Self Employment and PAYE

tsmedley_2

Hi,

I'm currently employed and pay tax by PAYE, i have however in the last few months of the last tax year started my own business, which for that tax year ran at a loss, Can i claim this on my self assessment form against the tax i have paid on my PAYE income? Also i have paid Class 2 NICs for being self employed but have not reached the earnings threshold, can these be refunded? I know th loss on the self employment can be carried over but can i reclaim it rather than carry over.

I know i need the help of an accountant, but thought i'd ask peoples advice here first.

Many Thanks In Advance!

Tom

Pennywise

Re tax, yes you can claim for a trading loss to be set against other income in the same tax year. However, that may be short-term thinking as there may be a better option - i.e. if you were a basic rate taxpayer, then you'd get loss tax relief at basic rate, but next year, if the business becomes profitable you may be a higher rate taxpayer, so carrying forward the loss rather than setting it against other income would potentially give you tax relief at 40% instead of 20% - i.e. doubling its value!

Re NIC, I'd suggest you contact the NIC office at Longbenton (phone and postal address on the demands they send), tell them your s/e loss, send a copy of the accounts, and ask for a refund - also submit a small earnings exception application for the current tax year if you don't think profits will reach around £5.5k which is the current exception limit.

If you do set your loss against other income for tax, don't forget that you can still carry it forward to set against future profits for class 4 NICs which are profit based - a lot of people forget this!!!

tsmedley_2

Thanks for the reply, was very very useful.

The overpayment will be useful for cash flow purposes so have today submitted my return on-line.

How long does an overpayment take to be put back in my bank account?

Thanks

Tom