Overpaid on Tax

canarydan

In the last few years, I've been doing some consultancy work outside of my part-time employment role. It's a fixed term, two year project and it was agreed I'd be paid £20k day one, £20k after 12 months and £18k at the end of the project. They have agreed to split the final payment to March last month and later this month to spread it across two tax years.

So, my income has been thus;

2021/22 tax year- PAYE income £25,200 - £20,000 SE income
2022/23 tax year - PAYE income £34,400 - £20,000 SE income
2023/24 tax year - PAYE income £43,685 - £9,000 SE income

Obviously the PAYE tax and NI is deducted at source. In both 22/23 and 23/24 I made one-off pension payments to reduce my adjusted net income to basically £50,000 (I've got three children so would have effectively been paying 70% tax on anything above £50k). I also claimed the £1,000 trading allowance in each tax year.

This current assessment has said I am over £2,000 in credit. I've just looked at my payment history and have paid HMRC, above and beyond PAYE tax and NI, £16,273.01. £1,744 of that would have been in the first payment to HMRC which basically reduced by student loan to zero so subsequent payments were purely tax and NI.

This seems excessive on the additional income of £49,000 (essentially £46,000 after the tax free trading allowance is factored in). Income tax would have been £9,200, plus £1,744 to the student loans company. That leaves over £5,300 of NI contributions. I don't know how SE NI works, but that seems a lot.

So when the HMRC tell me I am over £2,200 in credit, I can take that as gospel, request a repayment and enjoy a couple of grand I wasn't expecting, right? I don't want to spend it and then have them chasing me down in future months and have to say, "Sorry, taxman, I took the kids to Disney!"

Dazed_and_C0nfused

You need to be a bit clearer about what's happened to know for certain.

This is an odd comment,

This current assessment has said I am over £2,000 in credit

Do you mean your Self Assessment tax calculation (which is for a single tax year) or your Self Assessment account is in credit by more than £2,000?

To keep things as simple as possible have you added the bottom line from each of your 2021-22 and 2022-23 tax calculation (basically this is the tax/NI/HICBC/student loan/CGT due for each year in isolation)?

Then add in the first POA for 2023-24 (of one was required).  That is what you would owe so far.  Assuming nothing was collected via your tax code.

Then add up all your direct payments to HMRC.

Is the difference ~£2k?

Don't forget 2023-24 hasn't been taxed yet.  You may have made a first POA but there could be a second one due in July.  And a Balancing Payment in January next year.  Or maybe just a Balancing Payment.

canarydan

Apologies, that was a pretty ambiguous comment.

My self assessment account is in credit by more than £2,000.00. Coincidentally, it is stating it is in credit for the exact amount due for my next payment on account.

So the current position states;

"You have overpaid. £2,275.92 is available for repayment."

And then it states a payment on account is due by 31st July in the amount of £2,275.92.

My payments to HMRC add up to £16,273.01.

The total amounts under "tax" on each of the three tax year overviews is £16,070.27.

Dazed_and_C0nfused

So you have paid the July POA early.

You can get it back if you want but will then have to return. It to HMRC at the end of July.

Only you know of that is worth the effort for the bit of interest you could then earn on the £2,275.

canarydan

Seems that way, it's just odd as I've literally just paid the amounts they've told me to pay just before each deadline and that has left me in credit. I'm wondering if they calculated the POA on the basis that I would be getting another £20k in this tax year?

I'm still feeling flush as I'd stuck a couple of grand away thinking I'd need to give it to HMRC.

Dazed_and_C0nfused

canarydan said:

Seems that way, it's just odd as I've literally just paid the amounts they've told me to pay just before each deadline and that has left me in credit. I'm wondering if they calculated the POA on the basis that I would be getting another £20k in this tax year?

I'm still feeling flush as I'd stuck a couple of grand away thinking I'd need to give it to HMRC.

The POA due for 2023-24 will be entirely based on the amount due for 2022-23.

If you expect your 2023-24 Self Assessment liability to be less than £4,550 then you could make a claim to reduce the 2023-24 POA to whatever you think will be due.

For example if you think the total would be £3,000 then you could reduce each 2023-24 POA to £1,500.

But if you get it wrong (for ANY reason) you will be charged interest on anything paid late.

A more prudent approach would be to file your return before 31 July and then you will know the correct position.

canarydan

I've submitted my return, the credit and July POA figures are based on that submission.