Self Assessment Guidance

odegramusic

Hi Everyone.

I am a full-time PAYE employee with some self employment on the side as of last tax year. I have filled in my return for 21/22 and have been quoted what looks like 60% tax so I assume I must have done something very wrong!

PAYE total: 39,666.00
PAYE tax: 5,417.40

Self employment profit: 21,545.00

2021-22 balancing payment: 9,643.98
1st payment on account for 2022-23 due 31 January 2023: 3,788.46
Total due by 31 January 2023: 13,432.44

The summary seems to be recharging me NI and income tax for my PAYE job - was I supposed to include NI contributions when it asked me for "UK tax taken off XXXX pay"?

I was expecting my tax to be higher than 20% for the first ~10k of self employment profit and 40 for the remainder due to NI and student loans, but 60% of 21,545 seems way off...

Dazed_and_C0nfused

Your maths is a bit out, it's only 44.76% of £21,545

Self employment profit: 21,545.00

2021-22 balancing payment: 9,643.98

You seem to be ignoring the fact that you now have POA towards your current tax years liability.

[Deleted User]

Total payable 31st January 2023 is 9643.98 less POA made 31 January 2022 less POA due on 31 July 2022 plus POA for 2022/23 £3788.46.

£9643.98 is the amount due BY 31 January 2023, not the balancing payment.

odegramusic

@Dazed_and_C0nfused
I am super new to all this! What is a POA?

The other confusing thing is that in the breakdown, the NI contributions and student tax are being based on total income and not factoring the NI/student loans I have already paid for that year.

This why I am wondering if I was supposed to include NI contirbutes where it asked me for total tax paid for my primary PAYE job.

It is asking for 1,202.98 NI payment based on total income tax (11,916.40), where as far as I am concerned surely it should only be on the tax for the £21,545 I earned as self employed as I have already paid NI for my PAYE job.

Thanks for the help!

DE_612183

POA - Payment on Account

DE_612183

you can go online and amend your POAs to zero - and then just pay whatever is due at the end of the Financial Year 

Jeremy535897

Without student loan repayments, you would expect the tax and NIC on your profits to be as follows:
£10,604 at 20% (£50,270-£39,666) = £2,120.80
£10,941 at 40% (£21,545-£10,604) = £4,376.40
Class 4 NIC at 9% on £21,545-£9,568 = £1,077.93
Class 2 NIC = £158.60
2021-22 balancing payment £7,733.73
2022-23 1st payment on account £7,733.73 - £158.60 = £7,575.13/2 =£3,787.56

The rate seems high because you are effectively paying tax on 1.5 times your profits as you have to make a payment on account for 2022/23. Presumably your profits for 2020/21 were too small to result in a payment on account  due on 31 January 2022.

[Deleted User]

POA - payment on account.

The Class 4 NI on self-employment is calculated as follows -( 21545 - 9568) at 9% = 1077.93. You also have to pay Class 2 of £3.05 per week which is £158.60.

[Deleted User]

DE_612183 said:

you can go online and amend your POAs to zero - and then just pay whatever is due at the end of the Financial Year 

No - you can’t unless you are sure that you will have nothing to pay for 2022/23! Reduce them to zero deliberately and incorrectly and expect an interest charge and the possibility of penalties.

odegramusic

Jeremy535897 said:

Without student loan repayments, you would expect the tax and NIC on your profits to be as follows:
£10,604 at 20% (£50,270-£39,666) = £2,120.80
£10,941 at 40% (£21,545-£10,604) = £4,376.40
Class 4 NIC at 9% on £21,545-£9,568 = £1,077.93
Class 2 NIC = £158.60
2021-22 balancing payment £7,733.73
2022-23 1st payment on account £7,733.73 - £158.60 = £7,575.13/2 =£3,787.56

The rate seems high because you are effectively paying tax on 1.5 times your profits as you have to make a payment on account for 2022/23. Presumably your profits for 2020/21 were too small to result in a payment on account  due on 31 January 2022.

Why do I have to pay for 22/23?

Sorry if these are stupid questions!

[Deleted User]

odegramusic said:

Jeremy535897 said:

Without student loan repayments, you would expect the tax and NIC on your profits to be as follows:
£10,604 at 20% (£50,270-£39,666) = £2,120.80
£10,941 at 40% (£21,545-£10,604) = £4,376.40
Class 4 NIC at 9% on £21,545-£9,568 = £1,077.93
Class 2 NIC = £158.60
2021-22 balancing payment £7,733.73
2022-23 1st payment on account £7,733.73 - £158.60 = £7,575.13/2 =£3,787.56

The rate seems high because you are effectively paying tax on 1.5 times your profits as you have to make a payment on account for 2022/23. Presumably your profits for 2020/21 were too small to result in a payment on account  due on 31 January 2022.

Why do I have to pay for 22/23?

Sorry if these are stupid questions!

Probably best to read this:

https://www.gov.uk/understand-self-assessment-bill/payments-on-account