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Self-Employment Tax Formula:
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Self-Employment Tax in the UK consists of Class 2 National Insurance contributions and additional National Insurance payments that self-employed individuals must pay on their profits.
The calculator uses the self-employment tax formula:
Where:
Explanation: The calculation combines both Class 2 National Insurance and additional National Insurance contributions based on your annual profits.
Details: Accurate self-employment tax calculation is crucial for proper financial planning, meeting HMRC obligations, and avoiding penalties for underpayment.
Tips: Enter your annual self-employment profits in pounds. The calculator will compute your total self-employment tax liability including both Class 2 and National Insurance components.
Q1: What are the current self-employment tax rates?
A: The calculator uses 9% for Class 2 and 8% for additional National Insurance. Actual rates may vary based on tax year and government policies.
Q2: When are self-employment taxes due?
A: Self-employment taxes are typically paid through self-assessment tax returns, with payments due by January 31st following the end of the tax year.
Q3: Are there thresholds for self-employment tax?
A: Yes, there are profit thresholds below which you may not need to pay Class 2 National Insurance. Check current HMRC guidelines for exact figures.
Q4: Can I claim expenses against self-employment tax?
A: You can deduct allowable business expenses from your profits before calculating tax, which reduces your overall tax liability.
Q5: Is this calculator suitable for all self-employed individuals?
A: This provides a basic estimate. Complex situations involving multiple income sources or specific deductions may require professional tax advice.