I am new to the whole self employed thing and I had a few questions about tax. I have an accountant who is going to sort out my tax at the end of the year. My questions are: will I pay tax on the amount that I take from clients or on the drawings that I take out? Roughly do you know how much of a percentage it is and can I use money that the business makes to pay my tax bill. Finally, how long to you get to pay your tax bill?
You will be taxed on the profit you make not the amount you draw from the business. Everyone receives a personal allowance on which they do not pay tax. For 08/09 it is around £6K so the first £6K of profit you make is not taxed, assuming you have no other income. After that you are taxed at 22%. The money you draw from the business can be used for whatever you want, including paying the dreaded tax bill. The tax year ends on 5th April each year and a tax return has to be submitted by January 31st at the latest in the following year. This is when the tax becomes due.
