Self-Employment to Employee

Confused25

Dear all,

I am hoping someone can help as I am utterly baffled. I started doing some self-employed work in February 2013 that ran until June when I finished self-employment. I filled in a self-assessment form in April for the self-employed period of Feb to April (with the help of many, many phone calls to HMRC and visiting the local tax office and running through all the figures with them - I really did not know what to do as you might have guessed!).

Anyway, I am just starting back work as an employee and after doing some research I see I have to fill in a P46. I called HMRC this morning but unfortunately I am now more confused than ever! This was the advice I was given on whether to tick box A or B on the form (they told me they could not tell me what to tick and subsequently started running through something along the lines of 'Capital Allowances, Person Allowances' etc which left me even more confused. This is what I was told (bearing in mind that I earned around £1,500 in self-employment from Feb to June):

If I select Box A there will be around £200 tax to pay at the end of the year. Furthermore, I was advised to state all of my income on my next self-assessment tax return for the tax year April 2013 until April 2014, from self-employment from April 2013 until June 2013 (when I finished SE) AND to state all of the income I received from my employment also (note: she also confirmed that this will only be taxed once through my employer (or if I am taxed on that amount then they will check and I will receive a refund afterwards).
I was advised that if I selected Box B then I would probably overpay tax.

Can someone please just tell me whether I need box A or B as I am getting nowhere? Or if you can't please just explain everything to me in laymans terms.

Thanks,
Utterly Confused :eek::(.

anamenottaken

P46? Were they talking about a P46 - which are no longer submitted to HMRC?

Wait until you have an employer and see what they ask you to complete.

Otherwise, your self-employment from 6 April to whatever date in June will be covered in your next self-assessment.

Confused25

Hi anamenottaken,

Thank you for your reply. I have been asked to supply a P46 as I can't provide a P45. Do you have any info on what box I should select based on my information as above?

Thanks v much in advance

hcb42

If you tick A you will be given the normal tax code, tick B and you will get the tax code on a Wk1/Mth1 basis

I would tick B I think any overpayment or indeed underpayment will sort itself out eventually and it's not like you have earned a fortune here, if you tick A, all it will mean is you will have a period of not paying tax due to unused allowance, either way not a problem I dont think as long as you declare the earnings from the self employment when you do your next self assessment

anamenottaken

This is a PAYE-related form. "Jobs" would therefore be work where PAYE is operated.

I therefore believe the correct statement for you would be A.

The income you have earned between February and June needs to be split between the two tax years it spans and included when you complete the self-assessment forms for the appropriate tax years.

Confused25

Hi hcb42 and anamenottaken and thanks for your reply, that is helpful. I thought I was being pointed to Box A this morning when I rang HMRC (in a very round about way!). It tripped me up because of the terminology (Box A - 'This is my first job since last 6 April') but I feel reassured by what you've said.

It seems I could tick box A or B, in that there is not a specific right or wrong answer. I was just worried as when I spoke to HMRC this morning I was warned of all sorts of penalties and fines if I didn't fill in certain forms and I think I'd actually rather be in the situation where I overpay tax and have a refund later than the other way around!

Thanks again .

anamenottaken

Confused25 wrote: »

Hi hcb42 and anamenottaken and thanks for your reply, that is helpful. I thought I was being pointed to Box A this morning when I rang HMRC (in a very round about way!). It tripped me up because of the terminology (Box A - 'This is my first job since last 6 April') but I feel reassured by what you've said.

It seems I could tick box A or B, in that there is not a specific right or wrong answer. I was just worried as when I spoke to HMRC this morning I was warned of all sorts of penalties and fines if I didn't fill in certain forms and I think I'd actually rather be in the situation where I overpay tax and have a refund later than the other way around!

Thanks again .

The P46 is one way that the employer can collect information from you in order to complete their paperwork. They don't have to use it: it is no longer a form sent to HMRC.

The penalties which HMRC would be talking about could be about not completing your self-assessment returns on time. Have you confirmed with them that you have not carried out any self-employed work since June 2013 so that you don't pay Class 2 £2.70/week NI contributions? I don't think you have earned enough to pay Class 4 contributions when your affairs for the year are reported.

........

Remember that what you earned when self-employed is of no concern to your employer. Those profits would only be of interest to HMRC and they won't know what they are until you report them. At that point they might adjust your tax code to reclaim any underpayment.

Confused25

The P46 is one way that the employer can collect information from you in order to complete their paperwork. They don't have to use it: it is no longer a form sent to HMRC.

Ah OK, thanks for the info. I thought I might just get 'emergency taxed' if I didn't send it in to them.

The penalties which HMRC would be talking about could be about not completing your self-assessment returns on time. Have you confirmed with them that you have not carried out any self-employed work since June 2013 so that you don't pay Class 2 £2.70/week NI contributions? I don't think you have earned enough to pay Class 4 contributions when your affairs for the year are reported.

Yes I rang them back in June and told them that I was stopping being self-employed and asked them what I had to do and how I could formally tell them and they directed me to an online form of theirs which I filled in and sent back online. Also I was paying NI contributions (I think it was class 2 as I'm sure I was told that I didn't earn enough to pay Class 4 when I visited the tax office and talked it through with them, like you said above). I rang the NI Contributions helpline a while ago and they confirmed that I was all up-to-date with payments and nothing else needed to be done on that.

Also I was told this morning that when I do the self-assessment in April 2014 that I will have to declare all of my income from both self-employment and this job. I asked whether I would be taxed twice on the amount earn't as an employee but the answer was ambiguous (I assume that I will receive a refund if I pay too much). This is when she mentioned the penalties - that I would be fined if I didn't put the whole amount earn't from self-employment AND as an employee now on the self assessment in April 2014. (I'm sorry if these are obvious questions but I am trying to figure everything out from the basics!)

I know we are not talking big figures but I really do want to make sure it is all correct.

........

Remember that what you earned when self-employed is of no concern to your employer. Those profits would only be of interest to HMRC and they won't know what they are until you report them. At that point they might adjust your tax code to reclaim any underpayment.

Confused25

Hi everyone,

I think I have this sorted now. I think I will go with Box B as it seems that at least that way I will overpay tax and I suppose I can get a refund later (I'd rather it be that way than underpay and have to worry about sorting it out). I've just got one more quick question though: What do the following mean and what is the difference between them?

Box A - Emergency code on a cumulative basis

Box B - Emergency code on a non-cumulative
Week 1/Month 1 basis

Thanks

hcb42

Cumulative basis would take your prev PAYE earnings into account - so you would pay less tax if you have no earnings from April 6th until you use up your allowance so to speak.

Wk1/Mth1 basis effectively takes your first pay as it would have been in April and the tax code will be applied as though it was that month - in your case you will pay more this way as you have not earned up to your allowance in the last six months.

LittleVoice

Confused25 wrote: »

Hi everyone,

I think I have this sorted now. I think I will go with Box B as it seems that at least that way I will overpay tax and I suppose I can get a refund later (I'd rather it be that way than underpay and have to worry about sorting it out). I've just got one more quick question though: What do the following mean and what is the difference between them?

Box A - Emergency code on a cumulative basis

Box B - Emergency code on a non-cumulative
Week 1/Month 1 basis

Thanks

"Emergency code" provides for the standard personal allowance (tax free amount) - £9,440.

Box A would mean that you would not have tax deducted until you had earned £9,441 in this new job.

Box B would give you 1/12 of £9,440 each month, so that you would have tax deducted every month on the amount above about £986.

So, given your low earnings from self-employment you would receive a tax refund - after you had completed your self-assessment return. As long as you put aside enough money to pay the tax on your self-employment profits, you would surely be better off to select Box A.