747L with prior earnings above basic allowance

wnoktnwbr

For the 2011 - 2012 tax year I was first self employed and earned above the basic allowance, I am now employed earning the same amount but as an employee. My tax code for my employment is 747L, this means (as far as I know) that the payments that are given to me don't deduct tax until the £7470 is reached. My previous earnings for this tax year are above £7470 as self employed.

Is it okay for me to remain on the tax code 747L when employed and when I file my tax return for my self employed income to not include my basic rate allowance? If I earned £20,000 self employed instead of paying tax on £12,530 I would pay tax on the £20,000 because my basic rate allowance was used in my employment earnings.

So I have technically already earned above my allowance, however I have not "claimed" it in any way. It would simplify things with my employer if I remain on 747L and then when I file my tax return I pay tax on everything I got as self employed and use my employment income to claim my allowance. So I would be claiming my allowance not on my first £7470, but still only on £7470.

is this okay to do? I assume it is as I'll be paying all the tax I owe but I want to check just in case.

CLAPTON

when you fill in your self assessment (after april 2012) you include the details of the PAYE earnings so your tax will be worked out correctly.


if your PAYE earnings for the year are more than 7475 then will will pay 20% tax on your SE earnings (unless your totals put you in 40% tax band)

it is correct that you are on 747L taxcode for your PAYE and there is no action you need to take (except file the SE in due course)

you don't actually need to 'claim' your tax allowance; your employer's payroll system automatically gives you a tax free amount each month based on your tax code (i.e. each month you get 7475/12 before tax is calculated at 20%)

PlutoinCapricorn

What you are doing is not only perfectly legal but the best way of paying tax. It is best to keep your PAYE Code and tax separate from your freelance earnings, use your personal allowance in your main job and pay tax on the self employment profit in arrears after you have filed the return. A major feature of self employment is that you DON'T need to Pay As You Earn!

HMRC will work out how much tax you owe at the end of the tax year on the basis of the figures you give them, which include untaxed self employment, PAYE gross and tax paid, so keep your payslips and P60.

jennifernil

If you have totally stopped self employment, you must tell them. If you don't you may get a request to pay Payments on Account for next year.

Mikeyorks

But you tell them on the Return ..... they won't accept 'cessation' without it. And then you simply reduce the POAs (if the Paye being > 80% of the tax due doesn't kill them off) to £zero