £8504 Sounds a lot? …it’s no more than anyone employed will pay… given expenses it’s actually less!
40. Payment on Account... Paying Next Years Tax This Year
41. Payment on Account... Paying Next Years Tax This Year 2 Payments: 31st of January and 31st of July
42. Payment on Account... Paying Next Years Tax This Year 2 Payments: 31st of January and 31st of July Each one 50% of previous bill
43. Its not all bad news though!
44. Expenses, You Can Deduct: Business Mileage
45. Expenses, You Can Deduct: Business Mileage Professional Fees
46. Expenses, You Can Deduct: Business Mileage Professional Fees Tools and Specialist Clothing
47. Expenses, You Can Deduct: Business Mileage Professional Fees Tools and Specialist Clothing Capital Allowances
48. Expenses, You Can Deduct: Business Mileage Professional Fees Tools and Specialist Clothing Capital Allowances Household Expenses*
49. Expenses, You Can Deduct: Business Mileage Professional Fees Tools and Specialist Clothing Capital Allowances Household Expenses* Travel and Subsistence Costs *(when working at home)
50. You need to keep: A record of all your sales and takings A record of all your purchases and expenses
51. If In Doubt…Call HMRC …I’m not an accountant! www.hmrc.gov.uk/enq/
52. Insurance?
53. Insurance? Public liability insurance – covers the cost in the event that you cause injury or damage to a person.
54. Insurance? Public liability insurance – covers the cost in the event that you cause injury or damage to a person. Professional indemnity insurance – covers losses a client suffers as a result of your advice.
55. Pensions?
56. Average wage is now around £20,000
57. Average wage is now around £20,000 Basic state pension 40 qualifying years paying National Insurance gets you around £100 pounds per week after your 65...maybe!
58. Average wage is now around £20,000 Basic state pension 40 qualifying years paying National Insurance gets you around £100 pounds per week after your 65...maybe! Private Pension Arranged yourself with a pension company, a potentially volatile long term investment...but if your self employed, its your only choice.
59. If you start a pension at 25 you will need to contribute £261 pounds per month to retire on the average wage of £20,000 from 65
60. If you start a pension at 25 you will need to contribute £261 pounds per month to retire on the average wage of £20,000 from 65 If you start at 30... £500
61. If you start a pension at 25 you will need to contribute £261 pounds per month to retire on the average wage of £20,000 from 65 If you start at 30... £500 If you start at 40... £1000
62. If you start a pension at 25 you will need to contribute £261 pounds per month to retire on the average wage of £20,000 from 65 If you start at 30... £500 If you start at 40... £1000 If you start at 50... £1300
63. Don’t let the facts and figures scare you, it’s just organisation...
64. …Once it’s done, you can concentrate on your business and have some fun!
65. Image Credits mtsofan Rafael Penaloza Stefan ilkin cosmanautirussi jquiz Great Beyond .:teymur madjderey ntr23 BFLV Tom Newby iced soul photography scorpions and centaurs Long_divison_and_x_ra y_vision Kaptain Kobold Tinker*tailor loves lalka Manic toys …tim Sikegb Jd hancock Duanchaser Ben oh …Thanks Guys!