Self-Employed to Employed help please

[Deleted User]

Hi,

My husband is starting a new job in a couple of weeks time on a full time employed basis. Up until now he has been self-employed for the last couple of years.

Am I right in thinking he needs to be giving his new employer a P46 ? Also, which box does he tick on the form please? It looks like box B (now my only job, but have had another since April), but would it be box A (first job since April) since he has been self employed? He is not continuing with self-employment and does not have any other job, so I don't belive it's box C.

Also, does anyone have any idea what will happen then with his tax code please? Will it be emergency tax, and for how long?

I realise he would have to fill in his self assessment next April for this years self-employed period (April - August). Are we to expect that this self-employed amount will be taxed at 20% (even thought it's a relatively small amount) because his new employed job will come first and will use up the tax allowance?

Is there anything else we are missing or need to know?
Thanks

chrisbur

Strictly speaking the P46 has been replaced by the Starter Checklist, though in practise the same as the old P46. Select the option A first job since April 5 the new employer can then use the emergency tax code 1060L on a cumulative basis so he gets benefit of tax allowance back to April 5.
On self assessment these employed earnings and tax paid details will be filled in with the self-employed details so assuming all the tax allowance used up in the job yes the self-employed earnings will be due at 20% (assuming not high enough for 40%)

[Deleted User]

Thank you chrisbur for that info, that has helped clear things up.

Yes, it would be 20% (he's not earning enough for 40%) so we will make sure we have put that tax amount away ready to pay next April. So when we are filling in the assessment next April, is there a box to add his employed earnings too so they can calculate his total earnings for the year?
Just to check then, he's not likely to be 'emergency taxed' with the tax code 1060L? Just so we can try and plan our finances! Thanks.

[Deleted User]

Thanks blondebubbles, that's what I thought, I just wanted to check :-)

Thank you both for your help x

chrisbur

purpleposting4 wrote: »

Thank you chrisbur for that info, that has helped clear things up.

Yes, it would be 20% (he's not earning enough for 40%) so we will make sure we have put that tax amount away ready to pay next April. So when we are filling in the assessment next April, is there a box to add his employed earnings too so they can calculate his total earnings for the year?
Just to check then, he's not likely to be 'emergency taxed' with the tax code 1060L? Just so we can try and plan our finances! Thanks.

Regarding self assessment.
I am going from memory here but on the self assessment there is a section for employed earnings which you would need to fill in.

Regarding emergency tax.
Filling in the starter checklist (P46) is to enable your new employer to use the emergency tax.
He will be put onto emergency tax.

The emergency tax code is the same as the normal tax code that he will almost certainly end up on. It is not something you should avoid if you do not have a P45 it is in almost all cases the best option.
In this case it is definitely the best choice; avoiding emergency tax will result in paying extra tax which you will then have to wait to get back.

[Deleted User]

Thank you chrisbur. So when would the emergency tax stop please? Is it when they have checked everything through, or could it be next April?
Thanks.

[Deleted User]

Ok sorry, doing a bit of research myself too! So I understand they will be taxing him on a cumulative basis, assuming he has already earnt and being paying tax on the previous months.
However I already know his total self employed income from April - August is likely to be about £2500 (rubbish I know, hence getting new employed job), so is it likely then that come next April he will be due a tax refund as he wasn't earning enough to be paying tax those months and they will have been collecting tax on a cumulative basis?
Am I understanding this at all?!
Thanks.

chrisbur

purpleposting4 wrote: »

Ok sorry, doing a bit of research myself too! So I understand they will be taxing him on a cumulative basis, assuming he has already earnt and being paying tax on the previous months.
However I already know his total self employed income from April - August is likely to be about £2500 (rubbish I know, hence getting new employed job), so is it likely then that come next April he will be due a tax refund as he wasn't earning enough to be paying tax those months and they will have been collecting tax on a cumulative basis?
Am I understanding this at all?!
Thanks.

Declaring option A that is this is first job since April 5 will give him a tax allowance for the year of £10600. This will be on emergency tax and at some point ( I have no idea how long it takes these days) this will be converted to a normal tax code giving £10600 tax allowance for the year. Assuming no adjustments are required for taxable benefits, tax owing etc.
In all likely-hood the change will not be noticed as the emergency tax code is the same as the normal tax code every one starts with.
The following assumes that the eventual correct tax code is 1060L.

Anything earned over the £10600 will be taxed at 20%.
If earnings are over £10600 then self employed earnings will be due tax at 20%
If earnings are below £10600 no tax will be deducted from the earnings and the tax allowance not used will go against the self employed earnings.
For example total earnings £10000 no tax on these but tax will be due on self employed earnings of £2500 less the unused allowance of £600 ie £1900 at 20%

[Deleted User]

Brilliant, I understand now, thanks chrisbur!

I'm positive his eventual tax code will be 1060L and his earnings will be more than £10600, so he will also be taxed 20% on self-employed earnings. We will put aside approx £500 for this and get a Starter Checklist form printed off for him to hand in.

Looking forward to getting things sorted, thank you for your help.