£800 tax bill for £9k income - too much?

ragz_2 · 23 November 2009 at 2:32PM

I have done my OH's tax return this year (I do his books too) and although I found it really confusing and complicated, I did manage it and was very proud of myself.
However we've just had the tax bill and it's about £800 on a total income of about £9.3k
OH says this is way too much and I must have messed it up (hopefully we'll be able to afford an accountant next year!). But I worked out that that's still less tax than he would have paid if he was employed so I don't see how I could have got it so wrong. I had pointed to him several times that I am just a housewife with a B grade GCSE in Maths, not an accountant with a degree so I can't do a great job of it! :rolleyes:

Can anyone advise me whether that really is too much tax? Also any advice on ways to reduce it this/next year would be great!
Thanks

Any · 23 November 2009 at 2:53PM

I suppose that he is self employed? Sole trader? (not a ltd co)

And when you say this year... For tax year 2008-2009?

If you calculated the final income figure right, then the TAX should be (for 2008-2009)

£9300
less £6035 personal allowance
= £3265
20% on £3265 = £653 Tax payable
(there will be some NI as well, but he should have been paying some during the year..)

However question is whether you calculated the Total income figure correctly.

CLAPTON · 23 November 2009 at 2:53PM

presumably you are referrring to last years tax return i.e. tax for 2008-9?

he is taxed on his profit i.e. his income less expenses

if these were 9,300 then he would owe

tax
profit 9,300
less tax free allowance of 6035
so that means 3265 is taxed at 20% i.e. £653

plus he would owe for NI
at 9,300 less NI allowance 5435 = 3865 at 8% = 309

so I would say he would owe 962 in total

Any · 23 November 2009 at 2:55PM

ragz wrote: »

OH says this is way too much and I must have messed it up (hopefully we'll be able to afford an accountant next year!). But I worked out that that's still less tax than he would have paid if he was employed so I don't see how I could have got it so wrong. I had pointed to him several times that I am just a housewife with a B grade GCSE in Maths, not an accountant with a degree so I can't do a great job of it! :rolleyes:

BTW tell him to do it himself if he is so clever and cocky.

ragz_2 · 23 November 2009 at 2:59PM

Yes he's self employed as a sole trader.

Figures from tax calculation they sent the other day

Profit from self employment £8,692
minus personal allowance £6,035
Total income on which tax is due £2,657

So tax on that is £531.40

Oh, I've just seen the NI contributions bit! £260.56
Didn't know about that, we pay his NI by DD I didn't realise more NI had to be paid, why is that?

CLAPTON · 23 November 2009 at 3:07PM

He will pay class 2 NI contributions at a rate of £2.30 per week by DD
but also he will pay class 4 NI on earning over 5435 at 8%

ragz_2 · 23 November 2009 at 3:07PM

OK have now read up on NI, that makes sense now, thanks for your help everyone. I think OH was expecting me to be able to get him off most of the tax on expenses, but he didn't really have that many expenses, apart from tools he bought and mileage. I don't understand capital allowances or depreciation yet so guessed which parts of the form to put it all down on...
maybe we do need an accountant!

Any · 23 November 2009 at 3:09PM

Amount of National insurance is based on the amount of your earnings - so when you start working for yourself noone can guess how much these will be.

So you pay some during the year and then once the income figure is known they calculate the difference.

I think in the continuous years they then estimate the figure of future earnings according to your past earnings... Not 100% how that works for self employed now, I am mainly Ltd companies accountant

Any · 23 November 2009 at 3:11PM

ragz wrote: »

OK have now read up on NI, that makes sense now, thanks for your help everyone. I think OH was expecting me to be able to get him off most of the tax on expenses, but he didn't really have that many expenses, apart from tools he bought and mileage. I don't understand capital allowances or depreciation yet so guessed which parts of the form to put it all down on...
maybe we do need an accountant!

If his affairs are fairly straight forward (and it sounds it) it might be cheaper to take quick bookeeping course or buy yourself a good self-teaching book...

ragz_2 · 23 November 2009 at 3:33PM

Any wrote: »

If his affairs are fairly straight forward (and it sounds it) it might be cheaper to take quick bookeeping course or buy yourself a good self-teaching book...

Thanks, this is what I thought. I am more than capable with the actual bookkeeping and I keep neat and tidy records in a book, not like it's a bag full of paper lol
The only bit I don't get, like I said, is things like depreciation and capital allowances - and no amount of googling got me any closer (don't suppose you can recommend a book that's tell me this?)

I would resent paying an accountant £500 (even though OH insists they save you more money in tax than they cost you in fees, I'm not so sure about this) for something I can do myself...

Any · 23 November 2009 at 3:38PM

ragz wrote: »

Thanks, this is what I thought. I am more than capable with the actual bookkeeping and I keep neat and tidy records in a book, not like it's a bag full of paper lol
The only bit I don't get, like I said, is things like depreciation and capital allowances - and no amount of googling got me any closer (don't suppose you can recommend a book that's tell me this?)

I would resent paying an accountant £500 (even though OH insists they save you more money in tax than they cost you in fees, I'm not so sure about this) for something I can do myself...

Bookkeeping is not only about keeping things in books, it also touches on depreciation etc..

Recently I saw very good book in the shop which I thought would be very good for my sister (who is in the same situation as you), I will have a look if I can find the name of it.

Your OH is basically right about the accountant saving taxes... but if you have 1 van and 1 PC to depreciate and already are putting expenses such as tools, mileage, home office % (if you have one) cost etc there is not that much to put through...

It will probably be true once the business grows a lot. But then you will also know more, can prepare the books and pay accountant just to check it out and give you an advice rather then to let him/her do all of it.

£800 tax bill for £9k income - too much?

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