Self Assessment calculation -- no personal allowance?!

laurenced

Hello everyone

I've just completed (but not submitted) my Self Assessment tax return online, and the final calculation seems to be taken from the gross income amount, without any consideration of the personal allowance. Needless to say this has come as a bit of a shock.

The gross amount is ~£15k, and the calculated tax liability is ~£3k (so roughly 20%). Surely it should be more like £1400 (20% of 15k-8k)?

Am I missing something fundamental here? This wasn't a problem in my previous return because I'd already done some PAYE work during that year, so the personal allowance was eaten up already and it didn't matter.

Any help would be much appreciated

PlutoinCapricorn

Did you complete 3 fields: income, expenses, profit?

What about payments on account?

laurenced

PlutoinCapricorn wrote: »

Did you complete 3 fields: income, expenses, profit?

What about payments on account?

Oddly, on the income page it asks for 'turnover' (which presumably is gross), then on the expenses page it gives a figure called 'net profit' (i.e. turnover less expenses). This is confusing terminology.

Is it as simple as deducting the personal allowance from the turnover figure on the Income page? That doesn't seem quite right to me, and I don't want to fill it in inaccurately.

laurenced

PlutoinCapricorn wrote: »

Did you complete 3 fields: income, expenses, profit?

What about payments on account?

Apologies, it does mention a payment on account of £1,106 due now, followed by another in July. Are these unavoidable? Why can't I just pay the 2012/13 tax bill next year (as I'm trying to do with this one, and did with last year's)?

PlutoinCapricorn

Is this the first time that you have completed a self assessment?

I am assuming that you are filing for 2011/12.

I think that you may have not told it that your total income was under the limit - it changes but is around £60k. Unless you earn more than this, you just need to out three figures in, on the same page.

As for payments on account, you have to pay them unless you know that your self employment income is dropping a lot. You pay now because we are more than halfway through 2012/13! People whose tax for one tax year is below a certain amount (£2K?) are not required to make these payments.

nomunnofun

With regard to payments on account - think of it this way:

Part of the profits that you were returning were earned almost two years ago and have not paid a bean in tax on those profits- not your fault- that is the system. You are now settling your tax bill for the year up to 5th April 2012 - ten months ago!

This is 'catch-up' time in an effort to bring you into line with others on PAYE etc. who do not gain the cashflow advantage from which self employed people benefit.

laurenced

PlutoinCapricorn wrote: »

Is this the first time that you have completed a self assessment?

I am assuming that you are filing for 2011/12.

I think that you may have not told it that your total income was under the limit - it changes but is around £60k. Unless you earn more than this, you just need to out three figures in, on the same page.

As for payments on account, you have to pay them unless you know that your self employment income is dropping a lot. You pay now because we are more than halfway through 2012/13! People whose tax for one tax year is below a certain amount (£2K?) are not required to make these payments.

Thanks for the reply.

This is the second return I've done. First was for 2010/11, during which I had worked (with PAYE) for the first 4 months. The amount due under the Self Assessment for the remaining 8 months was under the threshold for payments on account, so it wasn't an issue then.

I'm not sure about the £60k threshold -- are you referring to the personal allowance threshold of £100k?

It certainly looks like I'll have to pay the POA. This is unfortunate because it adds quite a chunk! I suspect the calculation is accurate, I just didn't realise there was a requirement to pay anything in advance.

(£15k - £7,475) x 20% = 1505 (+ NICs and Student Loan) = £2,200.

POA for 2013/14 = (£2,200 / 2) = £1,100.

Total due = £2,200 (2012/13) + £1,100 (POA 1 for 2013/14) = £3,300.

Ouch.

laurenced

nomunnofun wrote: »

With regard to payments on account - think of it this way:

Part of the profits that you were returning were earned almost two years ago and have not paid a bean in tax on those profits- not your fault- that is the system. You are now settling your tax bill for the year up to 5th April 2012 - ten months ago!

This is 'catch-up' time in an effort to bring you into line with others on PAYE etc. who do not gain the cashflow advantage from which self employed people benefit.

Thanks for the explanation, it does make sense now. Still, it seems a bit unlucky to be in my position of not having had POAs before and therefore to have to pay a whole year's tax in one lump, plus the first POA for the next year.

nomunnofun

I would be concerned about the accuracy of your self assessment given, if you will forgive me, the nature of your questions.

Did you make £15000 PROFIT? i.e. turnover (takings, sales) less expenses?

The calculation will calculate on the basis of what you enter whether it is correct or complete fiction.

CLAPTON

laurenced wrote: »

Thanks for the explanation, it does make sense now. Still, it seems a bit unlucky to be in my position of not having had POAs before and therefore to have to pay a whole year's tax in one lump, plus the first POA for the next year.

But of course you have already put money aside for tax that accrued in the year 2011-12 and your are curently putting money away for this year.

The POA doesn't even cover the tax liability to date for this year.

A lot better than PAYE

PlutoinCapricorn

I am confused by what you said about PAGES: these are normally only given to you to complete when your freelance income is above £60K or so. You need to tick a box or something to get the right, simple form: I did mine last September so can't remember!

Under the limit you just input 3 totals, no breakdowns.