UK The past tax year I have been working as a contractor, How do I pay my taxes?

[Ebiso]

Hi,

Basically after I graduated I was approached by a company to develop a piece of software for them. (friend of a friend type deal) anyway every week since then the company has paid wages directly into my account.

Now I've been told I need to send them an invoice of everything I have been paid so far for their own records. and that I should set myself up as a sole trader and sort mine out myself.

Anyway I'm not really sure where to begin, Do I need to set myself up as something like a sole trader? I thought I could just fill in a form online saying how much I took and that would be that?

 

[ColinCPA]

Does this employer pay you as an employee or an independent contractor? If a contractor, this company should 1099 you at the end of the year, which you will report on a Schedule C on your return. If not, you still need to keep track of what you are being paid so you can report receipts accurately at the end of the year.

You need to keep track of all of your expenditures, business mileage, etc., which you will be able to deduct at the end of the year. You'll need to seperate business expenses from personal expenses. Are you working from home? Consider whether you will be able to take a home office deduction for the portion of your home you are exclusively working in.

You need to watch out for estimated taxes as well. If you are a contractor, your employer is not withholding federal income tax, state income tax, or FICA taxes. You may be required to pay in quarterly federal and/or state installments to avoid underpayment penalties. You will be responsible for 100% of self-employment taxes, although you will get a 50% deduction on your return.