Mobile DJ Advice   Back to Main News Page   Mobile DJ Advice   If you are self-employed You are responsible for your own tax and National Insurance contributions. This means telling HMRC about your income by filling in a Self Assessment tax return. It's important to let HMRC know that you’re self-employed as soon as possible - even if you already fill in a tax return each year. If you don’t tell them within three months of the end of your first month in business you could face a penalty. Depending on what type of National Insurance contributions you pay, you may lose the right to certain benefits, statutory payments, employment rights and the additional State Pension. If you are employed If you are employed, your employer is responsible for deducting and paying your tax and National Insurance contributions through the Pay As You Earn (PAYE) system. You are also entitled to certain rights and benefits, such as maternity or paternity leave, sick pay, Jobseeker's Allowance if you lose your job and a State Pension (including the additional State Pension) when you retire. You can also be employed and self-employed at the same time, perhaps by working for an employer during the day and running your own business in the evenings. Think about each contract separately: you may find that you are self-employed for one but employed for another.   You can get more detailed guidance from HM Revenue & Customs (HMRC) website. If you are still unsure, you should ask to talk to the Status Officer at your Tax Office.   Income Tax and Self Assessment Once you’re registered as self-employed, you’ll be a Self Assessment taxpayer. You’ll have to fill in a tax return each year and give details of your earnings and any other income you get. This information is used to work out how much tax you have to pay. Your Tax Office will automatically send you a tax return every year in April. If you send your completed return back to your Tax Office by 30 September they’ll work out your tax bill for you. You should send it back by the following 31 January at the latest. If it’s late, you’ll have to pay a penalty. Instead of filling in your tax return by hand and posting it back, you could save time by filing it online. National Insurance contributions Class 2 National Insurance contributions Class 2 NICs count towards certain benefits, like State Pension, Maternity Leave and Bereavement Benefit. You pay Class 2 NICs at a flat rate per week, or you can choose to make your payments either quarterly or by monthly direct debit. Bear in mind that Class 2 NICs don't count towards the additional State Pension, Statutory Sick Pay or Jobseeker's Allowance, so you might want to think about making other arrangements like a personal pension and income protection insurance. You can register for Class 2 NICs when you register as self-employed with the HMRC helpline. Exceptions to paying Class 2 NICs If you earn less than your personal allowance per year, you can apply for a 'certificate of small earnings exception' and not pay Class 2 NICs. However, you might decide to carry on paying them voluntarily to keep your entitlement to the State Pension and other benefits. Class 4 National Insurance contributions The amount of Class 4 NICs you have to pay for any tax year is based on your profits for that year. You pay eight per cent on annual profits between your lower personal allowance and upper limit and one per cent on any profit over that amount. You work out your Class 4 NICs on your tax return and pay them alongside your Income Tax. Note: Class 4 NICs don't count towards benefit entitlements. Value Added Tax (VAT) If your business turnover is more than the VAT threshold, you will normally have to register for VAT. Even if your turnover’s below the threshold it might benefit your business to register voluntarily. If you have an accountant they will be able to advise you or you can ring HMRC's National Advice Service Enquiry Line on 0845 0109 000 (open from 8.00 am to 8.00 pm Monday to Friday). Key dates for self-employed tax Self Assessment deadlines If you send in your tax return late, you'll have to pay a penalty and possibly interest on any tax you owe. So it's important to know the deadlines: Date (after the end of the tax year) Self Assessment deadline for 30 September sending in your paper tax return if you want HMRC to work out how much tax you owe (if you file online your tax is calculated automatically, so this deadline doesn't apply) 31 January sending in your tax return (paper or online) to avoid a penalty 31 January and the following 31 July tax payments VAT return deadlines When you register for VAT you'll usually be given a three-monthly 'tax period'. HMRC will send you a VAT return towards the end of each tax period. At the top of the return it'll show the date when it has to be sent back. Record keeping Legally you have to keep records for your business and for any other income you get. This is so you can fill in your tax return and show that the figures are right. You’ll need to keep at least: invoices for sales and purchases receipts for business expenses bank records Good records will also save you time and help you run your business more efficiently. Tax year A tax year runs from 6 April one year to 5 April the following year.   The percentage rates and/or bands of taxable income may change for each tax year. Details of any changes are announced in the budget and apply from the beginning of the tax year.   Income Tax Personal Allowance Everyone who lives in the UK is entitled to an Income Tax personal allowance. This is amount of income you can receive each year without having to pay tax on it.   The amount of your personal allowance depends on: Your age on 5 April  Your total income Total income means everything you receive from all taxable sources. That means you need to include things like pensions and interest on your savings in a building society before the tax has been taken off.   If you are DJ'ing full-time, your Tax obligations will be slightly different to that of a part-time DJ: For the tax year 2007-08, your personal allowance would be £5,225.  This is the amount you are allowed to earn before you are required to pay Tax.  Therefore, everything earned above this figure would be Taxed at the rate of 22%.   Income Tax allowances     2007-08   2008-09 2009-10 Personal Allowance £5,225 £6,035 £6,475   Income Tax rates and taxable bands Rate of Tax 2007-08 Starting rate: 10% £0-£2,230 Basic rate: 22% £2,231-£34,600 Higher rate: 40% Over £34, 600       Income Tax rates and taxable bands     2008-09 2009-10 Starting rate for savings: 10%* £0-£2,320 £0-£2,440 Basic rate: 20% £0-£34,800 £0-£37,400 Higher rate: 40% Over £34,800 Over £37,400 * From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply. The rates available for dividends are the 10 per cent ordinary rate and the 32.5 per cent dividend upper rate. If you are on a low income (if your earnings are less than your personal allowance plus £2320), some or all of the income from your savings will be taxable at 10%. From 6 April 2008, the starting rate of 10% is abolished for non-savings income. Tax is payable at the basic rate of 20% on taxable income up to £36,000. If you have more than £36,000 of taxable income, you will have to pay a higher rate of tax on the amount above this level. To calculate the tax payable, you should:   work out the taxable income, after taking any allowances or tax reliefs into account, then calculate tax on your taxable income up to the limit of £34,800 at 20%, then if you have taxable income over £34,800, calculate tax on the taxable income over £34,800 at 40%, then add the last two figures together. This is the amount of tax that is payable for 2008 -09. Please Note: The basic rate threshold has been changed from £36,000 (the figure previously announced in the budget) to £34,800 (the figure in the table above). However, the changes will not be implemented until September 2008 and will then be backdated to 6 April 2008. For example Your taxable income is £11,000 after deducting your personal allowance from your total income. You have no taxable income above £34,800, so you pay tax at the basic rate of 20% on all your taxable income. 20% X £11,000 is £2,200.   Income tax: taxable bands and rates for previous years Tax year 2007/2008 Taxable income rate of tax 0 - £2,230 10% £2,231- £34,600 22% Over £34,600 40%   Tax year 2006/2007 Taxable income rate of tax 0 - £2,150 10% £2,151 - £33,300 22% Over £33,300 40%   Tax year 2005/2006 Taxable income rate of tax 0 - £2,090 10% £2,091 - £32,400 22% Over £32,400 40%   Tax year 2004/2005 Taxable income rate of tax 0 - £2,020 10% £2,021 - £31,400 22% Over £31,400 40%   Tax year 2003/2004 Taxable income rate of tax 0 - £1,960 10% £1,961 - £30,500 22% over £30,500 40%   Tax year 2002/2003 Taxable income rate of tax 0 - £1,920 10% £1,921 - £29,900 22% Over £29,900 40% Personal allowance This chart below gives details of personal tax allowances for the previous six tax years. Name of allowance 2002/2003 tax year 2003/2004 tax year 2004/2005 tax year 2005/2006 tax year 2006/2007 tax year 2007/2008 tax year Personal allowance             age under 65 £4,615 £4,615 £4,745 £4,895 £5,035 £5,225       Tax Evasion Tax evasion is a pretty serious offence! Further reading (wiki)     Limitation of Liability   While DJ Associates uses reasonable efforts to include accurate and 'up-to-date' information on this web site it makes no representations as to the accuracy, timeliness or completeness of that information, and you should not rely upon it.   In using this web site, you agree that its information and services are provided "as is, as available" without warranty, express or implied, and that you use this web site and information at your own risk.   By accessing any portion of the DJ Association's web site, you agree not to redistribute any of the information found therein. 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