Self employed to employed

monaymadlol

Hi after 15+ years as a sole trader doing my own returns, I will be looking to commence employment from Jan.

I've already submitted by tax return for 22/23. I will be paying it next month including the POA for 23/24.

I will unlikely do any or little self employed work in the next 18 months (under £5k I would guess?).

My question is what do I do next, tax wise?

I suppose I pay the tax demand in full Inc POA for 23/24 in Jan & July 2024, then complete another return in Jan 2025 for 23/24, where id get a rebate? Then I'd have to do no more returns (unless I do self employed work), and then keep my sole trader account open?

Do I tell HMRC on starting employment or no?

Any thing I'll need to know about NIC contributions or adjustments?

Or anything else in general?

[Deleted User]

There really is very little to do at all. 

In next years return you will complete the date that you ceased self-employment and that will be that. 

You don’t need to inform HMRC of your new job - your employer will do that. 

Whether you get a rebate or not, and how much, will depend on the tax code operated against your new employment.

Either way  it will all be resolved upon completion of the return for 2023/24. My advice would be to submit that asap after April 2024 to establish just how you stand as soon as is possible.

monaymadlol

[Deleted User] said:

There really is very little to do at all. 

In next years return you will complete the date that you ceased self-employment and that will be that. 

You don’t need to inform HMRC of your new job - your employer will do that. 

Whether you get a rebate or not, and how much, will depend on the tax code operated against your new employment.

Either way  it will all be resolved upon completion of the return for 2023/24. My advice would be to submit that asap after April 2024 to establish just how you stand as soon as is possible.

Thanks for this.

But what if I don't cease self employment or don't know if I will? As in, maybe I'll do the odd bit for some extra cash, so does that technically mean I would do a return every year 'in case'?

I suppose it's frustrating since I'll be paying tax through employment from Jan, whilst also putting aside cash towards my July POA!

Dazed_and_C0nfused

monaymadlol said:

[Deleted User] said:

There really is very little to do at all. 

In next years return you will complete the date that you ceased self-employment and that will be that. 

You don’t need to inform HMRC of your new job - your employer will do that. 

Whether you get a rebate or not, and how much, will depend on the tax code operated against your new employment.

Either way  it will all be resolved upon completion of the return for 2023/24. My advice would be to submit that asap after April 2024 to establish just how you stand as soon as is possible.

Thanks for this.

But what if I don't cease self employment or don't know if I will? As in, maybe I'll do the odd bit for some extra cash, so does that technically mean I would do a return every year 'in case'?

I suppose it's frustrating since I'll be paying tax through employment from Jan, whilst also putting aside cash towards my July POA!

If you don't want to pay tax from January to 5 April just tick statement A on the new starter declaration you should get from your new employer.

That will mean they use the emergency tax code (1257L) on a cumulative basis and you will only pay tax if you exceed the following amounts,

Month 10 (to 5 February) £10482
Month 11 (to 5 March) £11530
Month 12 (to 5 April) £12579

Jeremy535897

You can apply to reduce your payments on account for 2023/24, which is likely to be appropriate if your profits will significantly reduce. If you pay too little tax, though, interest will be charged. If your profits for 2023/24 are likely to be similar to 2022/23, don't recuce the POA for 2023/24. When you submit 2023/24's tax return you should probably reduce the POA for 2024/25, although the interest point mentioned above will apply if you pay too little tax.

If you pay sufficient class 1 NIC in a tax year there will be no reason to pay voluntary class 2 NIC.

monaymadlol

Jeremy535897 said:

You can apply to reduce your payments on account for 2023/24, which is likely to be appropriate if your profits will significantly reduce. If you pay too little tax, though, interest will be charged. If your profits for 2023/24 are likely to be similar to 2022/23, don't recuce the POA for 2023/24. When you submit 2023/24's tax return you should probably reduce the POA for 2024/25, although the interest point mentioned above will apply if you pay too little tax.

If you pay sufficient class 1 NIC in a tax year there will be no reason to pay voluntary class 2 NIC.

Can you apply to reduce the POA even once submitted? I may leave that as I'll be three quarters through 23/24 once I start anyway. I will have to ensure that I do a return in April 24 basically stating I've started employment and will be earning basically zilch from 24/25 onwards, or else I'm toast with future poa 

[Deleted User]

You can reduce your payments on account at any time. Clearly, by completing your return for 2023/24 early you can crystalise your liability for that year and override the payment on account due in July 2024 should that prove to be excessive. 

monaymadlol

If I'm likely starting next month employment, I will have a quarter year's less profit for 23/24. With reducing my poa for 23/24 as advised even once my return for 22/23 has been submitted calculating that POA, would the POA be reduced for the 50% in Jan or the 50% in July, or both (ie overall POA)?

As I haven't been employed for 15 years plus, I don't understand the emergency tax concept in the above situation. Would it apply to me? How could I work
And opt not to pay tax?

[Deleted User]

You estimate your tax liability for 2023/24 - remember that this will be dependent on the tax code operated at your new job. 

Let’s say that this is £3000. You can reduce EACH payment on account to £1500 when submitting your return for 2022/23. You can reduce the payments on account to whatever you want bearing in mind that any payment that interest will be charged if you reduce by too much. 

Come April you can submit your return for 2023/24. Let’s say that the liability for that year is actually £2800. Having paid £1500 as the first payment on account in January 2024 you are only required to pay £1300 In July 2024. You don’t need to do anything as the payments on account will revert to £1400 each as a result of the return and you will receive a bit on interest on the payment made in January which turned out to be £100 more than ultimately necessary.. 

monaymadlol

Ok, still a little confused.

So my turnover increased for 22/23, first time I years. I owe around £4200 end of Jan. My 2nd POA for July is around £2500.

With expenses, I'm predicting my turnover (Inc income tax, NIC, Plan 1 student loan) to be £6000-8000 less for 23/24 due to winding up in Jan.

Based on this, can HMRC calculate how much I reduce the POA or is it a self calculation? If so, what sort of figures of reduction am I looking at (to save all that stuff with employment emergency tax code etc)

monaymadlol

Edit - will obviously do a more accurate turnover calculation in a couple weeks after Xmas, but to give me an idea, what sort of 23/24 liability am I looking at do you think and therefore reduction in Poa, as a lower rate payer, sole trader?