As a sole trader in my second year it dawned on me that since my profits went over £17,495 this year I am paying 20% income tax (on profits above £11,000), 9% National insurance class 4 (on profits above £8060), and 9% student loan (on profits above £17,495). That is a total of 38% deductions on the profit of every job I do!??
Does this sound right of have I calculated it wrong? And is there anything else I can do about it, i.e. register as a limited company instead?
I don't officially take a a wage out of my profits I just work out how much I charge for the job, minus any expenses I paid for, (waste disposal, materials etc), and then the rest is my profit I think? I also claim business expenses like van costs, petrol, insurance, rent etc.
I just wanted to see if this 38% I have to put aside every time I get paid is right? Any opinions?