Self Assessment

ET100

I am hoping to gain some guidance re my self assessment.  I am a PAYE, I have no pension or any other elements that need completing in my form as I have a base salary (no perks or expenses) but just trip over the 100k so I have to complete this form largely for savings tax.   I have just completed my 2021/22 form and have found out that I owe a double digit amount of tax as I have underpaid tax.  Is this normal.  I leave this to the finance team where I work and have little to no control over their calcs and now a year later I find that I owe HMRC.  It is what it is but just curious if I am alone with these failings.   Secondly I have been asked to pay a considerable sum on account for 22/23 yet I am PAYE and have a role up to Oct 2022 but after that do not know when I will be next employed and what that salary will be.  Is this something I need to pay or will I have a right to reduce this based on the fact I am not a self employed person but a PAYE contractor who largely gets 6 month assignments when they present themselves.   Many thanks ET100

lisyloo

Normally PAYE is very accurate.
are you sure you filled everything in correctly?
do you have any pension contributions to claim relief on?
i normally do my own rough calculations to make sure it’s correct.

yes you can ask to reduce your payments on account.
when I did it, it got accepted automatically.
just be aware that if you lower it and it turns out you should have paid it then you will be charged some interest.
note that the payment on account is still in arrears i.e. it’s paid jan and jul for a tax year April - April.

ET100

Thank you Lisyloo.  I was surprised as I wrongly relied on the finance team where I worked to calculate this right.  It seems I was given a tax free amount when this wasn’t applicable but still annoying a year later.  

I have no pension or anything other than base salary. 

That’s helpful.  I know I’ll be in employment for 6 months from June 13 but after that it’s an unknown and I sense I’ll not earn anywhere near what I did in previous years.  

Sandtree

ET100 said:
I was surprised as I wrongly relied on the finance team where I worked to calculate this right. 

Almost certainly where you work simply plugs numbers into a system with the tax code provided by HMRC and it calculates everything else. What can be the problem is if you change job mid tax year etc and have a big income increase... I know with some online calculators they struggle to deal with additional rate tax payers and dont factor in the total loss of tax free.

Dazed_and_C0nfused

It's your responsibility to make sure your tax code is as accurate as possible, nothing to do with your finance team.

Once your adjusted net income exceeds £100k you are into an effective tax rate of 60% which is where (extra) pension contributions can be very very tax efficient. 

Too late now for 2021:22 but worth thinking about going forwards.

Payments on account have nothing to do with self employment.  They can apply to anyone required to compete a Self Assessment return.

You are perfectly entitled to reduce them if you think the tax owed for 2022:23 will be less however if it isn't, for any reason whatsoever, then you will be charged late payment interest for any tax paid late.

lisyloo

I calculated mine a bit wrong and reduced it too much.
the interest was tiny.
so it’s certainly something to be aware of but I wouldn’t pay thousands for fear of a few pounds of interest if you’re fairly sure you don’t need to

what you need to do is keep an eye on it yourself as HMRC don’t know about your circs changing and any payroll dept won’t know about other jobs or income.

what you could do is reduce the payments on account and then put a date in your calendar to review on say 1/1/23 as I don’t think there is anything stopping you making an ah-hoc payment if your circs have changed,

on the subject of pensions
1) what are you planning to live on when you retire?
2) they are massively tax efficient at 60%, very at 40% and still beneficial at 20%.

Albermarle

Why are you not a member of your workplace pension scheme, which all employers have to provide ( and contribute a minimum amount ) ?

diystarter7

If you are a "contractor" and I've read your post correctly, from what people used to tell me, things can go wrong EG, proper tax not being paid etc.

When the tax office opens, give them a call as they are helpful

Trebel check your form. 

Your yearly returns on the p60 I think its called, use them for the years they are seeking info.

If it is a lot of tax, ask them to pay this over a period.

Give them a call. Sadly, based on what you said and I know about contracting and some employers, people often pay too much tax or in some cases too little and only find out when completing a SA.

Good luck

[Deleted User]

lisyloo said:

I calculated mine a bit wrong and reduced it too much.
the interest was tiny.
so it’s certainly something to be aware of but I wouldn’t pay thousands for fear of a few pounds of interest if you’re fairly sure you don’t need to

what you need to do is keep an eye on it yourself as HMRC don’t know about your circs changing and any payroll dept won’t know about other jobs or income.

what you could do is reduce the payments on account and then put a date in your calendar to review on say 1/1/23 as I don’t think there is anything stopping you making an ah-hoc payment if your circs have changed,

on the subject of pensions
1) what are you planning to live on when you retire?
2) they are massively tax efficient at 60%, very at 40% and still beneficial at 20%.

You are correct - the interest is tiny. However, HMRC can charge a penalty if insufficient care and attention was not applied at the time of the decision to reduce payments on account. In my time I have only ever come across this twice although it was pretty blatant - reducing from thousands to zero! Just something to be aware of - I suppose there has to be some preventative measures though!

https://www.taxinsider.co.uk/should-i-reduce-my-payments-on-account-ta

ET100

I am a 100% paye employee but work on an interim bases so for example I can live with the 2021/2022 tax payment due as it’s something I have to pay but my new assignment ends Dec 2022 and starts June 13. All earnings are at source and then I’m unemployed after Dec. I will be looking to find new employment but again this will not be a contractor role but an interim position - fixed term.  So being asked to pay on account when I’m 100% paye seems wrong as I don’t know what I’ll earn and when I’ll be in employment and when I am working I’m taxed at source so I pay my tax. 

lisyloo

Then consider what I suggest and reduce but keep an eye on your tax situation yourself (diarising in order make a payment before 31st jan) and put some money aside as you go (if required).
i used to get dividends on top of PAYE. I calculated the tax myself, opened an additional bank account and put the extra tax money aside monthly.
All of that is relatively easy it just requires you to accept the responsibility to do it yourself.

Also do consider what you are going to live on in retirement.
a state pension is hard to live on and state retirement ages have been going up 65-68.