What are the taxes?
Every tax payer is entitled to a tax free allowance of £11,500 for 2017/18. Income above this threshold is taxes at the following levels:
- The Basic Income Tax rate of 20% on income up to £45,000
- The Higher Income Tax rate of 40% on income between £45,001 and £150,000
- The Additional Income Tax rate of 45% on income over £150,000.
In additional to Income Tax, sole traders are liable to pay two types of National Insurance Contributions (NICs):
- Class 2 NICs which is £2.85 per week for Tax Year 2017/18
- Class 4 NICs which is 9% of your earnings between £8,164 and £45,000, and 2% of any profits above this.