Understanding Tax for Self-Employed Nail Technicians UK | Essential Guide

Sep 25 / TGB Academy
Confused about tax as a self-employed nail technician? Looking to start your career? This guide explains everything you need to know for UK tax, from managing payments to key deadlines. 

Understanding Tax: A Guide for Self-Employed Nail Technicians in the UK

Navigating the world of taxes can be daunting, especially for self-employed nail technicians. Understanding the basics of tax obligations is crucial for running a successful and stress-free business. In this blog post, we'll break down the essentials of self-employment tax in the UK, explain the difference between being self-employed and operating as a limited company, outline important tax dates, and provide tips on managing your tax payments.  

The Importance of Understanding Tax

As a self-employed nail technician, you are responsible for managing your own tax affairs. Proper tax management ensures you stay compliant with HM Revenue and Customs (HMRC), avoid penalties, and maintain financial health. Being knowledgeable about your tax obligations helps you plan and save appropriately, giving you peace of mind and allowing you to focus on growing your business.  

Self-Employed vs. Limited Company

Self-Employed:

  • Sole Trader: As a self-employed individual, you operate as a sole trader. You are personally responsible for any business debts and liabilities.  
  • Tax Return: You must complete a Self-Assessment tax return yearly, declaring your income and expenses.  
  • National Insurance: You pay Class 2 and Class 4 National Insurance contributions based on your profits.  

Limited Company:

  • Separate Legal Entity: A limited company is a separate legal entity. You, as the owner, are an employee and a shareholder of the company.  
  • Corporation Tax: The company pays Corporation Tax on its profits. You must file a Company Tax Return annually.  
  • Director's Responsibilities: As a director, you are responsible for running the company correctly, including maintaining accurate financial records and filing accounts with Companies House.  
  • Salary and Dividends: You can pay yourself a salary through PAYE and take dividends from the company's profits.  

Important Tax Dates

Tax Year: The UK tax year runs from 6th April to 5th April the following year.  

Self-Assessment Deadlines:  
  • 5th October: Register for Self-Assessment if you’re self-employed for the first time.  
  • 31st October: Deadline for paper tax returns.  
  • 31st January: Deadline for online tax returns and paying any tax owed for the previous tax year.  
  • 31st July: Deadline for making the second payment on account for the current tax year.  

How Much to Set Aside for Tax

To avoid any surprises, it's wise to set aside a portion of your earnings throughout the year. A common rule of thumb is to save around 20–30% of your income for tax purposes. This should cover your income tax and National Insurance contributions. Using a separate savings account for your tax money can help you manage your finances more effectively.  

How to Pay Your Tax to HMRC

  1. Calculate Your Tax: Use HMRC’s online calculator or consult with an accountant to determine how much tax you owe.  
  2. Set Up a Payment Plan: If you’re unable to pay the full amount by the deadline, you can set up a payment plan with HMRC.  
  3. Make Payments: Pay your tax bill through HMRC’s online portal, by bank transfer, or by setting up a direct debit.  
  4. Keep Records: Maintain accurate records of all payments and correspondence with HMRC for future reference.  

Consequences of Late Tax Payments

Failing to pay your tax on time can result in penalties and interest charges. Here’s what can happen if you miss the deadlines:  
  • Initial Penalty: £100 for filing your tax return up to three months late.  
  • Daily Penalties: £10 per day for up to 90 days if your return is more than three months late.  
  • Additional Penalties: Higher penalties if your return is more than six or twelve months late.  
  • Interest Charges: HMRC charges interest on late payments, which can add up quickly.  

How to Complete a Tax Return

  • Register for Self Assessment: If you haven’t already, register with HMRC for Self Assessment.  
  • Gather Your Records: Collect all your income and expense records, including invoices, receipts, bank statements, and mileage logs.  
  • Log In to Your Account: Access your Self Assessment account on the HMRC website.  
  • Complete the Form: Fill in the required sections of the online tax return form. You’ll need details about your income, expenses, and any other taxable income.  
  • Submit and Pay: Review your completed form, then submit it online. And make your payment by the 31st of January deadline.  

Tax For Nail Techs — Staying Informed

Understanding your tax obligations as a self-employed nail technician is essential for maintaining a successful business. By staying informed, setting aside funds, and adhering to deadlines, you can manage your taxes effectively and avoid penalties. Remember, keeping accurate records and seeking professional advice when needed can simplify the process and ensure you stay on top of your tax responsibilities. With the right approach, you can focus on what you do best — creating beautiful nails for your clients.  

PLEASE NOTE: any information provided in this blog post is for informational and illustrative purposes only. We are not a regulated accounting firm, and we do not intend for any of the material written to be taken as explicit advice. For specific accounting and tax advice, please contact HMRC or a firm of accountants.