Hi, I would like to know whether someone doing business as a sole trader is liable to pay income tax. Could someone please help? Thanks!
Yes, sole traders pay Income Tax when their total annual income exceeds the tax-free Personal Allowance threshold. Currently, this is set at £10,600 for the 2015-16 tax year.
Income Tax is charged at the following rates:
20% (basic rate) - up to £31,785 (or £42,385 including your personal allowance)
40% (higher rate) - £31,786 - £150,000
45% (additional rate) - above £150,000
Depending on how much you earn, you may also have to pay Class 2 and Class 4 National Insurance Contributions.
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