Understanding Your Tax Position

Understanding your tax position

One of Accounted's most powerful features is your real-time tax position — a live estimate of how much tax you're likely to owe, updated every time a new transaction comes in. No more nasty surprises at year-end.

What the tax position shows

Your tax position dashboard displays:

• Estimated Income Tax — Based on your current profit (income minus allowable expenses), calculated using the current tax bands and your personal allowance.
• Class 2 National Insurance — The flat-rate NI contribution for self-employed individuals (currently £3.45 per week if your profits exceed the Small Profits Threshold).
• Class 4 National Insurance — The percentage-based NI contribution on your profits, calculated using current thresholds and rates.
• Total estimated tax bill — The combined figure for Income Tax, Class 2 NI, and Class 4 NI.
• Payments on account — If applicable, the estimated payments on account you'll need to make for the following tax year (typically 50% of your current year's bill, split into two payments).

How it's calculated

Penny calculates your tax position using:

1. Your year-to-date income — All business income recorded in the current tax year.
2. Your year-to-date expenses — All categorised, allowable business expenses.
3. Annualised projection — Penny extrapolates your current income and expense trends to estimate your full-year figures. This projection becomes more accurate as the year progresses.
4. Current tax rates and thresholds — The applicable Income Tax bands, personal allowance, and NI rates for the current tax year.

The calculation updates automatically every time a new transaction is imported and categorised.

Reading the dashboard

The tax position dashboard is designed to give you a clear picture at a glance:

• Green indicator — You're in a comfortable position. Your estimated tax bill is manageable relative to your income, and there are no actions needed.
• Amber indicator — Worth paying attention. You may want to start setting aside money for your tax bill, or there are transactions that need reviewing.
• Red indicator — Action recommended. Your estimated bill is high relative to your available funds, or there are overdue submissions.

Tax position via WhatsApp

You can ask Penny for your tax position at any time on WhatsApp. Simply send a message like:

• "What's my tax position?"
• "How much tax do I owe?"
• "What's my estimated bill?"

Penny will reply with a summary of your current position, including estimated Income Tax, NI, and total liability.

Setting money aside

Accounted can remind you to set money aside for tax. Based on your current tax position, Penny can suggest a monthly or weekly amount to transfer to a savings account so you're never caught short when your tax bill is due.

Important caveats

Your tax position is an estimate based on the information available. It may not account for:

• Other sources of income (employment, rental, investments) unless you've told Penny about them
• Tax reliefs or allowances beyond the personal allowance and trading allowance
• Student loan repayments
• Marriage allowance transfers

For a complete and accurate tax calculation, especially if your affairs are complex, we recommend consulting an accountant. Your accountant can access your Accounted data directly if you grant them access.