Should I be paying income tax?

flyer

Without boring you with the details, in 2007/8 and 2008/9, I didn't earn a penny and didn't claim any benefits. In 2009/10 I have earned money and 2010/11, a lot of money!

Is there any way I can avoid paying a lot of income tax by offsetting latter earnings against earlier years?

Hammyman

No. You can only do that as self employed and it would be offsetting a trading loss but would need to be notified you intended to carry it forward in the self assessment you completed in the year the losses occurred.

It was a bit daft not claiming benefits, even if not entitled to any money, as you'll have lost a years NI contributions.

flyer

In the first two years, I was effectively unemployed, but I am now self employed. Does that change anything?

GavB79

No. Pay your tax

flyer

GavB79 wrote: »

No. Pay your tax

Thank you for your constructive and most helpful comment.

KiKi

No, you have to pay income tax for those years as you were not trading in previous years. Have you registered as self-employed with HMRC? If not, you will be in trouble if you don't sort this out very very soon. You have to register as soon as you are self-employed, and pay weekly Class 2 NICs.

You must register ASAP for self-employment and to use the online self-assessment system. It takes a while to register you, a while to get your online assessment details through, and then you have to complete the self-assessment by January 31st if you don't want to incur a fine for your 2009-10 tax year.

I assume you are a self-employed sole trader, and not a limited company?

KiKi

Gertie_Walker

Your 2009/10 profits must be included in an SA before 31 Jan 2011.
The question is, when was the work done? Your turnover normally includes all worked invoiced for during the accounting year.
It would help if we knew the date your s/e started and when your first income was invoiced for.

flyer

I started working back end of 2009, so not a great deal to pay for 09/10.

I have been on SA for several years now, so for the first two years I simply entered 0 for income.

I think I need to speak to IR to see where I stand.

KiKi

flyer wrote: »

I have been on SA for several years now, so for the first two years I simply entered 0 for income.

I think I need to speak to IR to see where I stand.

So are you declared as self-employed with HMRC already, then? If that's the case, and your accounting year is up to April 5th, then you do need to complete your SA before Jan 31 (but then you should already know that).

And the answer still stands - you do need to pay tax on that year, assuming the income was invoiced for in that financial year.

HTH
KiKi

flyer

I am aware I need to make my return next month.

It's just disappointing that, having chosen not to go on benefits, I am not credited in any way. Maybe I should have just gone on the dole!

KiKi

flyer wrote: »

It's just disappointing that, having chosen not to go on benefits, I am not credited in any way. Maybe I should have just gone on the dole!

Even if you had claimed benefits, you still couldn't offset your earnings, now, though?! You can't reduce your income tax because you've not taken out of the tax system in previous years. Sadly!

KiKi