Self Employment Tax

Self-employment tax (SET) is a type of a taxation pertaining to the social security tax and the medicare tax for the individuals those who are self employed, i.e., the people engaged in business or commercial activity of some kind which is legally approved by the Governmental authorities.

The concept of self-employment tax is more or less similar to the social security tax and the medicare tax which is withhold from the monthly income of the professionals engaged in any kind of services under the private or the public sector. The employers of most of the working professionals calculate the social security tax and the medicare tax of the concerned person.

In case of the self-employment tax the self employee may even deduct nearly 50% of the gross income as the self-employment tax. The rate of self-employment tax is calculated at 15.3%. The self-employment tax is comprised of two parts, i.e. 12.4% for the social security to help the individuals those who are old, disable, etc and the next part of 2.9% is for medicare tax or hospital insurance.

Self-employment tax in United States:

An individual engaged in a commercial activity in United States in the form of a limited company or a sole proprietorship is termed as a self employed pertaining to taxation. The nominal shareholders of a joint stock company are not considered for the purpose of taxation under self-employment tax. The rate of self-employment tax in United States of America is 15.3% on income. The self employed individuals in US are paid a quarterly estimated tax on income. The self employed individuals have to pay both the part of the FICA tax in case of an employed person which is called the self-employment tax. The self employed also gets the privilege of relaxation on the self-employment tax as only 92.35% of the income of the self employed is taxable.

Self-employment tax in United Kingdom:

In United Kingdom a self employed individual functions as a limited company or a sole proprietorship. An individual working as an employee and also running a part time business is also termed as a self employed person. This kind of self-employment is very popular in United Kingdom and there are several law based responsibilities attached to such kind of self employment. The legal liabilities are home clearance from local bodies, registration under Data Protection Registrar in case of business records in electronic form, statutory public liability insurance, record of financial transactions, etc. The self employed person is charged with more tax than a person who is an employee. The self-employment tax includes contributions on employers and employees national insurance, value added tax, taxes on business, and taxes paid to local and central governments.