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What does being self employed mean, practically?

Being self-employed means that you work for yourself and not for an employer. It also means that you get paid a gross amount (no tax is taken off your earnings when you get them). You still need to pay this tax but you do it at the end of the year when you submit a Self Assessment Tax Return.

A Self Assessment Tax Return is an online form you complete every year in which you tell HMRC (the tax man) how much money you’ve earned over the course of the year. They then calculate how much tax you owe.

You will also have to pay National Insurance Contributions (NIC) on your earnings. The amount you pay depends on how much you earn over the course of the year and is calculated on your Self Assessment. The amount of National Insurance you pay when you are self-employed is almost certainly less than when you are an employee. Click this link for more information on National Insurance rates: https://www.gov.uk/self-employed-national-insurance-rates

The government includes a helpful calculator that you can use to calculate your income tax and NI contributions.

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