Tax Types
Tax and accounting software built with you in mind.
80% of people who are self employed are sole traders. And there are over 3 million more people who make other income on top of their primary job. Taxes for these two groups are not the easiest, especially as many of the tools made for the Self Employed are made with Limited Companies and Accountants in mind. Finmo was built with you in mind.
Click one of the links below to take you to that given section or scroll down to read all.
Sole traders
As a sole trader, your income comes from self-employment. You own and operate your business as an individual and don’t have your own limited company. There is no legal distinction between you as an individual and your business. Approximately 80% of all self-employed people are sole traders.
Your most important job when it comes to accounting and tax is keeping track of your income and expenses. Ideally, each month, your income is higher than your expenses and what’s left over is your “taxable income” – the money you live off of.
From a tax perspective, you pay two kinds of tax. Firstly you pay income tax on your taxable income. Secondly, you pay national insurance. There are two types of national insurance, Class 2 and Class 4.
Finmo helps you track your income and expenses and then calculates for you how much you owe in tax. At the end of the year, Finmo’s integrated tax system passes this information into the tax forms, connects you with an accountant to review everything, making sure it’s as accurate as possible and then submits your Self Assessment (tax return) on your behalf. This is all done for less than half the cost of a high street accountant.
Freelancers
‘Freelancer’ is not an official term used by HMRC. Freelancer can mean many things, but primarily it means you are free to pick and choose the work that comes your way. You are your own boss and answer to no one but yourself.
From a tax perspective, MOST freelancers are sole traders. We say most because there isn’t a distinction that is made in popular culture. Freelancers could have their own limited company or be paid through PAYE from an umbrella company. That said, typically freelancers act as sole traders so Finmo treats them as such.
See Sole Trader.
Multi-job
Multi-job refers to those who have more than one trade, profession or vocation (all three generally mean the same thing with only slight distinctions). We can generalise this by saying an individual has more than one job if they incur income and expenses in two distinct industries. Let’s look at some examples.
John drives for Uber and plays music professionally. He receives income and incurs expenses for both of his professions. These are looked at by HRMC as two separate professions. When completing a Self Assessment, John would need to fill in separate forms, one for each of his two jobs.
Beth is a copywriter. She receives income and incurs expenses through her corporate copywriting clients as well as advertising revenue from a popular blog she writes. While these are two distinct income sources, Beth can combine all of this as one source of income as it’s within one industry.
Finmo’s software was built with these situations in mind. When creating a new account with Finmo, you would create a ‘job’ for each of your jobs. Keep track of your income and expenses by tagging transactions associated with each job. Finmo will do all the hard work when it comes time to complete your taxes. This is all done for less than half the cost of a high street accountant.
Landlords
Rent out a second home? Rent a room? Have a portfolio of houses to rent? You’re a landlord! You make income by renting out property owned or occupied by you. Depending on how much you make and how you make it, HMRC wants you to pay tax on that income.
As a landlord, you have many potential tax reliefs and expenses to claim against your income – rent-a-room relief, mortgage interest, maintenance and replacement of domestic items to name a few. As a landlord, your first £1,000 in turnover is tax-free and you may not have to pay tax or file a self assessment until your income is over £2,500.
Finmo’s software helps track your rental income and rental expenses. Finmo advisors and accountants give guidance and then file your tax return on your behalf.
Feel confident in your submission.
Subcontractors
There are around 1 million contractors in the UK who are self-employed. Many work through CIS – the Construction Industry Scheme. Under CIS, your employer withholds tax and pays it to HMRC on your behalf. Many subcontractors get tax back after submitting their tax returns.
Understanding the rules around what you can write off and the reliefs you can claim determine how much you get back. As a self-employed person, you are subject to the same rules as a sole trader and can write off expenses incurred through your job. As a subcontractor, these expenses can be things like using your vehicle for work, using personal tools for the job and training costs.
Finmo helps track income and related expenses and at the end of the year, Finmo advisors and accountants give guidance and then file your tax return on your behalf.
First-time tax filers
Welcome to the world of Self Employment! If you haven’t already, please take a look at our new to self-employment section which has a lot of helpful content for first-timers.
Finmo’s aim is for you to go from knowing nothing to feeling confident about self-employed taxes.
PAYE plus side income
3+ million people make side income in the UK. This means you have a “normal” job, typically paid through payroll (PAYE) as well as income on the side. Income on the side can range from driving an Uber to giving tutoring lessons to renting out a room in your house. HMRC needs to know about all your income in order to tax you properly.
As a PAYE employee, you are taxed through your job which is facilitated by your employer. Side income, ie. any income that has not had taxes taken out, is taxed in addition to the income you receive from your job.
A bonus for side income people – your first £1,000 of income is income tax-free. HMRC gives taxpayers a buffer of tax-free income. After that, you will need to pay income tax as well as national insurance, just like a sole trader
As a PAYE employee, you pay Class 1 national insurance. As a sole trader and side income earner, you will need to pay Class 2 and Class 4 on top of your Class 1.
Side income tax can be tricky if you don’t know what you’re doing. You could potentially pay more tax than you need to without proper guidance. Finmo advisors and accountants are here to offer you that guidance as you complete your Self Assessment. This is all done for less than half the cost of a high street accountant.
Get started for free
Get Started