Started Self Employment - Questions

Coeus

Hello Happy People!

Hope all is well and you are enjoying your Christmas's!

Trying to help a friend out who has started as a Sole Trader get his tax affairs in order and have a few questions if anyone can offer insight please?

Background:

Works in construction industry.
Employed to the Sep 17.
Self-employed (sole trader) from Oct 17.

Has registered with HMRC for self assessment and has received a UTR - required for CIS tax deductions @ 20% by the individuals contractor (being a subcontractor).

Questions:

1) As registered in the 2017/18 tax year any Income Tax / National Insurance will be due on the 31st Jan following the end of the tax year i.e. 31st Jan 2019 - is this correct?

2) How will amounts taken as CIS tax (20% on labour) be utilised against his Income Tax bill? I assume that any deductions made in the 2017/18 tax year will be deducted from the Income Tax bill and thus a balancing payment (or refund) will be due on 31st Jan 2019?

3) As in the CIS tax scheme will payments on account (31st Jan 2019 & 31st Jul 2019) still be required? I am unsure how CIS tax deductions affect the payment on account processes.

4) Given employed until Sep 2017 he has paid Income Tax already for the 2017/18 tax year. Given the return and balancing payment is not due until 31st Jan 2019 is there any risk of HMRC refunding the income tax paid? Or will their system note the individual as being self-assessment registered thus 'hold' the Income Tax paid to utilise against the balancing payment 31st Jan 2019?

5) A modern world question! The individual has registered with HMRC online services - has both a 'Personal' tax account and a 'Business' tax account. Given the individual is a sole trader I find it odd there is a distinction! Is this usual? I assume any self assessment return will need to be filed on his 'Personal' tax account?


Many thanks in advance for any insights - I am getting rusty in the modern age of self assessment!


Merry Christmas :-)


Coeus.

jobbingmusician

Someone may surprise me, but I suspect this question would do better on the tax board. I'll move it in a couple of days if no-one surprises me!

Dazed_and_confused

1. You might want to read what you have written as it makes no sense. The 2017:18 tax year, which we are in now, ends on 5 April 2018

2. They are taken into account in the self assessment calculation for the year providing your friend remembers to include the details on the return. See 1 above re the date you refer to.

3. They don't really. What matters is the final position after the CIS tax is allowed for. So if refund is due no POA but if extra tax/NIC is payable over and above the CIS tax then there could be POA due (but none are charged if the liability is less than £1000)

4. Yes but registering for self assessment has minimised the risk. Worst case scenario he can simply declare any tax refund (for 2017:18) in a special box on the return for that very purpose (something like "Tax already refunded by HMRC.....)

5. Don't know for sure but personal tax account shows state pension info as well as PAYE details. Business account may be because he is running his own business and not doing self assessment simply because he is a very high earner or some other non business related reason??

Coeus

Hi Dazed and Confused.

Thanks for that meant 2019 for the first due date - mental block!

Updated the original post :-)

Kind regards,

Coeus.

Coeus

Dazed_and_confused wrote: »

5. Don't know for sure but personal tax account shows state pension info as well as PAYE details. Business account may be because he is running his own business and not doing self assessment simply because he is a very high earner or some other non business related reason??

Thanks again.

Responses 1 - 4 make perfect sense to me.

In regards to 5 makes sense as well but I will get access to the business account see what's going on.

I know that is the account holding the UTR.

Your point on PAYE makes sense as vice versa the business account could hold his CIS tax or VAT details.

He is running his own business but is in the self assessment scheme and not a very high earner.

Just wondering if it is the norm to have the separate business tax account?

Regards,

Coeus.