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Self Employed

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Self Employed

The Tax Year runs from 01 July to 30 June in any year.

QUESTIONS

Q. How do I know if I should register as a self-employed individual or as an employee under the Pay As You Earn (PAYE) system?
Q. How do I register as self-employed?
Q. Can I be registered under the PAYE system and also part-time self-employed individual?
Q. I am in receipt of rental income from a property in Gibraltar – what are my tax obligations?
Q. I have registered with the Income Tax Office, what happens next?
Q. What allowances am I eligible for? How do I claim them?
Q. As a self-employed individual, what are the important dates?
Q. How do I know what I have to pay?
Q. What are ‘Payments on Account’?
Q. I have made both Payments on Account, do I need to make any further payment?
Q. What will happen if I miss a filing or payment deadline?
Q. Can I reduce my payments on account?
Q. What records should I keep?
Q. Why do I need to keep records?
Q. For how long do I need to keep records?
Q. What expenses can I claim as deductions?
Q. What expenses are not allowed as deductions?

 

QUESTIONS & ANSWERS

Q.   How do I know if I should register as a self-employed individual or as an employee under the Pay As You Earn (PAYE) system?

A. You should register as:

  • - A self-employed individual if you are in receipt of trade income or own a business and you bear the responsibility for it.
  • - An Employee under PAYE if you work under the control of someone else's terms and conditions.

Q. How do I register as self-employed?

A. To register as a self-employed individual you are required to complete a registration and enclose additional documentation as specified in the form.

  • - Self Employed Registration - Form S1
  • - Taxi Operator/Rental Registration - Form S3

Q.  I am in receipt of rental income from a property in Gibraltar – what are my tax obligations?

A.  Rental income from a property that you are renting out in Gibraltar is chargeable to tax. You must register at the Income Tax Office using the Rental Income Registration Form and thereafter, at the end of every tax year, you must submit a completed tax return together with an income and expenditure account in respect of your property(ies).

Rental Income – Registration Form - S4

Q.  I have registered with the Income Tax Office, what happens next?

A.      After you register at the Income Tax Office, you are then required to register at the Ministry of Employmnet. Once both Departments approve your registration, the Income Tax Office will send you by post the approval letter and all documents you will need..

Q. What allowances am I eligible for? How do I claim them?

Allowance Type Amount
(2017/18)
Amount
(2016/17)
Who is eligible to claim? Document(s) required in order to claim this allowance
AGE ALLOWANCE  £8,900          maximum top-up for unmarried  individuals    £5,600     maximum top-up for married individuals £8,815          maximum top-up for unmarried  individuals    £5,600     maximum top-up for married individuals Any individual of state-pensionable age who is in receipt of taxable income. Original or certified copy of ID card, passport, or birth certificate.
APPRENTICE £380 £380 Any individual who is contracted on an apprenticeship basis. Original or certified copy of contract duly approved by the Industrial Training Board, the Gibraltar Official Employers Apprentices Board or equivalent.
BLIND PERSON £5,155 £5,020 Any blind individual, or his/her spouse. Confirmation from a qualified medical practioner confirming that the individual is blind.
CHILD  £1,135 £1,105 Any parent in respect of one unmarried child who is either aged 16 or under or is in full-time education.  Can be claimed by one parent only. Original or certified copy of child's birth certificate.
CHILD STUDYING ABROAD £1,290 £1,255 Any parent in respect of each child over the age of 16 in full-time education abroad.  Can be claimed by one parent only. Proof of educational grant received from the Government's Education Department or proof of enrolment in a University or other educational institution abroad.
DEPENDENT RELATIVE
(NON-RESIDENT)
£210 £205 Any individual caring for a non-resident dependent relative. Life certificate and proof of income in respect of the dependent and proof that he/she is being maintained by the taxpayer, said proof to be issued in the dependent's country of residence.
DEPENDENT RELATIVE (RESIDENT) £315 £305 Any individual caring for a resident dependent relative. Dependent relative's Life certificate and proof of income.
DISABLED INDIVIDUAL  £9,285 £9,040 Any parent of an unmarried disabled individual who resides with him/her. Confirmation of entitlement from the Department of Social Security.
GENERAL TAX CREDIT  £300 or 2% of tax liability £300 or 2% of tax liability Any individual who is taxed on the Allowances Based System. Applied automatically at assessment time.  No documentation required.
HOUSE PURCHASE  £12,000 £12,000 Any legal owner of residential property in Gibraltar which is intended to be used as his/her own main residence. Original or certified copy of title document.
HOUSE PURCHASE
(SPECIAL DEDUCTION)
£4,000  Restricted to £1,000pa £4,000  Restricted to £1,000pa All legal owners of residential property in Gibraltar which is intended to be used as his/her own main residence.  Parents who purchase a property for their child/children are not eligible. Original or certified copy of title document(s).
LOW INCOME EARNER From £500 up to a maximum of £6,962     From £500 up to a maximum of £6,947     Any individual earning less than £19,500pa. Proof of income earned in the previous year.
MEDICAL  £5,155            maximum £5,020            maximum Any insured individual. Original or certified copy of health insurance policy document.
MINIMUM ALLOWANCE £4,188  maximum top-up £4,103  maximum top-up Any individual in receipt of taxable income with tax allowances of less than £4,088. Applied automatically.  No documentation required.
NURSERY SCHOOL  £5,160 £5,025 Any parent in respect of any child(ren) up to pre-school age who is/are enrolled in a private nursery for a full school year.  Can be claimed by one parent only. a)  Letter from the nursery stating the name of the child(ren), date(s) of birth and date(s) during which the child(ren) has/have been attending the nursery; or  b)  Original or certified copies of invoices from the nursery for the period(s) claimed.
PERSONAL £3,300 £3,215 Any individual in receipt of taxable income. Applied automatically.  No documentation required.
SINGLE PARENT FAMILY £5,435 £5,290 Any unmarried, separated or divorced parent in respect of any one child.  Original or certified copy of child's birth certificate.
SOCIAL INSURANCE (EMPLOYEE) £335 £335 Any employee paying social insurance contributions. Applied automatically.  No documentation required.
SOCIAL INSURANCE
(SELF EMPLOYED)
£432 £432 Any self-employed individual paying social insurance contributions. Applied automatically.  No documentation required.
SPOUSE/CIVIL PARTNER £3,300 £3,215 Can be claimed by only one Spouse/Civil Partner. Original or certified copy of marriage/Civil partner certificate.
TAX CREDIT - INDIVIDUALS AGED 60+  IN EMPLOYMENT WHO ARE NOT IN RECEIPT OF AN OCCUPATIONAL PENSION  £4,000 upto £6,000 income £4,000 upto £6,000 income Any individual over the age of 60 who continues to be in employment and who is not in receipt of an occupational pension. Completed application form.
 

Q. As a self-employed individual, what are the important dates?

Please refer to our helpful guide by just clicking on the following link:

Q. How do I know what I have to pay?

A. Your tax liability for a particular year will depend on: - Your net profit for the year, and;- the system of taxation you select (ABS or GIBS). You can use our Online Tax Calculator to work out how much tax you are required to pay in a particular tax year. Please note certain restrictions may apply for married couples/civil partnerships who elect to be taxed under different tax systems.

Q. What are ‘Payments on Account’?

A. These are advance payments of your tax liability, based on your liability in the previous accounting period.  They are payable in two equal instalments by no later than the 31st January and 30th June every calendar year.

Q. I have made both Payments on Account, do I need to make any further payment?

A. On submission of your Complete Tax Return, you may be liable for an additional tax payment if your profits for that year exceed those of the prior year (on which your Payments on Account were based).  If this is the case, you are required to pay the additional tax liability when you submit your Return by no later than 30 November.

Q.  What will happen if I miss a filing or payment deadline?

A.

SURCHARGES FOR LATE PAYMENT
Length of delay
Penalty
1 day late
10% of tax due.
90 days late
An additional 20% on the balance (ie tax plus surcharge) due.
 
 
PENALTIES FOR LATE SUBMISSION OF TAX RETURN
Length of delay
Penalty
1 day late
£50.
3 months late
An additional £300.
6 months late An additional £500.
 

You should note that legal action may be initiated at any point after initial default. Please note that penalties on late or non-submission of complete tax returns will be incurred even if your resulting tax liability is nil, or you have already paid the tax due.

Q. Can I reduce my payments on account? 

A. If you are reasonably confident that your tax liability this year is going to be less than that of the previous year because your business has been less profitable this year, you are able to claim to reduce your Payments on Account. Please note that surcharges will be incurred if, after having submitted such a claim, your accounts reflect that your actual tax liability exceeds the sum of the payments on account already made. Claim to Reduce Payments on Account. Form S2

Q. What records should I keep?

A. You are required to keep records of all your business transactions, including the following: - Documentation in respect of any assets (stock, equipment, etc) purchased for your trade/business.  You should also keep a detailed record of any plant, machinery or equipment for trade/business use which you buy or sell.  These are capital items for tax purposes and you may be able to claim Capital Allowances as a deduction against your profit, thereby reducing your tax liability; - Sales invoices; - Stock inventories, value of stock (stock-take) and work-in-progress at the end of your accounting period; - Details of payments to employees (e.g. wages, expenses, benefits); - Business vehicle and travel costs and mileage records; - All other income e.g. money you invest in your trade/business; - Purchase receipts; - Electronic records of sales or till rolls; - Details of items not rung through the till; - Cash book; - Petty cash book; - Sales and purchase ledgers; - Bank statements; - Cheque book stubs; - Bank paying-in slips. Profit and loss account template

Q.  Why do I need to keep records?

A.  Keeping up-to-date and accurate records from the date you start your trade is essential because the Income Tax Office may request to have sight of them if any queries are raised upon the examination of your accounts.   
 

Q. What expenses can I claim as deductions?

A.  Most items of expenditure are generally allowed as deductions against your profit, as long as these expenses are incurred wholly and exclusively in the production of the income from your trade/business.  For example:

  • The cost of materials e.g. wood bought by a carpenter.
  • Employee wages, salaries and other staff costs.
  • Rent, rates, electricity and water costs of business premises.
  • Repairs to and maintenance of business premises.
  • Bank charges and interest on business loans and overdrafts.

Q. What expenses are not allowed as deductions.

A. Certain expenses are not allowed as deductions. For example:

  • Private expenditure - Your own wages/salary and social insurance contributions.
  • Donations to charities or sponsorships.
  • Fines for breaking the law.
  • Travel expenses between your home and place of business.

For any enquiries please contact us on Tel 200 74874 or email us at selfemployed@gibraltar.gov.gi