Self employed tax question.

[GetCarter]

I'm self employed (40% tax band).

If I employ someone to work for me for a day next week and pay them £500, how much will my tax bill go down and when?

TIA

[Eric Mc]

What is youir business' financial year end i.e. the date up to which you complete your annual accounts (NOT the tax return)?

[GetCarter]

5th April

[Eric Mc]

Thanks.

You are currently in the middle of your business year ended 5 April 2011. This will form the basis for the entries on your 2010/11 Self Assessment tax return.
The tax arising from the details showing on your 2010/11 tax return will be payable by 31 January 2012.

If you pay someone £500 NOW, it will reduce your tax bill payable on 31 January 2012 by £200 and your Class 4 NI by £40, an overall saving of £240.
This will also have an impact on your two 2011/12 payments on Accounty (if you are required to pay these). If you are, these will reduce by £120 each.

This means that potentially, by paying £500 now, you reduce the tax amount payable on 31 January 2012 by £360.

[GetCarter]

Cheers!

[anonymous-user]

Are you employing them as in paying employers NIC's etc? Are they going to give you an invoice for the £500? Or are you just dropping them 50 tenners in their bin?

[GetCarter]

Well I'm actually thinking of employing 12 string players, a pianist and a recording studio, so the muso's will be on MU rates and the studio will charge the going rate. Whole deal will be +/- £4k

Everything will go through the books (I'm VAT registered etc)

[Eric Mc]

Musicians are often paid on a self employed basis - it's the norm for the profession.