Messy tax situation

monaymadlol

Hi

I've been self employed sole trader for many years. Earlier this year, I took up PAYE employment. I haven't done any self employed work for the last few months. I'm due to submit my 23/24 return and then will have a remaining POA to pay in July.

In employment, I was initially taxed as expected on an emergency 0TM1 Code for the first month.

The following month, payroll received a P6 notification, and I was put on a 1257L code (as backed up when I check my HMRC account online).

No year to date earnings and tax figures were given to payroll from HMRC (why? Because I'm self employed and yet to submit a return?), their software assumes therefore that the two months pay were my only ones. So no income tax deduction for month two and emergency tax paid back.

Last month, again, no tax deducted (only NI etc), as above, and below the £12570 threshold.

Issue is, how do I go about resolving this?

1) I obviously have not had two months of PAYE tax deducted, so how and at what point does this happen? Will it be through HMRC self employed tax return? Or will I get docked two months of tax from my fourth payslip by the employer?!

2) don't most employers spread the tax allowance over the 12 months for ease of budgeting?!

Any insight to clear this mess would be grateful ty

Marcon

monaymadlol said:

Hi

I've been self employed sole trader for many years. Earlier this year, I took up PAYE employment. I haven't done any self employed work for the last few months. I'm due to submit my 23/24 return and then will have a remaining POA to pay in July.

In employment, I was initially taxed as expected on an emergency 0TM1 Code for the first month.

The following month, payroll received a P6 notification, and I was put on a 1257L code (as backed up when I check my HMRC account online).

No year to date earnings and tax figures were given to payroll from HMRC (why? Because I'm self employed and yet to submit a return?), their software assumes therefore that the two months pay were my only ones. So no income tax deduction for month two and emergency tax paid back.

Last month, again, no tax deducted (only NI etc), as above, and below the £12570 threshold.

Issue is, how do I go about resolving this?

1) I obviously have not had two months of PAYE tax deducted, so how and at what point does this happen? Will it be through HMRC self employed tax return? Or will I get docked two months of tax from my fourth payslip by the employer?!

2) don't most employers spread the tax allowance over the 12 months for ease of budgeting?!

Any insight to clear this mess would be grateful ty

1. No. Your next pay period (April) will be in the new tax year.
2. No. The tax allowance is 'spread' because that's what HMRC dictates - nothing to do with ease of budgeting or anything so considerate!

It'll be picked up when you file your self assessment tax return, so make sure you have the necessary cash set aside to pay the outstanding tax (allowing 20% of our gross pay should do the trick, unless you are in a higher rate tax bracket).

Dazed_and_C0nfused

monaymadlol said:

Hi

I've been self employed sole trader for many years. Earlier this year, I took up PAYE employment. I haven't done any self employed work for the last few months. I'm due to submit my 23/24 return and then will have a remaining POA to pay in July.

In employment, I was initially taxed as expected on an emergency 0TM1 Code for the first month.

The following month, payroll received a P6 notification, and I was put on a 1257L code (as backed up when I check my HMRC account online).

No year to date earnings and tax figures were given to payroll from HMRC (why? Because I'm self employed and yet to submit a return?), their software assumes therefore that the two months pay were my only ones. So no income tax deduction for month two and emergency tax paid back.

Last month, again, no tax deducted (only NI etc), as above, and below the £12570 threshold.

Issue is, how do I go about resolving this?

1) I obviously have not had two months of PAYE tax deducted, so how and at what point does this happen? Will it be through HMRC self employed tax return? Or will I get docked two months of tax from my fourth payslip by the employer?!

2) don't most employers spread the tax allowance over the 12 months for ease of budgeting?!

Any insight to clear this mess would be grateful ty

That sounds like things have worked to plan.

You just aren't used to PAYE.

If you went from self employment to employment then there would be no previous pay details for HMRC to advise your new employer of.  

0T isn't the emergency code, it's one used where someone hasn't complied with the new starter process.  Or their employer hasn't complied with it.

The emergency tax code is 1257L and that was issued on a cumulative basis so you got the benefit of your full Personal Allowance rather than just a small portion at the end of the tax year.

Your employer should continue to use the emergency code (1257L) in the new tax year and there will be no adjustment made by them for what has happened in previous pay periods.

When you come to complete your Self Assessment return for 2023-24 you would include the employment income and that will be taken into account then your overall liability is calculated.

monaymadlol

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

Dazed_and_C0nfused

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

monaymadlol

Dazed_and_C0nfused said:

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

Yes, statement B.

Ok, I was under the impression that 1257L was not an emergency tax code and that OT was.

So, if I submit a return next week, adding in relevant employment earnings, this will calculate a total self employed and employed liability for me to pay 31/7/24, and then generate a new tax code for payroll (how soon?), and everything will be adjusted (IE correct tax code, taxed at source) come the April paycheck? So I'll just need to ensure that I don't spend it and set aside 

This is an additional question which I may need to ask in a different section: I plan to keep my sole trader account open but not do any self employed work for the foreseeable future, will I need to submit further tax returns with my 23/24 balance soon to be calculated and cleared? Ie I won't be paying further tax self employed or doing any self assessment.

Dazed_and_C0nfused

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

Yes, statement B.

Ok, I was under the impression that 1257L was not an emergency tax code and that OT was.

So, if I submit a return next week, adding in relevant employment earnings, this will calculate a total self employed and employed liability for me to pay 31/7/24, and then generate a new tax code for payroll (how soon?), and everything will be adjusted (IE correct tax code, taxed at source) come the April paycheck? So I'll just need to ensure that I don't spend it and set aside 

This is an additional question which I may need to ask in a different section: I plan to keep my sole trader account open but not do any self employed work for the foreseeable future, will I need to submit further tax returns with my 23/24 balance soon to be calculated and cleared? Ie I won't be paying further tax self employed or doing any self assessment.

Your 2023-24 Self Assessment calculation will show the total tax due for the year taking into account all the taxable income you include on your return.

I don't know what adjustment you are expecting to your 2024-25 tax code but there won't be any that is related to your employment income from 2023-24.

Your employer will continue to use the 1257L code until something changes that.  That means the first £1,048/month won't have any tax deducted.  And the £1,048 is cumulated each month so by the end of the tax year you have had the benefit of all your tax code allowances.

Why do you think that that is wrong 🤔

If you file your return by 30 December you may have the option to pay any (Self Assessment) tax owed via your 2025-26 tax code.  But if you prefer for that not to happen and prefer to pay as normal with the January/July/January POA and Balancing Payment system then just make sure you complete the relevant question near the end of your return to prevent the tax from being in included in your tax code.

monaymadlol

Btw, it was HMRC that issued the 1257L tax code not the employer, having checked my personal tax account 

monaymadlol

Dazed_and_C0nfused said:

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

Yes, statement B.

Ok, I was under the impression that 1257L was not an emergency tax code and that OT was.

So, if I submit a return next week, adding in relevant employment earnings, this will calculate a total self employed and employed liability for me to pay 31/7/24, and then generate a new tax code for payroll (how soon?), and everything will be adjusted (IE correct tax code, taxed at source) come the April paycheck? So I'll just need to ensure that I don't spend it and set aside 

This is an additional question which I may need to ask in a different section: I plan to keep my sole trader account open but not do any self employed work for the foreseeable future, will I need to submit further tax returns with my 23/24 balance soon to be calculated and cleared? Ie I won't be paying further tax self employed or doing any self assessment.

Your 2023-24 Self Assessment calculation will show the total tax due for the year taking into account all the taxable income you include on your return.

I don't know what adjustment you are expecting to your 2024-25 tax code but there won't be any that is related to your employment income from 2023-24.

Your employer will continue to use the 1257L code until something changes that.  That means the first £1,048/month won't have any tax deducted.  And the £1,048 is cumulated each month so by the end of the tax year you have had the benefit of all your tax code allowances.

Why do you think that that is wrong 🤔

If you file your return by 30 December you may have the option to pay any (Self Assessment) tax owed via your 2025-26 tax code.  But if you prefer for that not to happen and prefer to pay as normal with the January/July/January POA and Balancing Payment system then just make sure you complete the relevant question near the end of your return to prevent the tax from being in included in your tax code.

I'm referring to any adjustment for self employment rather than employment since I'm now fully employed going into 24/25.

I think the issue is, with no tax on the first £1048 per month is that surely my self assessment will have taken into consideration that tax allowance when calculating the remaining £1800 or so I owe (tbc) for 31/7/24 (balancing payment), so at what point is that amended to take into account my new employment status...as in I've been setting aside money for that £1800 but surely that amount will change now.

Hopefully when I complete and return the 22/24 return next week, I will get a clearer idea what I owe and that payroll can ensure I'm taxed at source with the correct code rather than putting aside money for the self assessment that I won't need to complete thereafter 

Dazed_and_C0nfused

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

Yes, statement B.

Ok, I was under the impression that 1257L was not an emergency tax code and that OT was.

So, if I submit a return next week, adding in relevant employment earnings, this will calculate a total self employed and employed liability for me to pay 31/7/24, and then generate a new tax code for payroll (how soon?), and everything will be adjusted (IE correct tax code, taxed at source) come the April paycheck? So I'll just need to ensure that I don't spend it and set aside 

This is an additional question which I may need to ask in a different section: I plan to keep my sole trader account open but not do any self employed work for the foreseeable future, will I need to submit further tax returns with my 23/24 balance soon to be calculated and cleared? Ie I won't be paying further tax self employed or doing any self assessment.

Your 2023-24 Self Assessment calculation will show the total tax due for the year taking into account all the taxable income you include on your return.

I don't know what adjustment you are expecting to your 2024-25 tax code but there won't be any that is related to your employment income from 2023-24.

Your employer will continue to use the 1257L code until something changes that.  That means the first £1,048/month won't have any tax deducted.  And the £1,048 is cumulated each month so by the end of the tax year you have had the benefit of all your tax code allowances.

Why do you think that that is wrong 🤔

If you file your return by 30 December you may have the option to pay any (Self Assessment) tax owed via your 2025-26 tax code.  But if you prefer for that not to happen and prefer to pay as normal with the January/July/January POA and Balancing Payment system then just make sure you complete the relevant question near the end of your return to prevent the tax from being in included in your tax code.

I'm referring to any adjustment for self employment rather than employment since I'm now fully employed going into 24/25.

I think the issue is, with no tax on the first £1048 per month is that surely my self assessment will have taken into consideration that tax allowance when calculating the remaining £1800 or so I owe (tbc) for 31/7/24 (balancing payment), so at what point is that amended to take into account my new employment status...as in I've been setting aside money for that £1800 but surely that amount will change now.

Hopefully when I complete and return the 22/24 return next week, I will get a clearer idea what I owe and that payroll can ensure I'm taxed at source with the correct code rather than putting aside money for the self assessment that I won't need to complete thereafter 

You cannot rewrite history.  Any tax that is owed for 2023-24 will form part of your 2023-24 Self Assessment calculation and that will be collected following the Self Assessment process. 

Your 2024-25 tax code will never be adjusted to take into account any tax owed from 2023-24.

And for the new tax year (2024-25) the correct tax code, based on what you have posted, is 1257L.  Which, unless HMRC send them a different code, is what they will use for your April pay.

What exactly do you think should be different from April onwards 🤔.

monaymadlol

Dazed_and_C0nfused said:

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Dazed_and_C0nfused said:

monaymadlol said:

Right, that's frustrating. Both my self employed and employed are in 20% bracket.

In my new starter I did tick the fact that I had other employment since April but that this was now my only job, so I don't know why I now have to combine or calculate tax liability for both earnings, it really should have been taxed at source by the employer, based on the information and tax code provided, perhaps using an estimate of previous returns if needed!

Will this be resolved after April then?!

I presume you are referring to statement B?

If so you would have to ask your employer why they ignored this and used code 0T.

With statement B they should have defaulted to the emergency tax code on a non cumulative basis, i.e. just looking at things pay day by day and not giving any allowances from the earlier part of the tax year.  Although HMRC might have still issued a cumulative code.

It will be resolved via your Self Assessment return.

Yes, statement B.

Ok, I was under the impression that 1257L was not an emergency tax code and that OT was.

So, if I submit a return next week, adding in relevant employment earnings, this will calculate a total self employed and employed liability for me to pay 31/7/24, and then generate a new tax code for payroll (how soon?), and everything will be adjusted (IE correct tax code, taxed at source) come the April paycheck? So I'll just need to ensure that I don't spend it and set aside 

This is an additional question which I may need to ask in a different section: I plan to keep my sole trader account open but not do any self employed work for the foreseeable future, will I need to submit further tax returns with my 23/24 balance soon to be calculated and cleared? Ie I won't be paying further tax self employed or doing any self assessment.

Your 2023-24 Self Assessment calculation will show the total tax due for the year taking into account all the taxable income you include on your return.

I don't know what adjustment you are expecting to your 2024-25 tax code but there won't be any that is related to your employment income from 2023-24.

Your employer will continue to use the 1257L code until something changes that.  That means the first £1,048/month won't have any tax deducted.  And the £1,048 is cumulated each month so by the end of the tax year you have had the benefit of all your tax code allowances.

Why do you think that that is wrong 🤔

If you file your return by 30 December you may have the option to pay any (Self Assessment) tax owed via your 2025-26 tax code.  But if you prefer for that not to happen and prefer to pay as normal with the January/July/January POA and Balancing Payment system then just make sure you complete the relevant question near the end of your return to prevent the tax from being in included in your tax code.

I'm referring to any adjustment for self employment rather than employment since I'm now fully employed going into 24/25.

I think the issue is, with no tax on the first £1048 per month is that surely my self assessment will have taken into consideration that tax allowance when calculating the remaining £1800 or so I owe (tbc) for 31/7/24 (balancing payment), so at what point is that amended to take into account my new employment status...as in I've been setting aside money for that £1800 but surely that amount will change now.

Hopefully when I complete and return the 22/24 return next week, I will get a clearer idea what I owe and that payroll can ensure I'm taxed at source with the correct code rather than putting aside money for the self assessment that I won't need to complete thereafter 

You cannot rewrite history.  Any tax that is owed for 2023-24 will form part of your 2023-24 Self Assessment calculation and that will be collected following the Self Assessment process. 

Your 2024-25 tax code will never be adjusted to take into account any tax owed from 2023-24.

And for the new tax year (2024-25) the correct tax code, based on what you have posted, is 1257L.  Which, unless HMRC send them a different code, is what they will use for your April pay.

What exactly do you think should be different from April onwards 🤔.

I thought you said that 1257L was an emergency ie temporary code, so I thought that would be changed once I submit my 23/24 return and sent to my employer to use 🤔

There seems to be a misunderstanding about the other point so I wouldn't worry - what I'm trying to say is - this will be my last self employed self assessment for the foreseeable future and I need to contact or find out from HMRC so that I don't submit or owe future self assessment self employed returns given I finished that work earlier this year