PAYE and self employed tax confusion

dulcies

Hi all, I'm after a bit of help as I can't seem to make these numbers add up!

So I am employed on PAYE and self employed (consultancy). I started the self employment at the tail end of 19/20 tax year - no POA were due that year due to small earnings.

For tax year 20/21 the figures are:
PAYE earnings gross - £21980
PAYE tax paid - £1895

Consultancy earnings gross - £11712
Consultancy expenses - £645
Consultancy net - £11067

I paid - £3389.03 balancing payment
£1177.71 payment on account for Jan
£1177.71 payment on account due by July 22

This tax year also included £882 payment for student loan through self assessment and paying back student loan through PAYE (student loan is now paid off)

For tax year 21/22
PAYE earnings gross -  £22199
PAYE tax paid - £1924

Consultancy earnings gross £12875
Consultancy expenses £956
Consultancy net £11919

Total due
Balancing payment £2755.79
£1298.59 first payment on account
£1298 second payment on account

So I feel like I am paying too much tax?? OR is this correct? I'm so confused! It feels like for the 21/22 tax year I will of paid £6151 tax on £35074 of earnings? (tax figure is taken from the 2 payment on accounts from 20/21 plus the balancing payment of 21/22 minus student loan repayment in 20/21)

I'm about to start maternity leave so trying to get this sorted before I pop. Also because once I submit my tax return for 21/22 I then want to reduce the payments on account for this year as I won't be earning as much. 

Thanks for any help on this as i'm super confused!

Dazed_and_C0nfused

I think part of the problem is that you seem to be getting your tax years mixed up.

For example,

So I am employed on PAYE and self employed (consultancy). I started the self employment at the tail end of 19/20 tax year - no POA were due that year due to small earnings.

POA are always (initially) based on the prior year's tax return.  So if you don't file a return for 2018:19 you could never have POA for 2019:20.  Anything to be paid for 2019:20 would always have been a Balancing Payment payable in January 2021.

You might find it simpler to follow if you always refer to specific tax years.  

You also need to remember that your Self Assessment tax calculation doesn't (and shouldn't) make any reference to any POA you have paid.  

Based on what you've posted this is what you need to pay.

2019:20 unknown (payable January 2021)

2020:21 £3389.03

All payable as a Balancing Payment in January 2022

2021:22 £2755.79

£1177.71 POA due in January 2022

£1177.71 POA due in July 2022

£400.37 Balancing Payment due in January 2023

2022:23 POA £2597

£1298.59 POA due in January 2023

£1298.xx POA due in July 2023

Things are likely to be much clearer once you file your return and can the full breakdown on your Self Assessment account, rather than just looking at the tax calculations.

[Deleted User]

^^^

Exactly how it should be explained - one tax year at a time.

sheramber

The amount shown as due on the tax calculation does not take POA s  into account. 

[Deleted User]

sheramber said:

The amount shown as due on the tax calculation does not take POA s  into account. 

Yes - many do not see the calculation as simply that - a calculation of the total amount due BY 31 January 2023. Then one looks at the payments on account paid in January 2022 and paid/due to be paid in July 2022

dulcies

Dazed_and_C0nfused said:

I think part of the problem is that you seem to be getting your tax years mixed up.

For example,

So I am employed on PAYE and self employed (consultancy). I started the self employment at the tail end of 19/20 tax year - no POA were due that year due to small earnings.

POA are always (initially) based on the prior year's tax return.  So if you don't file a return for 2018:19 you could never have POA for 2019:20.  Anything to be paid for 2019:20 would always have been a Balancing Payment payable in January 2021.

You might find it simpler to follow if you always refer to specific tax years.  

You also need to remember that your Self Assessment tax calculation doesn't (and shouldn't) make any reference to any POA you have paid.  

Based on what you've posted this is what you need to pay.

2019:20 unknown (payable January 2021)

2020:21 £3389.03

All payable as a Balancing Payment in January 2022

2021:22 £2755.79

£1177.71 POA due in January 2022

£1177.71 POA due in July 2022

£400.37 Balancing Payment due in January 2023

2022:23 POA £2597

£1298.59 POA due in January 2023

£1298.xx POA due in July 2023

Things are likely to be much clearer once you file your return and can the full breakdown on your Self Assessment account, rather than just looking at the tax calculations.

Thanks still not sure I understand (please excuse my exhausted pregnancy brain!) although the way you have laid it out is making much more sense than the way I did!!!

So I did file a tax return for 19:20
Self employed earnings were £2400 and expenses were £354.96
I paid £481 balancing payment

21:22 your figures are correct re POA but the balancing payment is £2755.79 (due Jan 23)

Then 22:23
POA is £1298.59 due in Jan 23
POA £1298.59 due Jul 23

So I guess my real question is the balancing payment for 21:22 being £2755.79 seems high?

Dazed_and_C0nfused

What does the bottom line of your 2021:22 Self Assessment calculation show?

The bit which lists your income and allowances.

[Deleted User]

dulcies said:

Dazed_and_C0nfused said:

I think part of the problem is that you seem to be getting your tax years mixed up.

For example,

So I am employed on PAYE and self employed (consultancy). I started the self employment at the tail end of 19/20 tax year - no POA were due that year due to small earnings.

POA are always (initially) based on the prior year's tax return.  So if you don't file a return for 2018:19 you could never have POA for 2019:20.  Anything to be paid for 2019:20 would always have been a Balancing Payment payable in January 2021.

You might find it simpler to follow if you always refer to specific tax years.  

You also need to remember that your Self Assessment tax calculation doesn't (and shouldn't) make any reference to any POA you have paid.  

Based on what you've posted this is what you need to pay.

2019:20 unknown (payable January 2021)

2020:21 £3389.03

All payable as a Balancing Payment in January 2022

2021:22 £2755.79

£1177.71 POA due in January 2022

£1177.71 POA due in July 2022

£400.37 Balancing Payment due in January 2023

2022:23 POA £2597

£1298.59 POA due in January 2023

£1298.xx POA due in July 2023

Things are likely to be much clearer once you file your return and can the full breakdown on your Self Assessment account, rather than just looking at the tax calculations.

Thanks still not sure I understand (please excuse my exhausted pregnancy brain!) although the way you have laid it out is making much more sense than the way I did!!!

So I did file a tax return for 19:20
Self employed earnings were £2400 and expenses were £354.96
I paid £481 balancing payment

21:22 your figures are correct re POA but the balancing payment is £2755.79 (due Jan 23)

Then 22:23
POA is £1298.59 due in Jan 23
POA £1298.59 due Jul 23

So I guess my real question is the balancing payment for 21:22 being £2755.79 seems high?

£2755.59 appears to be the amount DUE for 2021/22. You must take off the POA made in a January 2022 and the amount due in July 2022 which are in respect of 2021/22.

It is important to differentiate between the amount due BY 31 January 2023 (£2755.59) and the balancing payment which is £2755.59 less POA made in January 2022 less POA due in July 2022. 

sheramber

So I guess my real question is the balancing payment for 21:22 being £2755.79 seems high?

Where are you seeing this figure? 

dulcies

purdyoaten2 said:

dulcies said:

Dazed_and_C0nfused said:

I think part of the problem is that you seem to be getting your tax years mixed up.

For example,

So I am employed on PAYE and self employed (consultancy). I started the self employment at the tail end of 19/20 tax year - no POA were due that year due to small earnings.

POA are always (initially) based on the prior year's tax return.  So if you don't file a return for 2018:19 you could never have POA for 2019:20.  Anything to be paid for 2019:20 would always have been a Balancing Payment payable in January 2021.

You might find it simpler to follow if you always refer to specific tax years.  

You also need to remember that your Self Assessment tax calculation doesn't (and shouldn't) make any reference to any POA you have paid.  

Based on what you've posted this is what you need to pay.

2019:20 unknown (payable January 2021)

2020:21 £3389.03

All payable as a Balancing Payment in January 2022

2021:22 £2755.79

£1177.71 POA due in January 2022

£1177.71 POA due in July 2022

£400.37 Balancing Payment due in January 2023

2022:23 POA £2597

£1298.59 POA due in January 2023

£1298.xx POA due in July 2023

Things are likely to be much clearer once you file your return and can the full breakdown on your Self Assessment account, rather than just looking at the tax calculations.

Thanks still not sure I understand (please excuse my exhausted pregnancy brain!) although the way you have laid it out is making much more sense than the way I did!!!

So I did file a tax return for 19:20
Self employed earnings were £2400 and expenses were £354.96
I paid £481 balancing payment

21:22 your figures are correct re POA but the balancing payment is £2755.79 (due Jan 23)

Then 22:23
POA is £1298.59 due in Jan 23
POA £1298.59 due Jul 23

So I guess my real question is the balancing payment for 21:22 being £2755.79 seems high?

£2755.59 appears to be the amount DUE for 2021/22. You must take off the POA made in a January 2022 and the amount due in July 2022 which are in respect of 2021/22.

It is important to differentiate between the amount due BY 31 January 2023 (£2755.59) and the balancing payment which is £2755.59 less POA made in January 2022 less POA due in July 2022. 

Ah ha - I think it has clicked! So I have done my self assessment (but not yet submitted) and section 6 is 'view your calculation' which is where I have been getting the figures. It says

Total amount due for 2021-22 £2,755.79
Plus
First payment on account for 2022-23£1,298.59

Total to be added to Self Assessment account due by 31 January 2023 £4,054.38

HM Revenue and Customs will add this amount to your Self Assessment statement of account. It doesn't include any 2021 to 2022 payments on account you may have made or any other amounts outstanding. To help you to decide how much, if anything, to pay by the due date, check your Self Assessment account and use the information above until it transfers over.

Please note: Please carefully check the figures and the amounts due, which are calculated using the amounts you have entered. HM Revenue and Customs will allocate your payments against any Class 2 National Insurance first unless you have outstanding debts.

Help about: Tax Calculation Summary

Second payment on account for 2022-23 will be due by 31 July 2023 £1,298.59

So from this the 'total amount due' is minus the POA made by Jan 22 and Aug 22. So £2755.59 minus £1177.71 (paid by Jan 22) and £1177.71 (paid by end jul 22) meaning the balance I owe on tax for the 21:22 tax year is £400.17???

Then I have 2 POA attributing to the next tax year 22:23 first is £1298.59 (due by end Jan 23) and then £1298.59 (due by end Jul 23). 

Is this correct? So total tax I owe/owed for 21:22 is £2755.29 (inclusive of 2xPOA and balance of £400 ish)???

Thank you all for all your help - I'm hoping I have this sorted in my head now providing you all say the above is correct!

If you do I will submit the return I will then need to complete a form to reduce my POA for 22:23 as I will be earning less than half of what I have in the previous year due to maternity leave.

[Deleted User]

Correct !!!!!!!!