New Sole Trader- how does PAYE so far affect my tax

gmchris

Hi, I have been a sole trader before many years ago and done my own returns so have a reasonable idea of self assessment, but i have just gone self employed again (on Jan 2nd) and am struggling to find an answer to this-

My earnings from my employee/PAYE job april/18 to jan 2nd/19 are about £42000. My antcipated earnings as a sole trader (in the CIS scheme so 20% is automatically deducted before payment) by 5th april/19 should be about £10800.
The problem is, during February i will hit the higher tax threshold of £46330 so to 20% deductions will not cover the 40% tax due so im guessing i will end up with a tax bill of £1200 or so. Obviously i will have tax deductable expenses but not enough by april to offset this. (the following full year(s) my expenses should be enough to get me a tax refund each year)

Am i missing something? do my PAYE earnings affect my sole trader tax in this way? is there some magic expenses boost i am missing that could offset this?

Thanks

Pennywise

If you've earned £42k in your job upto end of December, you will have already paid higher rate tax on it as PAYE works on a monthly/cumulative basis. You'd only have been allowed 9/12ths of your personal allowance and 9/12ths of the basic rate tax band. As long as your PAYE tax code was right, in all probability, you'll only be liable to basic rate tax on your s/e work for the last 3 months of the tax year.

gmchris

Ahhh yesss!
Thanks Pennywise, that's the nugget of logic I was not grasping. Having done a forcast I think I may even be due a refund, just waiting for my p45 for the exact figures.