Tax when PAYE & self-employed but not taking wage

includemeout · 7 March 2018 at 8:39PM

Hi there

I'm self-employed running a business I set up in March 2017 that is yet to be profitable. I've taken no money from the business as I've invested in equipment etc. I've lived off savings the past year or so.

I recently began doing some part-time work because money was getting tight. I'm being taxed despite not having earned this year so I queried this with HMRC. The agent on the phone said that because I'm registered self-employed I'll be taxed at 20% and, if when I submit my return it shows no earnings from self-employment, a refund will be due to me. This seems to make sense but things will be difficult in the interim - going forward I'll have to wait an entire year before I'm due a refund for my PAYE work in 2018/19. My friend who was in a similar situation claimed that he was on the 1100L code and wasn't taxed until he hit the allowance threshold despite being self-employed - could this be accurate?

I know, I probably need an accountant, that's more expense however. I'd like to think the business will be turning a modest profit in the next few months but if not I'm going to be in trouble.

Cheers for any advice you can offer.

Pennywise · 7 March 2018 at 9:09PM

Just tell HMRC that your business is earning no profit and that you want your full personal allowance allocated against your PAYE job. HMRC can't dictate how you want your PA allocated - you can allocate it as you wish.

includemeout · 7 March 2018 at 9:51PM

Wow, if that's the correct process than the conversation I had was an absolute waste of time. Much of what I've read suggests you're right but when HMRC themselves insist otherwise... perhaps it's the luck of the draw in terms of which agent you speak to.

I'll call them tomorrow and see how I go.

Thanks for helping.

Dazed_and_confused · 7 March 2018 at 10:15PM

Pennywise is spot on although personally I wouldn't get involved in the profitability (or otherwise) of your business.

You simply need to ask HMRC to allocate your Personal Allowance to a tax code for whoever this part time work is for.

You could actually ask them to issue a new code for this year (2017:18) and then you will get any refund due for the current tax year in your wages the first time your employer uses the new code (assuming they pay you again in the current tax year).

Sure you will do this but don't forget that whatever happens you need to include this part time employment on your Self Assessment return. The return is for you to declare all taxable income, its not just for your self employed income.

runninglea · 7 March 2018 at 10:21PM

Sounds like the person from HMRC assumed you were a contractor and that CIS Tax at 20% would be taken of at source by the payee.

includemeout · 22 March 2018 at 5:48PM

Just an update to confirm that the above was true, all sorted now and a refund is in the pipeline apparently. Many thanks for the help.

Dazed_and_confused · 22 March 2018 at 5:51PM

The refund could come through in your next wage (assuming you will be paid again before 5 April).

If not you will only be entitled to it when you send HMRC your self assessment tax return.

Tax when PAYE & self-employed but not taking wage

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