Self-employed: too much tax?

Nearlyold

You need to post up the exact figures as per the tax statement otherwise we are all just guessing what it might be.

System

The first year you reach a profit sufficient enough to be above the personal allowance and actually pay some income tax you pay 150% of what is due, 50% being added as an advance payment on the following tax year. There will then be another 50% due in the June. If the tax bill if it was PAYE income would have been £2400 and she is being asked to pay £3600 then this is what has happened. She would then have to pay a further £1200 in June 2019. When she fills in her SE for the 2018-19 tax year then the amount she has overpaid in Jan and June 2019 will be deducted from the bill and she will pay or be refunded the difference depending if she has ended up overpaying in advance.

There will also be an element of Class 4 NI to pay as well.

Dazed_and_confused

Tarambor is pointing you in the right direction but isn't quite correct.

Going over the personal allowance has no bearing whatsoever on this and Self Assessment payments arent normally payable in June.

The need to make payments on account only starts when the Self Asessment bill for one tax year exceeds £1,000 and even then there exceptions which mean payments on account towards the next year aren't required.

The first thing you need to do is understand that Self Assessment has two distinct elements, the tax due for a particular tax year (shown on her Self Assessment tax calculation) and your (wife's) ongoing Self Assessment account with HMRC.

If you confused the two you will get in a pickle.

So the first thing you need to do is look at the 2017:18 tax calculation again and check what the tax, NI and student loan (if applicable) amount due for 2017:18 is.

Then check her statement of account and this should show if she made any payments towards 2017:18 in January (first payment on account) and July (2018).

If she has then the amount she has to pay in January 2019 to finalise 2017:18 is the total 2017:18 liability less those payments on account.

If no payments on account were due for 2017:18 then she will have all of the liability for 2017:18 to pay in January 2019.

Next you need to consider payments on account for 2018:19, if required these will be payable on 31 January 2019 (same time as any balance for 2017:18) and 31 July 2019.

A few days after the tax return is sent to HMRC her statement of account should be updated to show the payments which will become due next January.

Without some proper details of what happened after filing the 2016:17 return it is impossible to say with any certainty but my gut feeling is that she hasn't previously needed to make payments on account and therefore January 2019 will be a tricky month for her as she will have to pay all of the tax, NIC and student loan (if applicable) for 2017:18 AND a payment on account for 2018:19.

The second payment on account for 2018:19 will be payable in July 2019.

There's lots of permutations with this so if you provide some actual figures it will be easier to provide examples of what might happen over the next year, including when she files her 2018:19 return.

phill99

This is why the thing you CANNOT afford NOT to have is an accountant. He would sort this out and reduce your overall tax bill. Self employed people not employing an accountant is one of the most short sighted and naïve things they can do.

GreenTreen123

Yes get an accountant!

oligopoly

Thanks all. The issue and how this came about for me to post on here is that my wife is on mat leave and consequently won't be earning this year. Therefore it seems incorrect for her to pay for half of this year's estimated costs when her earnings will be £0 or certainly minimal.

I think we'll need to speak to an accountant. Or just pay it and see what happens...

comeandgo

Get in touch with HMRC and explain that she will not be working and that the profits will drop. They will reduce the "on account" amount.