When you start self employment, tax rates start having more relevance. Unlike PAYE, where your taxes are taken off you by your employer throughout the year, self employment will result in a tax bill at the end of the year. If you are currently self employed, either as a sole trader or a partner in a partnership, you can expect to be subject to the following taxes (all rates relate to the 2013-14 tax year):
Income Tax
The main 3 bands affecting most people are as follows:
Personal allowance £9,440
20% income tax £9,440 - £41,450
40% income tax (‘higher rate’) £41,450+
NB these figures apply to all sources of income, not just self employment
National Insurance (NI)
If you are self employed, it is more than likely that you will be paying Class 2 NI, currently £2.70 p/w. You should also be subject to Class 4 NI which is based on your self employed income (unlike income tax, this is only based on self employed income). The bands of Class 4 NI are as follows:
0% up to £7,755
9% £7,755 - £41,450
2% £41,450+
The following table shows what tax you may expect to pay from the appropriate level of earnings (all assumed to be from self employment):
| Earnings | Income tax | NI | Total |
| 5,000 | 0 | 0 | 0 |
| 10,000 | 112 | 202 | 314 |
| 15,000 | 1,112 | 652 | 1,764 |
| 20,000 | 2,112 | 1,102 | 3,214 |
| 25,000 | 3,112 | 1,552 | 4,664 |
| 30,000 | 4,112 | 2,002 | 6,114 |
| 35,000 | 5,112 | 2,452 | 7,564 |
| 40,000 | 6,112 | 2,902 | 9,014 |
| 45,000 | 7,822 | 3,104 | 10,926 |
| 50,000 | 9,822 | 3,204 | 13,026 |
