Moving from self employed to a PAYE job
Options
swingaloo
Posts: 2,773 Forumite
Asking on behalf of a friend who has been self employed for a number of years but is now taking a job as he is not getting the work he needs to make enough wage.
I have no experience of this and he just seems to think that the company he is going to work for will sort it all out but Im worried that he may end up on emergency tax and he is struggling as it is.
The situation is that he has had an accountant doing his accounts for a number of years and he has paid almost no tax after his accountant has done the expenses and no doubt cut every corner he can!
He has no P45 to hand in. He has worked as a self employed courier for a nationwide company and has invoiced them and been paid weekly.
What usually happens is that his accountant does his accounts at the beginning of January and tells him how much tax he owes then.
He has told him that he will have no figures till he does that so he is starting a new job with no idea as to how much of his earnings he has to pay tax on up to now this year. He knows how much he has invoiced his customers for and been paid but as yet has paid no tax this year.
Ive looked at the Gov.uk site and it says that if a new starter has no P45 then they fill in a form in order for the company to acquire a tax code but that form asks for details of earnings and tax paid to date etc.
Is it a case of just having to put up with being on emergency tax till January or should his accountant be finalising his accounts now and giving him the information.
I have no experience of this and he just seems to think that the company he is going to work for will sort it all out but Im worried that he may end up on emergency tax and he is struggling as it is.
The situation is that he has had an accountant doing his accounts for a number of years and he has paid almost no tax after his accountant has done the expenses and no doubt cut every corner he can!
He has no P45 to hand in. He has worked as a self employed courier for a nationwide company and has invoiced them and been paid weekly.
What usually happens is that his accountant does his accounts at the beginning of January and tells him how much tax he owes then.
He has told him that he will have no figures till he does that so he is starting a new job with no idea as to how much of his earnings he has to pay tax on up to now this year. He knows how much he has invoiced his customers for and been paid but as yet has paid no tax this year.
Ive looked at the Gov.uk site and it says that if a new starter has no P45 then they fill in a form in order for the company to acquire a tax code but that form asks for details of earnings and tax paid to date etc.
Is it a case of just having to put up with being on emergency tax till January or should his accountant be finalising his accounts now and giving him the information.
0
Comments
-
Get him to phone HMRC & tell them he is ceasing self employment & has accepted a job on a PAYE basis from whatever date he is planning to start with them. They will issue him a tax code & then he will do a return for the 2019/20 period next year where he will report his self employment income along with his new role then deducting tax already paid (PAYE) & his normal expenses.0
-
As above, he needs to phone HMRC to tell them what he's doing. He also needs to make sure that he gives the accountant all his paperwork as soon as the tax year ended 5/4/20 and instructs the accountant to prepare the 19/20 tax return as soon as possible so that he at least knows where he stands and any repayment can be secured as soon as possible. His accountant can't prepare the tax return until the tax year has ended, i.e. 5/4/20. If he's put on a week 1/month 1 tax code by HMRC, at least he'll be having some tax deducted and shouldn't face a huge demand. It means he'll get 1 month's worth of tax free allowance for each month worked under PAYE. That leaves the months where he was self employed to be covered by the same number of months of tax free personal allowance.0
-
Thank you very much for the replies. Much appreciated.0
-
but Im worried that he may end up on emergency tax and he is struggling as it is.
Most people in Britain are on the emergency tax code and they manage perfectly ok.Ive looked at the Gov.uk site and it says that if a new starter has no P45 then they fill in a form in order for the company to acquire a tax code but that form asks for details of earnings and tax paid to date etc.
Not sure what form you have looked at but the employer does not "acquire" a tax code. Completion of the new starter checklist is sufficient for the employer to themselves allocate a tax code before they make the first payment to your friend. There is no need to provide details of earnings from earlier in the tax year. In fact I'm sure the form doesn't actually ask for this information.Is it a case of just having to put up with being on emergency tax till January
I'm not sure you really understand how the emergency tax code system works.
And you are getting your January's mixed up. In January 2020 your friends accountant will be sorting the tax return for 2018:19 (last tax year). It isn't until January 2021 that the tax return for the current tax year will need to completed and tax due finalised.
NB. There is no need to wait until January 2021, indeed there can be distinct cashflow advantages in filing the return by 30 December 2020.0 -
There is nothing to be gained by phoning HMRC now. Until his new employer has actually paid him for the first time HMRC won't be able to do anything and if he completes the new starter declaration correctly there should be no need for him to contact at all.0
This discussion has been closed.
Categories
- All Categories
- 343.6K Banking & Borrowing
- 250.2K Reduce Debt & Boost Income
- 449.9K Spending & Discounts
- 235.7K Work, Benefits & Business
- 608.7K Mortgages, Homes & Bills
- 173.3K Life & Family
- 248.3K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards