Need help with tax return (confused)

briggzy01

Hi, i had an accountant do this years tax return as it is the first time i have been self employed and dont really understand it that well. I went self employed half way through the year as i was made redundant. I work with a friend of mine and we both do the same job and have the same accountant, and are both CIS registered. We just got our tax return back from the accountant and i will be receiving a lot less than my friend even though our allowable business expenses are very similar and our CIS payments are very similar. Here are the figures

Me: 1126 (£638 of which is overpaid tax from employment in 2010)

Friend: £1856 ( £253 of which is over paid tax from employment 2009)

That gives a difference of around £1100 which seems ridiculous based on the similarities of our accounts.

Is there something that i have forgotten to do? This is really confusing me as i though i was looking at receiving £2200 and this has come as a bit of a shock.

Thanks for any advice in advance.

pipscot

briggzy01 wrote: »

Hi, i had an accountant do this years tax return as it is the first time i have been self employed and dont really understand it that well. I went self employed half way through the year as i was made redundant. I work with a friend of mine and we both do the same job and have the same accountant, and are both CIS registered. We just got our tax return back from the accountant and i will be receiving a lot less than my friend even though our allowable business expenses are very similar and our CIS payments are very similar. Here are the figures

Me: 1126 (£638 of which is overpaid tax from employment in 2010)

Friend: £1856 ( £253 of which is over paid tax from employment 2009)

That gives a difference of around £1100 which seems ridiculous based on the similarities of our accounts.

Is there something that i have forgotten to do? This is really confusing me as i though i was looking at receiving £2200 and this has come as a bit of a shock.

Thanks for any advice in advance.

This will depend on the exact amount you earned from employment and the "net profit" from your self-employment. Possibly your friend earned a different amount before he/she went self-employed? (Your tax liability will be calculated on the total income for the year)

briggzy01

pay from employment: 6209.00 before tax taken off
net profit from self employment 7801

My friend starting working for the company at around the same time as me and has been payed around 8200 before tax. He wasnt working for the other part of the year and wasnt on jsa or anything like that.

How do i calculate tax liability?

pipscot

briggzy01 wrote: »

pay from employment: 6209.00 before tax taken off
net profit from self employment 7801

My friend starting working for the company at around the same time as me and has been payed around 8200 before tax. He wasnt working for the other part of the year and wasnt on jsa or anything like that.

How do i calculate tax liability?

you need to add these 2 figures together to give your total income for the year (£14,010).

Then subtract your personal allowance of £6,475 from the total income to calculate your taxable income (£7,535). Tax is then 20% of your taxable income (20% of £7535 = £1507).

This is the amount of tax that you have to pay for the year. Note - this is just tax not NIC.

Pennywise

Simply you earned more in employment during the year than your friend therefore more of your self employed income is taxed at basic rate. Your friend earned less, so some of their self employed income is tax-free covered by the balance of their personal tax free allowance. I'm sure a quick phone call to your accountant would clear this up.