£300 tax and NI on £750 earnings???

mancbird

Hi,

I would really appreciate some advice on this.

I work full time and pay tax and NI through PAYE. During the tax year 07/08 I also worked part time self-employed. During this period I made £750 profit. According to the online Self Assessment I now need to pay £300 tax and Class 4 NI contributions, almost half of what I earned. When I started working for myself I was told (by the hmrc helpline) that as I would be earning less than £4,000 I would not have to pay Class 4 contributions. I spoke to a lady today on the HMRC helpline who said she thought the amount I was being asked to pay was wrong. She said she thought I should be paying more like £150 but she wasn't really a lot of help as she keot having to go off and ask other people for advice.

Also, as I was going through the SA online, there was a section saying that I could have my 07/08 tax collected through my 09/10 tax code. I selected this option, but my dad reckons I shouldn't have been able to do this as I filed my return after 30/12/08. Surely if the option is there it should be available?

I'm just really stressing out and worrying now about this as I don't want to get whacked with a fine but can't afford to pay £300 today. I had been advised it would be more like £170 and this is what I have saved. I selected the collection through my PAYE because my bill is so much higher than I had been led to believe (40% as opposed to 25%)

I know I left it late but I really thought my tax would be straightforward as there were such small amounts of money involved. It's the first time I have ever had to complete a tax return and I have been less than impressed with the help available on the hmrc website.

Any advice would be greatly appreciated,
x

Mikeyorks

Can't comment on the amount charged - as it depends on your PAYE earnings - and you haven't posted that. If the aggregate sum has pushed you into 40% .... that would square?

There's a well documented fault on the online system whereby the option to have underpayments coded out should have withdrawn at the end of December (your Dad is spot on). But it didn't and they've either decided not to risk pulling it .... or are working on the basis that as some got in after 30/12 - they need to be even handed and leave the error available until today.
Extract from the 'issues' section on their homepage. Note the bit I've highlighted - you need to contact them, don't risk they may miss you from the worklist the error should create? :

There is an issue affecting customers using HMRC’s free online filing product to file their 2007-8 Self Assessment tax return if they have requested to have any tax underpaid collected through their PAYE tax code.
Usually HMRC can only consider collecting amounts due (up to £2000) through a customer’s PAYE tax code when an online return is filed before 30 December. After this date this option should be unavailable but it is still shown on HMRC’s free online filing product and will be until 31 January.
If customers use this option believing that having their underpayment coded out is still a valid option, we will show any underpayment in their PAYE tax code if they contact us and ask us to do so. After 9 February we will write to customers who have not contacted us to see if they would like us to code out their underpayment in this way (provided they qualify under the usual rules).
None of our customers will be unfairly disadvantaged.

Elaine_Wilson

This is 40% tax. There will be no NIC included.

As you used the online calculator I would carefully check the other figures on the return. The program believes you earn more than the basic rate band and is calculating the liability at the higher rate.

Does the program give you details of the calculation?

mancbird

Thank you both for your comments

Mikeyorks - does this mean if I ring HMRC then I can still do this, i.e. pay my tax in my 09/10 PAYE? Sorry if I sound a bit dense but this is all very new to me.

Elaine - In my PAYE job I earned around £25,000 before any deductions. My total earnings for both jobs are less than £26,000 so I shouldn't be in the 40% tax band, should I?

Does anyone have any advice on what I sould do about the 40% tax I'm being asked to pay?
x

mancbird

Oh, and the tax code for my PAYE job was 522L. Is that the right code?

x

Mikeyorks

mancbird wrote: »

1. Mikeyorks - does this mean if I ring HMRC then I can still do this, i.e. pay my tax in my 09/10 PAYE? Sorry if I sound a bit dense but this is all very new to me.

2. Elaine - In my PAYE job I earned around £25,000 before any deductions. My total earnings for both jobs are less than £26,000 so I shouldn't be in the 40% tax band, should I?

3. Does anyone have any advice on what I sould do about the 40% tax I'm being asked to pay?
x

1. Yes. Ring the office you deal with - not the Helpline. But be prepared to quote the bit I gave you. As there are people in all businesses who don't keep abreast of the material available to customers on their own website. It's a fault this has happened ... but HMRC are prepared to live with it .... not all their staff will have picked that up, as very few of them will use the online system.

2. You shouldn't be 40%. So you will need to go back in, next week, and check, very carefully, the figures you input. If they're all OK .... then is there anything else that pushed the charge up disproportionately? Any savings interest received gross - but taxable? Any Student Loan repayments where the self-employment had added more liability etc etc. You will then need to amend the Return if you find anything. Or post back on here with the figures / or ring your HMRC office otherwise. But resolve that - before you confirm you wish it Coded out.

3. The code number of 522L was the normal - for 07-08. Otherwise covered at 2 above?

amalis

i have similar problem. my self employed income was 535 and the tax calculated was 299!! I dont have loans or any other complications .In my PAYE job I earn 28.000pa.

sweetietot

It may also be worth checking your P60 or payslips for the year to see if you were paid over 53 weeks or 13 months - the year 2007/08 included an extra day and the 5th April was a Saturday so this caused an additional pay period, for some employees, in the year but tax codes are based on 52 weeks/12 months