Self Employed for half the year.

JHARRI

Hi,

From April-August 2015 I was self employed. I am yet to complete my assessment for my tax.

In September I started an employed job with a salary of £21,500 per year. I have not been taxed at all since starting (tax code 1060L).

Am I right in thinking that the HMRC will not have taxed me as they they think I have not earned any money from April-September so they are giving me my tax relief? And does this mean that when I submit my income/outgoings for April-August I will just declare my income from my employer and they will add it to my tax return when I pay it next Jan?

I hope this makes sense.

Thanks

absolutereturn

JHARRI wrote: »

Hi,

From April-August 2015 I was self employed. I am yet to complete my assessment for my tax.

In September I started an employed job with a salary of £21,500 per year. I have not been taxed at all since starting (tax code 1060L).

Am I right in thinking that the HMRC will not have taxed me as they they think I have not earned any money from April-September so they are giving me my tax relief? And does this mean that when I submit my income/outgoings for April-August I will just declare my income from my employer and they will add it to my tax return when I pay it next Jan?

I hope this makes sense.

Thanks

HMRC doesn't actually 'tax you', you either do self-assessment or your employer withholds tax from your salary. When you are a salaried employee as you seem to be right now, your employer withholds tax as if you had been working all year for them, that's how so many people are entitled to tax refunds. You can't ask your employer not to deduct tax or to deduct it a at a lower rate, if you end up overpaying that's when you can ask for a refund.

When you say you have not been taxed at all, are you saying your employer is not withholding any tax from your salary? If so, that's highly irregular I would say. 1060L is just the standard tax code for 2015/16 and personal allowance is £10,600, so there's no reason for them not to withhold tax from your pay.

booksurr

absolutereturn wrote: »

When you say you have not been taxed at all, are you saying your employer is not withholding any tax from your salary? If so, that's highly irregular I would say. 1060L is just the standard tax code for 2015/16 and personal allowance is £10,600, so there's no reason for them not to withhold tax from your pay.

hardly "irregular", it is actually easily understood. OP started work in Sept and HMRC issued a 1060 code to the employer. Very obviously the OP could not have given in a P45 with any taxable earnings to date since he was self employed and so did not have one. Employer therefore starts him with zero pay to date.

Sept is month 6 so the cumulative allowance by then would be 5,299.99. OP earns 1,791.66 per month and at that rate OP will not exceed his cumulative allowance until Jan (mth 10) when his earnings to date (8,958.67) will by then be >8,833.33 (ie. 10,600x10/12). So he won't pay any PAYE income tax until Jan (and any pension payments at source could further delay it).

OP is already on self assessment and will thus have to pay the tax owed on his self employed profit in the normal way when he submits the SA return showing employment and self employment incomes and tax paid to date. Although of course he will also need to notify HMRC that he ceased self employment (if he has in fact done so) so that his records will be updated and he can be removed from payment on account (if applic).

JHARRI

Hi

Thank you for your reply, you have been very helpful and has cleared up my question.

I have told the HMRC that I have ceased self employment by filling out an online form. And I'm guessing they are aware as I am paying NIC through my current monthly salary (assuming that's how it works)

I thought I would have to submit them both, I was just concerned that if I wasn't being taxed now, I would get stung with a tax bill/fine next year.

Again thank you. You have been a great help

laticsforlife

You could still end with a sizeable tax bill because we don't know how much profit you made in the 6 months of s/e.


If it were only small then it's not going to be that painful (20% plus maybe some Class 4 NIC); but if say you made £40,000 then add that to the 6 months of salary and it would push you into Higher Rate tax.


Care to guess how much profit you made after allowable expenses? We can then tell you exactly what to expect so you can budget.

JHARRI

laticsforlife wrote: »

You could still end with a sizeable tax bill because we don't know how much profit you made in the 6 months of s/e.


If it were only small then it's not going to be that painful (20% plus maybe some Class 4 NIC); but if say you made £40,000 then add that to the 6 months of salary and it would push you into Higher Rate tax.


Care to guess how much profit you made after allowable expenses? We can then tell you exactly what to expect so you can budget.

Hi

Thanks for the reply. I was only self employed on a part time basis as I was studying at the time so my gross income was only around £8,000 for that 6 months

Thanks

James

CLAPTON

JHARRI wrote: »

Hi

Thanks for the reply. I was only self employed on a part time basis as I was studying at the time so my gross income was only around £8,000 for that 6 months

Thanks

James

best to put aside at least 20% of your 8,000 for the tax