When you are your own boss, you are regarded as someone who is self-employed. In this dispensation, so many people are trying to be self-efficient, entrepreneurs and business owners. This group of people do not earn a regular salary from an employer, rather, their profits determine how much they will pay on tax.
When you are self-employed, you pay income tax on your profits, not your total income. To work out your profits simply deduct your business expenses from your total income. You will pay income tax on this amount.
We round the cost to the nearest whole.
The amount of income tax you pay on your profits is the same as if you were employed.
In this instance, let us assume that £45,000 is your profit after deducting all your business expenses. Therefore, when your profit is £45k per annum, your tax for 2020/2021 tax year will be 20% tax on £32,500 (the difference between £12,500 and £45,000). The 12,500 is your personal allowance.
This brings your tax for the year 2020/2021 to £6,500, and your take-home pay for the year will be £38,500.
Please note we are yet to include the National Insurance deduction. You pay Class 2 and Class 4 National Insurance, and your annual bill would be £3,353.6.
45000 AFTER TAX SCOTLAND
If you live in Scotland From April 2017, income tax is calculated differently than if you live in the rest of the UK. The Scottish Government sets the rates and thresholds.
You are classed as living in Scotland if that is where your main residence is. When you earn 45000 in Scotland, you will pay £6,994.06 income tax and £4,260 National Insurance. Your monthly income before tax is £3,750. Your monthly take-home pay is £2,812.16.
If your main home is in Scotland, you will pay the Scottish Rate of Income Tax. If you move homes, either to or from Scotland, you will pay the Scottish Rate if you live in Scotland for more than half of the year.
45000 AFTER TAX AND NATIONAL INSURANCE.
A £45,000 gross income earner is expected to pay tax and National Insurance. Over the year 2020/2021, you will pay £6,500 income tax and £4,260 National Insurance. Your monthly income before tax is £3,750. Your take-home pay is £2,853.33, weekly you will earn £658.46 and your daily income will be £131.70.
SHOULD A £45K EARNER PAY INCOME TAX?
Income Tax is charged on most types of income, such as wages and salary from jobs, your profits if you run a business, pensions, rents you receive if you are a property owner, and interest and dividends from savings and investments.
When you earn 45000 per annum, you are automatically required to pay income tax, either you are an employee, an entrepreneur or a property owner, as long as your rent or profit for the year is 45,000, you are mandated to pay income tax.
You do not usually pay Income Tax on all of your taxable income. This is because most people qualify for one or more allowances. An allowance is an amount of otherwise taxable income that you can have tax-free each tax year, for the year 2020/2021, the personal allowance is £12,500. What this means is that for the year 2020/2021 tax year, you do not have to pay tax on £12,500 from your gross income of £45k.
WHAT IS THE INCOME TAC FROM MY £45K USED FOR?
Income Tax is collected annually by the by Her Majesty’s Revenue and Customs (HMRC) on behalf of the government. Your £45K is used to help provide funding for public services such as the National Health Service (NHS), education and the welfare system, as well as investment in public projects, such as roads, rail and housing.
In summary, it is important that those who reside in Scotland should ensure that they follow the Scottish tax process, as this is slightly different from those living in the rest of the United Kingdom. Furthermore, you pay Scottish income tax rate if that is where your family lives, if you are married or in a civil partnership. That is where most of your property is. That is where you have registered for things such as your GP, car insurance or your bank account.