Self assessment help!

droiderm

Hi,

I am looking ahead to doing my self assessment tax return for 19/20. I used to be a contractor through a limited company. I am now permanent , so this tax year I will have a combination of salary from a permanent job, salary from my limited company, and dividends from my limited company.

My accountant normally does my tax returns and obviously he won't be doing it next year , meaning I have never done one before. Typically this will be the most complicated one !

I am trying to get an idea how much I will owe in around a years time. I paid the previous tax years today , including 1170 on account.

I have tried to estimate my salary for the year ahead, and how much income tax I will pay(there is a 6 percent pension deduction).

Income from employment 28581
Salary from ltd company 3520
Total salary 32101
Dividends from ltd company 28,265.79
Total 60,366.79

Based on a salary calculator
Tax due from salary of 32101 = 3543.99
NI due from salary of 32101 = 2816.28

Estimated deductions based on actual dedudtions so far :
Tax = 3915.31
NI = 2825.76

Tax due from dividends @ 7.5 = (50,000 - 32101(total salary))
17899 @ 7.5 % = 1342
28265(total div)-2000(tax free) -17899 @ 32.5 % = 2718.95

Total dividend tax = 4060.95
Total estimated paye tax = 3543.99
Total due = 7604.94
- tax estimated deducted at source (3915.31)
= 3689.63
Minus ( 2 x payments on account ) ( 2340)

= 1349.63

I think I will also have to add all of child benefit to pay back?

Doe that sound about in the right ball park? It's bending my head ! Thanks for any help !

Dazed_and_confused

Firstly, if you are trying to work out what you will owe under Self Assessment you should ignore (Class 1) National Insurance.

At the moment you are making things look more complicated than they are. Unless you are/were self employed then National Insurance isn't relevant for Self Assessment.

Also, tax, and the High Income Child Benefit Charge, isn't based on "salary". It is taxable pay/salary which counts. Are both the £28,581 and £3,520 the correct taxable amounts? With the proliferation of auto-enrolment pension schemes a salary of £28,581 can actually only be say £26k in taxable income.

droiderm

Hi, thanks for the reply.
3520 is the salary I drew from my limited company. That is 100% correct. There wasn't any tax/pension/NI paid.

28,581 is pro rata of the gross I expect to earn from this permanent job, this tax year, before pension deductions.

I guess you are saying gross - minus pension deductions is only relevant for the child benefit charge?

I still expect with the pension deductions my taxable pay (both salaries and dividends ) will have me mostly paying back all of the child benefit?

BoGoF

Why is your accountant not doing it seeing as it's your most 'complicated' one?

Who thought it would be a good idea to take that much dividends and trigger the child benefit charge.

Bad planning.......because you went DIY?

droiderm

I suspect he won't be doing it. He is currently closing my company down , so I am not paying monthly anymore.

Perhaps it's an idea to get him to do it , even if it costs.

The unplanned dividends were down to needing the money for a cross country move. That said as I am closing the company IIRC there were also other factors to consider

Dazed_and_confused

I guess you are saying gross - minus pension deductions is only relevant for the child benefit charge?

Not at all. If you are in a "net pay" pension scheme and contribute say 10% then your £28,581 "salary" will actually only be £25,723 taxable pay/salary (the amount which will be shown on your P60).

You really need to check your taxable pay values again before doing any further calculations as you could be overstating your income. Which in turn could impact the PAYE tax deduction figures you have used.

Your payslips should make it clear what your taxable pay/salary values are.

droiderm

I think additionally, at that time , I didn't know I would be working, and how much I would earn.

droiderm

Dazed_and_confused wrote: »

Not at all. If you are in a "net pay" pension scheme and contribute say 10% then your £28,581 "salary" will actually only be £25,723 taxable pay/salary (the amount which will be shown on your P60).

You really need to check your taxable pay values again before doing any further calculations as you could be overstating your income. Which in turn could impact the PAYE tax deduction figures you have used.

Your payslips should make it clear what your taxable pay/salary values are.

Thanks again, I will double check.
I guess it's not going to make THAT much difference though in terms of my tax due ?

Cook_County

If the company paid the accountant to prepare the personal tax return last year this is a taxable benefit. Where are P11D benefits in kind in the calculations?

Dazed_and_confused

Tax due from salary of 32101 = 3543.99

No idea how you get to £3543.99

Tax due from dividends @ 7.5 = (50,000 - 32101(total salary))
17899 @ 7.5 % = 1342
28265(total div)-2000(tax free) -17899 @ 32.5 % = 2718.95

That isn't how you calculate tax on dividends. There is no "tax free" amount for a start.

You are correct that based on the figures in your original post there will be £17,899 of your basic rate band left. But the dividend income would then be taxed like this,

£2,000 x 0% = £0.00 (dividend nil rate)
£15,899 x 7.5% = £1,192.42 (dividend lower/basic rate)
£10,366 x 32.5% = £3,368.95 (dividend higher rate)

Total tax due on dividend income = £4561.37. Not £4060.95

Dazed_and_confused

I guess it's not going to make THAT much difference though in terms of my tax due ?

Well each £1 your taxable income reduces then that is £1 less to be taxed at the dividend higher rate of 32.5%.

So personally I would say yes, it will make a big difference.

I'm not sure what the purpose of your thread is if you aren't bothered about the figures being as accurate as reasonably possible