How much to pay on account in January?

Seaxwyn

Can anyone help me work out how much tax I need to pay in January?

This tax year I have worked 3 days a week in a PAYE job, and the other two days freelance. All the PAYE earnings have been taxed, so all my allowances should apply to my freelance earnings.

I earned approx £15k on the PAYE job and my profit from freelance work net of expenses is £12,368.10

From January 2010 I start a full-time PAYE job so will not have any freelance income from this month onwards.

I am due to pay £1500 payment on account in January - do I have a case for requesting a reduction?

If anyone can advise I would be very grateful.

fengirl_2

Yes, of course - your self employment has ceased so you cannot be expected to pay tax on something which no longer exists.

Seaxwyn

Really? That's the best news ever. However I surely have to pay tax on the £12,368 I earned this year?

Mikeyorks

Seaxwyn wrote: »

However I surely have to pay tax on the £12,368 I earned this year?

Of course - fengirl was responding to your question regarding applying to reduce the POA due .... as you will be paying towards tax on earnings for a part year.

All the PAYE earnings have been taxed, so all my allowances should apply to my freelance earnings.

..... not sure I'm entirely picking up your train of thought there? If your code number applied to PAYE is > 0 then some of your allowances are utilised against PAYE?

Seaxwyn

Thanks Mike, I have been taxed at 20% on all my earnings in the PAYE job. So my 6475 personal allowance comes off my freelance earnings. Is that right?

I have done the following sums, could someone check them.

Tax owed =
20% of (12,368 minus 6,475 personal allowance) = £1178

Nat Ins owed =
8% of (12,368 minus 5,715) = 532.25

Therefore I need to pay £855 on account in Jan and £855 in July.

Is that right?

fengirl_2

Yes, your calculation is right, assuming your PAYE deductions are correct as well.

Mikeyorks

Seaxwyn wrote: »

I have been taxed at 20% on all my earnings in the PAYE job. So my 6475 personal allowance comes off my freelance earnings. Is that right?

It's quite right. You must have BR for the PAYE element.

Bear in mind - I suspect you have - that the Code number needs to increase as the freelance work ceases. But you may consider that will be better from April 2010 in order to leave the allowances deflecting the freelance? But it will make the PAYE deductions in Jan - Mar a bit onerous?

And - whilst your calculation for the POAs (£855 x 2) is quite right - I thought you were questioning in your OP a reduction in these (bit lost as to where you got £1500?) as a consequence of the freelance evaporating 75% through the year. As the POAs are based on 100% continuity at the previous year rate.

You can apply to reduce (the £855 x 2) based on that .... but calculate it carefully as interest gets charged if you overcook it. Or you could pay the POA1 (31st Jan) ....... and then get your Return in (after April) before the POA2 is due 31/7. That will then qualify all the figures and the POA2 should automatically reduce (not least in that you will have 'overpaid' on the Jan - Mar PAYE)

Seaxwyn

The £1500 due on account is from my HMRC statement - it must be based on last year's figure. I am going to apply to reduce the January POA to £900 as I'm very stretched, not least because I have to buy a rail season ticket in January.

Thank you both for your advice.

Mikeyorks

Apologies - I'd taken the figures in Post #5 as those from your embryonic Return for 08-09.