Sole Trader Tax Calculator:

How to Easily Work Out Your Tax and National Insurance

 

Tax can be complicated, right? In fact, it’s so nuanced that there’s an entire accountancy profession dedicated to understanding and applying its complex rules. That’s a lot to keep up with if you’re a small business owner.

At takepayments, we decided to make this all a tad easier. We’ve built a quick and easy tax calculator designed for sole traders and small businesses to get a snapshot view of the tax they should be paying.

All you need to do is throw in a few top-level details about your business (revenue, profit, etc.) and our handy calculator will give you an estimate of your tax and NI bill. It’ll even break it down into annual and monthly payments for you.

How the calculator works

The calculator uses data you provide to work out your business’:

  1. Annual profits
  2. Monthly profits
  3. Annual tax estimate
  4. Annual National Insurance estimate

Here’s how these calculations work:

  • Annual profits — This is calculated by taking your total annual business income and subtracting; your marketing costs, your spend on products and stock, your phone and broadband costs; your premises bills (i.e. rent, gas, electricity), your travel costs, your annual pension contributions and other allowable expenses.
  • Monthly profits — This is calculated simply by dividing your annual profits by twelve. 
  • Annual tax estimate — You’ll fall across up to three tax brackets depending on your earnings.
      • 20% of anything from £12,501 to £50,270
      • 40% of £50,271 to £150,000
      • 45% of £151k +
  • Annual National Insurance estimate — Similar to your tax estimate, this is calculated based on your earnings across different brackets:
      • A fixed rate of £163.80 on anything between £6,725 and £9,880
      • 10.25% on earnings from £9,880 to £50,270
      • 3.25% on anything over £50,270

(Rates correct as at 2022/23 tax year as at 14/11/2022)

How to budget for your annual tax and National Insurance costs

 

Once you know how much you can expect to pay on your taxes and National Insurance, it’s simpler to know how much you need to set aside. But when you’re a small business, saving is easier said than done.

Luckily, there are a few practical ways you can plan ahead to ensure you’re not left out of pocket — and you can still see your business grow, whatever the circumstances.

1. Look into discounted business rates

Business rates are taxes applied to commercial properties, like pubs, shops and offices. If you have a business premises and you’re looking for ways to cut costs, you might be eligible for discounted rates thanks to the UK government’s business rates relief schemes.

There are multiple relief schemes on offer. They include everything from relief for charities to exemptions for certain types of buildings. For more information, see our guide to business rates and relief schemes.

2. Overestimate your costs

Ever got a bill that was higher than expected? You can help set aside enough cash to cover these instances by overestimating your annual spend by 10%. 

Adding in a small buffer like this allows you to take unforeseen financial hits without going beyond your budget. Over time, you’ll develop a keener eye for costs that tend to land higher than you estimate, and create contingency plans for them.

3. Be ready to switch

While loyalty is valuable in your personal relationships, it can cost your business if you’re not careful. The market price of things like energy, broadband and insurance constantly fluctuates, so if you’re not comparing these things at least annually, you could be missing out on significant savings. 

The same goes for payment providers. Make sure you’re not being stung by hidden fees and high transaction costs; get quotes from other providers to see where your rates are compared with larger businesses. 

4. Negotiate

While not everything is up for negotiation, there’s occasionally wiggle room with suppliers to help you get more favourable rates in return for repeat custom — you just need to ask!

For example, if you’re renting your premises and your rates suddenly go up, you might be able to negotiate a lower monthly rental fee by agreeing to sign on to a longer-term agreement. The benefit to your landlord is that they won’t risk losing revenue for a few months between tenants — and will probably be willing to sacrifice a bit of income for that guarantee. 
For more information, check out our top budgeting tips for small businesses.

See how takepayments could help your business thrive with card machines, POS systems and online payment solutions today.

At takepayments, we provide our business customers with plenty of support to help with taking payments.

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