Abacus Online September 2001
If you are Self Employed, you could be in for a nasty shock this coming January
Over the last couple of Budgets, various changes to income tax allowances and National Insurance rates have been announced and are gradually being implemented.
Whilst for persons earning above the national average the effects are minimal in percentage terms, these charges can have a dramatic effect for those earning broadly an average profit as is illustrated below:-
Net Self Employed earnings (profit)
Less Personal Allowances
Taxable income
Tax due @ 10%
Tax due @ 23/22%
Total Tax Due
Class 4 National Insurance Due
Total taxation liability
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1999/2000
£
15,000.00
4,335.00
__________
10,665.00
__________
150.00
2,107.95
__________
2,257.95
__________
448.20
__________
2509.15
__________
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2000/2001
£
15,000.00
4,385.00
__________
10,615.00
__________
152.00
2,000.00
__________
2,152.90
__________
743.05
__________
2895.95
__________
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The position in percentage terms means that last year's average tax rate of just under 17% has increased to over 19%. When the direct National Insurance contribution (£2 per week) is added on, this in fact raises the rate of tax to just over 20% for someone earning just £15,000 per year!
The sting in the tail is to do with how the tax is collected. In this example the individual will have paid £1,254.58 in each of January and July 2001 based on the previous year's profit. Come January 2002, however, not only will he have to pay the balance of tax not paid on account of £386.80, he will also have to pay the first instalment for the following year of £1,447.98, i.e. a total of £1,834.78, an increase of £580.20.
Rightly, most people would have expected that, if their earnings had remained the same and allowances had increased slightly with inflation, their tax bill might well have gone down. This is clearly not the case. The position is likely, to be worse as most people's earnings rise slightly year on year.
If you are at all concerned that you are receiving only a modest income from your self employment and may be affected by the 'stealth' taxes illustrated above, please contact your usual Tax Manager or Stephen Cook, Tax Partner, who will be pleased to help you assess your position and minimise any nasty surprises that might be lurking.
The European Computer Driving Licence (ECDL)
Buckinghamshire County Council Continuing Education is offering 100 free courses aimed at employers/employees of SME.
ECDL is a European-wide qualification which, enables people to demonstrate their competence in computer skills. Its aims are:-
to raise the general level of competency in IT
to improve productivity at work
to enable employers to invest more efficiently in IT
and to ensure the best practice and quality issues are understood and implemented
The whole pack contains 7 modules with a test at the end of each module which are held at the Learn Direct Centre at Iver in Buckinghamshire.
To take up these courses students are asked to enrol on line and the course can be accessed this way or through the CD-ROM provided.
The true value of the course £500.
For further details please contact Joan Filler, Continuing Education at filler@cyber-guide.net.
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Please contact us to discuss the above furtherTel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.comNunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL. |
Registered Auditors, Licensed Insolvency Practitioners and authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales.
This publication has been prepared as a guide only to topics of current financial and business interest. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by us. All rights reserved.
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