2023/2024 Self Assessment Tax Bill - Please HELP

jmsa7

Happy New Year everybody and thank you for reading and any advise given.

For the last 7 years, me and my wife have been doing self assessments as we were getting rental income from a property that we own together. She hasn't been paying any tax on her share as this was her only income and always less than the tax free allowance. I have been paying what I consider my fair share of tax.

I am full time employed.
My income before tax was £41,525.00
Tax taken was £7,339.20 (PAYE)
I have a company car benefit of £7,743.00

Income from Property (my share) was £6,510.00
Property Income allowance £1,000.00
Taxable Profit for the year £5,510.00

Total amount due for 2023/2024: £2,004.00
Plus
First Payment on account for 2024/2025: £1,002.00
Total to be added to Self Assessment account due by 31 January 2025: £3,006.00
Second payment on account for 2024-205 will be due by 31 July 2025: £1,002.00

My tax bill always been around £1000 so I'm baffled why it is now doubled (circumstances are more or less the same as previous years). Also, I don't understand the £3,006.00 figure. The property income ceased in February 2024 so I'm not expecting any other source of income.

Can I challenge these calculations before I submit it? If so, what is the best way?

Thank you for any advise.

Nomunnofun1

First things first - the tax liability for 2023/34 is correct (I make it £2004.20 but there we go!) 

There could be any number of reasons for this - increased car benefit but most likely because you are now a higher rate taxpayer and the rental income is mostly at 40%. 

Because your outstanding tax liability is over £1000 you are required to make payments on account for 2024/25.

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

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

You can reduce EACH to zero if you wish but note that interest will be charged if subsequently there is an outstanding liability in 2024/25 which exceeds the total of the two payments on account. You have this option in a question just before submission. 

poseidon1

jmsa7 said:

Happy New Year everybody and thank you for reading and any advise given.

For the last 7 years, me and my wife have been doing self assessments as we were getting rental income from a property that we own together. She hasn't been paying any tax on her share as this was her only income and always less than the tax free allowance. I have been paying what I consider my fair share of tax.

I am full time employed.
My income before tax was £41,525.00
Tax taken was £7,339.20 (PAYE)
I have a company car benefit of £7,743.00

Income from Property (my share) was £6,510.00
Property Income allowance £1,000.00
Taxable Profit for the year £5,510.00

Total amount due for 2023/2024: £2,004.00
Plus
First Payment on account for 2024/2025: £1,002.00
Total to be added to Self Assessment account due by 31 January 2025: £3,006.00
Second payment on account for 2024-205 will be due by 31 July 2025: £1,002.00

My tax bill always been around £1000 so I'm baffled why it is now doubled (circumstances are more or less the same as previous years). Also, I don't understand the £3,006.00 figure. The property income ceased in February 2024 so I'm not expecting any other source of income.

Can I challenge these calculations before I submit it? If so, what is the best way?

Thank you for any advise.

With regard to your property income for 2023/24 did you not make payments on account of around £1000 each in January/July 2023?  If not then £2004 of the 31 January 2025 liabilty relates to tax on rents for 2023/24.

The remaining  demands  of £1002 for  each of January/July 2025, assumes the rental source continues unchanged for the current 2024/25 tax year, which of course it did not but HMRC don't appear to know this. You will therefore need to lodge a request to HMRC to reduce your January/July 2025 payments on account to zero to reflect the income source ceasing in February 2024.

See HMRC link below for the form SA303 to claim the reduction.

https://www.gov.uk/guidance/claim-to-reduce-payments-on-account

Nomunnofun1

poseidon1 said:

jmsa7 said:

Happy New Year everybody and thank you for reading and any advise given.

For the last 7 years, me and my wife have been doing self assessments as we were getting rental income from a property that we own together. She hasn't been paying any tax on her share as this was her only income and always less than the tax free allowance. I have been paying what I consider my fair share of tax.

I am full time employed.
My income before tax was £41,525.00
Tax taken was £7,339.20 (PAYE)
I have a company car benefit of £7,743.00

Income from Property (my share) was £6,510.00
Property Income allowance £1,000.00
Taxable Profit for the year £5,510.00

Total amount due for 2023/2024: £2,004.00
Plus
First Payment on account for 2024/2025: £1,002.00
Total to be added to Self Assessment account due by 31 January 2025: £3,006.00
Second payment on account for 2024-205 will be due by 31 July 2025: £1,002.00

My tax bill always been around £1000 so I'm baffled why it is now doubled (circumstances are more or less the same as previous years). Also, I don't understand the £3,006.00 figure. The property income ceased in February 2024 so I'm not expecting any other source of income.

Can I challenge these calculations before I submit it? If so, what is the best way?

Thank you for any advise.

With regard to your property income for 2023/24 did you not make payments on account of around £1000 each in January/July 2023?  If not then £2004 of the 31 January 2025 liabilty relates to tax on rents for 2023/24.

The remaining  demands  of £1002 for  each of January/July 2025, assumes the rental source continues unchanged for the current 2024/25 tax year, which of course it did not but HMRC don't appear to know this. You will therefore need to lodge a request to HMRC to reduce your January/July 2025 payments on account to zero to reflect the income source ceasing in February 2024.

See HMRC link below for the form SA303 to claim the reduction.

https://www.gov.uk/guidance/claim-to-reduce-payments-on-account

You have got your years mixed up - 2023/24 payments on account were due January and July 2024.
  You also don’t need the SA303 if the return has not been submitted as this option appears shortly before submission. 

DRS1

Nomunnofun1 said:

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

Did I sleep through January?

poseidon1

Nomunnofun1 said:

poseidon1 said:

jmsa7 said:

Happy New Year everybody and thank you for reading and any advise given.

For the last 7 years, me and my wife have been doing self assessments as we were getting rental income from a property that we own together. She hasn't been paying any tax on her share as this was her only income and always less than the tax free allowance. I have been paying what I consider my fair share of tax.

I am full time employed.
My income before tax was £41,525.00
Tax taken was £7,339.20 (PAYE)
I have a company car benefit of £7,743.00

Income from Property (my share) was £6,510.00
Property Income allowance £1,000.00
Taxable Profit for the year £5,510.00

Total amount due for 2023/2024: £2,004.00
Plus
First Payment on account for 2024/2025: £1,002.00
Total to be added to Self Assessment account due by 31 January 2025: £3,006.00
Second payment on account for 2024-205 will be due by 31 July 2025: £1,002.00

My tax bill always been around £1000 so I'm baffled why it is now doubled (circumstances are more or less the same as previous years). Also, I don't understand the £3,006.00 figure. The property income ceased in February 2024 so I'm not expecting any other source of income.

Can I challenge these calculations before I submit it? If so, what is the best way?

Thank you for any advise.

With regard to your property income for 2023/24 did you not make payments on account of around £1000 each in January/July 2023?  If not then £2004 of the 31 January 2025 liabilty relates to tax on rents for 2023/24.

The remaining  demands  of £1002 for  each of January/July 2025, assumes the rental source continues unchanged for the current 2024/25 tax year, which of course it did not but HMRC don't appear to know this. You will therefore need to lodge a request to HMRC to reduce your January/July 2025 payments on account to zero to reflect the income source ceasing in February 2024.

See HMRC link below for the form SA303 to claim the reduction.

https://www.gov.uk/guidance/claim-to-reduce-payments-on-account

You have got your years mixed up - 2023/24 payments on account were due January and July 2024.
  You also don’t need the SA303 if the return has not been submitted as this option appears shortly before submission. 

My bad on the years mix up. I had assumed the tax demands resulted from his early submission of his SA 100, hence reference to SA 303

Nomunnofun1

DRS1 said:

Nomunnofun1 said:

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

Did I sleep through January?

A long day!

jmsa7

Nomunnofun1 said:

First things first - the tax liability for 2023/34 is correct (I make it £2004.20 but there we go!) 

There could be any number of reasons for this - increased car benefit but most likely because you are now a higher rate taxpayer and the rental income is mostly at 40%. 

Because your outstanding tax liability is over £1000 you are required to make payments on account for 2024/25.

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

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

You can reduce EACH to zero if you wish but note that interest will be charged if subsequently there is an outstanding liability in 2024/25 which exceeds the total of the two payments on account. You have this option in a question just before submission. 

Hi, thank you for your reply.

How can I be a higher rate tax payer if my total earnings did not exceed £50,270.00? I'm confused.

Nomunnofun1

jmsa7 said:

Nomunnofun1 said:

First things first - the tax liability for 2023/34 is correct (I make it £2004.20 but there we go!) 

There could be any number of reasons for this - increased car benefit but most likely because you are now a higher rate taxpayer and the rental income is mostly at 40%. 

Because your outstanding tax liability is over £1000 you are required to make payments on account for 2024/25.

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

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

You can reduce EACH to zero if you wish but note that interest will be charged if subsequently there is an outstanding liability in 2024/25 which exceeds the total of the two payments on account. You have this option in a question just before submission. 

Hi, thank you for your reply.

How can I be a higher rate tax payer if my total earnings did not exceed £50,270.00? I'm confused.

Salary £41525 plus BIK £7743 plus property income £5510 equals ……?

£54778. 

12570 is free of tax.
37700 is taxed at 20% - £7540
4508 is taxed at 40% - £1803.20

Total tax due £9343.20
less paid £7339.20

Balance due £2004.

Are there any pension contributions? How are they paid?

jmsa7

Nomunnofun1 said:

jmsa7 said:

Nomunnofun1 said:

First things first - the tax liability for 2023/34 is correct (I make it £2004.20 but there we go!) 

There could be any number of reasons for this - increased car benefit but most likely because you are now a higher rate taxpayer and the rental income is mostly at 40%. 

Because your outstanding tax liability is over £1000 you are required to make payments on account for 2024/25.

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

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

You can reduce EACH to zero if you wish but note that interest will be charged if subsequently there is an outstanding liability in 2024/25 which exceeds the total of the two payments on account. You have this option in a question just before submission. 

Hi, thank you for your reply.

How can I be a higher rate tax payer if my total earnings did not exceed £50,270.00? I'm confused.

Salary £41525 plus BIK £7743 plus property income £5510 equals ……?

£54778. 

12570 is free of tax.
37700 is taxed at 20% - £7540
4508 is taxed at 40% - £1803.20

Total tax due £9343.20
less paid £7339.20

Balance due £2004.

Are there any pension contributions? How are they paid?

Thank you very much for that information, I have learnt a few things now.

I do make pension contributions via my employer through salary sacrifice. Why do you ask? Is that relevant?

Dazed_and_C0nfused

jmsa7 said:

Nomunnofun1 said:

jmsa7 said:

Nomunnofun1 said:

First things first - the tax liability for 2023/34 is correct (I make it £2004.20 but there we go!) 

There could be any number of reasons for this - increased car benefit but most likely because you are now a higher rate taxpayer and the rental income is mostly at 40%. 

Because your outstanding tax liability is over £1000 you are required to make payments on account for 2024/25.

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

But - the good news!

Because your property income has ceased you are in a position to reduce those payments on account to whatever you think will be outstanding for 2024/25. For example, if you reckon on owing £200 you can reduce EACH payment to £100 meaning that £2104 is payable, err, yesterday! 

You can reduce EACH to zero if you wish but note that interest will be charged if subsequently there is an outstanding liability in 2024/25 which exceeds the total of the two payments on account. You have this option in a question just before submission. 

Hi, thank you for your reply.

How can I be a higher rate tax payer if my total earnings did not exceed £50,270.00? I'm confused.

Salary £41525 plus BIK £7743 plus property income £5510 equals ……?

£54778. 

12570 is free of tax.
37700 is taxed at 20% - £7540
4508 is taxed at 40% - £1803.20

Total tax due £9343.20
less paid £7339.20

Balance due £2004.

Are there any pension contributions? How are they paid?

Thank you very much for that information, I have learnt a few things now.

I do make pension contributions via my employer through salary sacrifice. Why do you ask? Is that relevant?

Not really no, as you aren't contributing to the pension.  You are agreeing to a reduced salary in return for extra employer contributions and you are not entitled to any tax relief on employer contributions.

You have of course avoided paying tax and NI on the salary you didn't receive because of the sacrifice.