You will be able to describe how your self-employed income is reported and assessed by IRAS.
When you had a job, tax season meant logging in, checking the figures your employer had already sent to IRAS, and clicking submit. The first year you file as a freelancer feels different. The form asks for numbers nobody has sent anyone. Your gross income, your expenses, your profit: all of it has to come from you. Then, months later, a bill arrives, and no part of it has been paid yet.
This lesson covers how your self-employed income gets from your invoices to that bill.
As a self-employed person, you declare your trade income and expenses in your yearly income tax return. IRAS sets out which form self-employed people use, which is Form B for most of them, and how to file it online through myTax Portal. If you also have a salary from a job, that employment income goes on the same return, and in most cases your employer has already sent those figures to IRAS.
For the trade income, you report your revenue and your expenses. IRAS lets businesses below a certain revenue report a short statement of a few lines rather than full accounts, as long as they keep proper records behind it. Check the current revenue limit and what the short statement includes on the IRAS website.
Either way, the figures are your own. IRAS does not know what your clients paid you until you tell it, though it can check later, which is why module 4 spends two lessons on expenses and records.
IRAS taxes your chargeable income: your net trade income, plus any other income such as a salary, minus the reliefs you qualify for.
Net trade income is the figure from lesson 2.2: gross trade income minus allowable business expenses and capital allowances. It is the same figure the CPF Board uses for your MediSave contribution, so one number drives two bills.
Reliefs are deductions IRAS allows for personal circumstances, such as some CPF contributions, supporting parents or having children. They reduce your chargeable income. This course only touches on them. Tax & Reliefs covers them in depth.
Tax is then charged on your chargeable income at progressive rates for residents. The first slice of income is taxed at nothing, and each slice above it is taxed at a higher rate. IRAS has a calculator on its website that does the arithmetic once you enter your income and reliefs.
Here is a simple example with made-up figures. Mei's net trade income is S$58,000. She earned S$1,200 from teaching workshops as an employee. Her reliefs come to, say, S$9,000. Her chargeable income is S$58,000 plus S$1,200 minus S$9,000, which is S$50,200. The calculator would turn that into her tax bill.
Tax rates, the bands they apply to, relief rules and filing deadlines are set by the government and IRAS and can change from year to year. A friend who freelanced five years ago may give you figures that are no longer right.
So make a habit of checking each year. Before you file, open the IRAS page for self-employed persons and note the current filing deadline and any change to the rates or the form. It takes ten minutes and it saves you from filing late or planning with an old rate.
Filing late or not filing has consequences. IRAS can issue an estimated assessment, which may be higher than the tax you would really owe, and it can add penalties. Since your MediSave contribution also follows the assessed figure, a late or estimated return can make two bills wrong.
An employee in Singapore usually pays income tax after the year ends, just as you do. The difference is that an employee has a salary of the same size arriving each month, so a tax bill is easy to plan for. Many employees also pay by monthly GIRO instalments.
A freelancer's income is lumpy, and no client takes anything off your fees for tax. If you spend each payment in full, the bill arrives in a year when that money has gone. IRAS does offer payment by GIRO instalments, and the conditions are on its website, but instalments only help if the money exists.
That is the job of the tax and MediSave pot from lesson 1.3, sized in lesson 2.4. Each payment that arrives sends its share to the pot. When the notice of assessment comes, you pay from the pot, in one go or in instalments, and your base pay does not move.
Mei's first year as a freelancer, before she had a pot, ended with a tax bill she paid on a credit card and cleared over three months. She now treats the pot as untouchable.
You do not need to master the tax system to file correctly. You need three things: the right form, the right deadline and accurate figures. The first two are on one IRAS page. The third is what the next three lessons build. Start with the first two, and keep the page bookmarked for next year's check.
Find the IRAS page for self-employed persons and write down this year's filing deadline and the form you will use.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).