Am I Due A Refund?

stewartbond

Hi all I'm new to the forum and looking for some advise.

I'm due to file my tax return for 2012 - 2013 with my net profit at £4,570 because I'm self employed.

For that year I also had a employed job earning about £7500 for the year.

Throughout my employment I paid the standard rate of tax, although my income never exceeded £8,500 for the tax year.

Also while I was in employment I had petrol expenses of £4,710 - petrol allowance (45p per mile, then 25p e.c.t.)


My question is.... when I go to fill in my self assessment and add my earnings and expenses on the employment page should I receive a refund?

It was my understanding (with my employer at the time) that I would be receiving a petrol allowance refund at the end of the year. And I was thinking should I be paying the full amount of tax on earnings under £8,500?

If someone could point me in the right direction please, many thanks.

cotswoldaccountant

If you were my client, my first question would be whether your petrol expenses were for travel to a temporary workplace - i.e. travel to a workplace different from your usual workplace. You cannot claim mileage for ordinary commuting to your usual place of work.

I would also want to know why your petrol expenses were so enormous compared to your income from employment. You earned £7,500 and incurred £4,710 of mileage expenses? The numbers look very unusual!

Assuming that actually your petrol expenses are just the costs of ordinary commuting, there is no deduction available.

Your total income will be:
£7,500 + £4,570 = £12,070
Taxable income = £12,070 - £8105 personal allowance = £3,965
£3,965 is taxed at 20% = £793

So your tax bill for the year will be £793

If you have already paid more tax than this, you will indeed be due a refund of the difference.

stewartbond

Cotswoldaccountant thanks for your reply.

My petrol expenses are so high because of the type of work I do, I often travel 50+ miles to different sites and the pay is min wage.

I have already sent my p87 form to HMRC, they have check with my employer at the time and has been accepted.

With that in mind how would that effect my tax refund.

Many thanks.

stewartbond

Any thoughts, anyone?

grey_gym_sock

if the petrol expenses are allowable - i.e. don't count as taxable income - then your income from employment (£7,500) is under the personal allowance.

however, income tax applies to your total taxable income in the year, so you need to add on your income from self-employment (£4,570) on to get your total taxable income: £13,070.

deducting the personal allowance (£8,105), leaves £3,965 taxable at 20%, which is £793 income tax due.

so if more income tax than that was deducted by your employer, you'd be due a refund.

cotswoldaccountant

grey_gym_sock wrote: »

if the petrol expenses are allowable - i.e. don't count as taxable income - then your income from employment (£7,500) is under the personal allowance.

however, income tax applies to your total taxable income in the year, so you need to add on your income from self-employment (£4,570) on to get your total taxable income: £13,070.

deducting the personal allowance (£8,105), leaves £3,965 taxable at 20%, which is £793 income tax due.

so if more income tax than that was deducted by your employer, you'd be due a refund.

I disagree. If the petrol expenses are allowable (i.e. they are to a temporary workplace rather than incurred through ordinary commuting) then taxable income will be reduced by £4,710.

In this case:
Total income = £7,500 + £4,570 - £4,710 = £7,360.
As this is under the personal allowance of £8,105, there is no tax due for the year. Any tax already paid will be refunded.

wronlaster

If you want to save money you have to think about your job and distance , it is telecommunication time you can minimize distance with the help of technology .

stewartbond

Many thanks for all your response.

stewartbond

cotswoldaccountant wrote: »

I disagree. If the petrol expenses are allowable (i.e. they are to a temporary workplace rather than incurred through ordinary commuting) then taxable income will be reduced by £4,710.

In this case:
Total income = £7,500 + £4,570 - £4,710 = £7,360.
As this is under the personal allowance of £8,105, there is no tax due for the year. Any tax already paid will be refunded.

Sorry I'm confused now lol. It was my understanding that I would receive 45p \ 25p per mile refunded.

By your calculations;

Tax paid on £7500 = £1500

So I will only be receiving the total sum of £1500 not the £4710 that I was told I would be paid for mileage covered?

John_Pierpoint

We really need to start at the beginning:

You are self employed. You are trying to make a profit from selling your skills to complete a task (not turn up at the bidding of your master to offer your time as his servant).

So your place of business is your back bedroom or possibly the back of your hatchback car ?

You are offered the opportunity to travel the land performing tasks at various locations. Obviously the cost of getting to those locations reduce your profit and the tax levied on you as both a self employed artisan and the tax payable on the wages paid to you by your master in an alternative period of the year.

As a self employed artisan you have a liability to pay a tax called National Insurance class 2, though those making very low profits request to opt out ( a decision to be make based on the regulations for future benefits). You might be over retirement age already and so also allowed to opt out.

The liability to contact HMRC about National Insurance tax provisionally classes the artisan as self employed and will trigger a self assessment tax form.

(I am making the assumption that your artisan skills are not part of the construction industry where special rules apply)

The 45/25p per mile is a tax allowance so if it adds up to £4710 and you have already paid tax of [ £4710 @ 20% = ] £942, for the fiscal year starting on 6th of April; then that is what you should get back.
[I cannot see why logically the rest of us should pay you for driving around in a car; you could try a push bike, there is an allowance for that too]

There is the alternative of producing full accounts for the use of you method of transport (van?) and setting that against your profits, but probably not worth the effort unless you run a new diesel motor and do high mileage as say a courier driver.

So that covers your profits from self employment, but now you need to explain where you are in terms of your remuneration from your master and servant job - your master has been sending you out in your own car but also paying you some "petrol money" ?

stewartbond

I'm more muddled up than ever now. Might be my fault so I will add more detail.

For the tax year 2011 - 2012 I was registered self employed but had no work, so I took up a job as an employee in the security industry that involves a lot of travel and working on many different sites.
Every site I will travel to I will be there for 12 hours minimum, so an office is provided for me, toilet e.c.t.. I would assume that that covers me for the petrol allowance since my place of work is constantly changing and I'm not working from my car.

I had earned £7500 from being an employee and was told I would receive 45p \ 25p a mile from HMRC as every employee does the same with the company and has done for years. I sent my P87 form back and has been approved after checks as my work place.

At the end of 2012 around December time I was offered a contract to work self employed, as I was still registered as self employed I jumped straight in to the job and after expenses (expenses from the start of my self employment in December, not while I was an employee so my petrol expenses and my self employed expense our separate)

So now the time has come to file my self assessment and I am now assuming that the petrol allowance that I am owed where I was an employee will be paid to me and any tax rebate?

Is my understanding of this true?