Mistake in self assesment ?

packmanuk_2

I've had someone fill out my self assesment forms the last couple of years and am afraid they've been making a mistake. I've shown the details below.

I pay myself £1750 month from the buisness = £21000 year

The buisness makes a profit of £6000 a year after all outgoings and these outgoings include the £21000 a year i pay myself in wages.

However my taxable amount for this year was only £6000 which was the buisness profit.

Is this wrong ? I'm a bit worried as this also affects my child and working credits which are based on the taxabe amount of £6000.

Can someone please comment and give me some advice on what to do next.

Pennywise

Not enough information...

Is the business you as a sole trader or a limited company.

If the business is a sole trader, you can't pay yourself a wage - you are taxed on the business profits regardless of how much you take out yourself.

If the business is a limited company, you pay personal tax on your wages and dividends, but the company pays tax on profits not you.

The most important thing is to get the tax returns corrected and you can do this by writing to the tax office and telling them the correct figures. It sounds as if the accounts and tax return have been prepared by an amateur so it would probably be best to get a professional tax adviser to review all previous tax returns and correct everything at one go. If you've only paid tax on £6k of income and claimed benefits on the grounds of such a low profit, it is highly likely that you owe a lot of tax and also liable to repay some benefits.

You say "someone" prepared your tax return - if you paid them to do it, it sounds like they've messed it up and you should be considering having the tax returns done professionally and sueing your "someone" to recover the costs of having them done properly and the extra interest/surcharges etc you'll suffer as a result of paying too little tax.

packmanuk_2

I'm not sure if i'm a sloe trader or a limited company. How do I know the difference ?

packmanuk_2

I think i must be a sole trader as all I did was register as self employed. I suppose this means that all wages i draw + the buisness profit are taxable ? If this is correct should I inform the inland revenue of the mistake now or wait until next years self assesment and change things then ?

oldwiring

packmanuk wrote:

I'm not sure if i'm a sloe trader or a limited company. How do I know the difference ?

Have you a registerd no at Companies House for yout business, directors, memorandum and articles of association?
if not then you are a self emplyed person.

Edinburghlass_2

packmanuk wrote:

I think i must be a sole trader as all I did was register as self employed. I suppose this means that all wages i draw + the buisness profit are taxable ? If this is correct should I inform the inland revenue of the mistake now or wait until next years self assesment and change things then ?

yes you should be taxed on it all. I wouldn't wait as its going to be a heck of a tax bill next year.

You also need to inform CTC and WTC as you are telling them you only "take home" £6,000 a year which is clearly not the case.

Edinburghlass_2

You also need to look into what NI you might be due.

Cook_County

I agree with all previous conclusions which are that drawings are not deductible and should not have been deducted.

Two possibilities occur:
1. A clever choice of accounting year-end date might reduce the tax a little.
2. To avoid being told you have fraudulently claimed WTC and CTC you could pay up to 100% of this years earnings into a pension plan.

Whatever you choose - you need professional advice!

jobbingmusician

I agree - the best thing you can do is get yourself professional advice. A good accountant will maximise the things you can claim against your tax bill, and thus minimise the amount of tax you will have to pay.