Tax return confusion - do I need to submit one?

RoisinDove

Not sure this is the right place to post but can't find a general board for tax questions!

I have a full-time PAYE job and also do some freelancing on the side and have been registered as self employed (individual) since 2012. In the past, this freelancing work made up the majority of my income but this past financial year, I earned under £1000 because I did very little freelance work. I understand that normally you don't need to submit a tax return at all if you earn under this limit, but what happens if you're already registered as self employed and are likely to remain so? Do you need to fill it in anyway?

I have filled mine in and it's done the calculations and told me I owe a small amount of tax and I can't understand why, if my earnings were under £1000? It's also asking me if I want to pay voluntary Class 2 NICs and again, I can't understand why. Surely my PAYE job (I earn 60K a year) is covering the past year for NI credit/eligibility? Why would I need to pay more on top?

Dazed_and_C0nfused

Yes, if you have been issued a notice to file a return then you need to complete one.

I don't think you have quite grasped the concept of Self Assessment, it is to calculate the tax owed across all taxable income sources.  There is nothing unusual in people on PAYE owing tax each year, often £1.80.

It's also asking me if I want to pay voluntary Class 2 NICs and again, I can't understand why. 

If you don't want to make voluntary contributions then don't pay them.

RoisinDove

Dazed_and_C0nfused said:

Yes, if you have been issued a notice to file a return then you need to complete one.

I don't think you have quite grasped the concept of Self Assessment, it is to calculate the tax owed across all taxable income sources.  There is nothing unusual in people on PAYE owing tax each year, often £1.80.

It's also asking me if I want to pay voluntary Class 2 NICs and again, I can't understand why. 

If you don't want to make voluntary contributions then don't pay them.

I understand it, I just don't understand why. How dies it end up that people owe £1.80?

The phrasing of the question about voluntary Class 2 NICs is confusing and borderline misleading. It implies your pension could be impacted if you don't pay them, but says nothing like 'if you are working through PAYE, it's likely this won't apply to you'. As far as I understand it, there is NO reason to pay them in my situation, right? Absolutely no benefit whatsoever?

Dazed_and_C0nfused

How dies it end up that people owe £1.80?

Usually it because your Personal Allowance is say £12,500 but the tax code 1250L means your employer allows tax code allowances of £12,509 by the end of the year.  £9 x 20% = £1.80

Your pension could be impacted if you don't pay them.  It all depends on people's individual circumstances.  If you have checked your State Pension forecast and that shows that 2020:21 is a qualifying year then there is no benefit to your State Pension in paying voluntary Class 2 NI 

[Deleted User]

Yes - it used to be the case that the personal allowance ended in a ‘5’ to minimise the underpayment - presumably when multiples of 20p (or whatever the basic rate band was) were more significant.

sheramber

RoisinDove said:

Dazed_and_C0nfused said:

Yes, if you have been issued a notice to file a return then you need to complete one.

I don't think you have quite grasped the concept of Self Assessment, it is to calculate the tax owed across all taxable income sources.  There is nothing unusual in people on PAYE owing tax each year, often £1.80.

It's also asking me if I want to pay voluntary Class 2 NICs and again, I can't understand why. 

If you don't want to make voluntary contributions then don't pay them.

I understand it, I just don't understand why. How dies it end up that people owe £1.80?

The phrasing of the question about voluntary Class 2 NICs is confusing and borderline misleading. It implies your pension could be impacted if you don't pay them, but says nothing like 'if you are working through PAYE, it's likely this won't apply to you'. As far as I understand it, there is NO reason to pay them in my situation, right? Absolutely no benefit whatsoever?

The form is a catchall for everyone. There are not different formats for different circumstances.

Some people will need to pay the voluntary NIC, some not.

if it doesn't apply to you then you do not need to pay.

RoisinDove

Dazed_and_C0nfused said:

How dies it end up that people owe £1.80?

Usually it because your Personal Allowance is say £12,500 but the tax code 1250L means your employer allows tax code allowances of £12,509 by the end of the year.  £9 x 20% = £1.80

Your pension could be impacted if you don't pay them.  It all depends on people's individual circumstances.  If you have checked your State Pension forecast and that shows that 2020:21 is a qualifying year then there is no benefit to your State Pension in paying voluntary Class 2 NI 

What are the circumstances in which your pension could be impacted by not paying them if you have a full time PAYE job? I thought anyone working, even on minimum wage, was guaranteed a 'qualifying year'? 

Jeremy535897

See  https://www.litrg.org.uk/tax-guides/pensioners/approaching-retirement#toc-what-is-a-qualifying-year-for-the-purpose-of-entitlement-to-state-pension-