Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • oligopoly
    • By oligopoly 3rd Aug 18, 8:46 AM
    • 314Posts
    • 77Thanks
    oligopoly
    Self-employed: too much tax?
    • #1
    • 3rd Aug 18, 8:46 AM
    Self-employed: too much tax? 3rd Aug 18 at 8:46 AM
    Hi. My wife's submitting her tax return for her self-employed business but the amount of tax they want to charge doesn’t seem right to me.

    For 2017/2018 she made approx. £17,000 after expenses (approx. £19k before expenses). On this, HMRC is trying to charge around £3.6k, which seems way to high to me. What do you think?

    We’ll probably hire an accountant to do future years’ as we find it so confusing!
    Increasingly money-conscious
Page 1
    • Comms69
    • By Comms69 3rd Aug 18, 8:48 AM
    • 4,876 Posts
    • 4,864 Thanks
    Comms69
    • #2
    • 3rd Aug 18, 8:48 AM
    • #2
    • 3rd Aug 18, 8:48 AM
    Hi. My wife's submitting her tax return for her self-employed business but the amount of tax they want to charge doesn’t seem right to me.

    For 2017/2018 she made approx. £17,000 after expenses (approx. £19k before expenses). On this, HMRC is trying to charge around £3.6k, which seems way to high to me. What do you think?

    We’ll probably hire an accountant to do future years’ as we find it so confusing!
    Originally posted by oligopoly
    Is that her only income?
    • oligopoly
    • By oligopoly 3rd Aug 18, 8:50 AM
    • 314 Posts
    • 77 Thanks
    oligopoly
    • #3
    • 3rd Aug 18, 8:50 AM
    • #3
    • 3rd Aug 18, 8:50 AM
    Is that her only income?
    Originally posted by Comms69
    Yes it is indeed.
    Increasingly money-conscious
    • theoretica
    • By theoretica 3rd Aug 18, 8:59 AM
    • 5,359 Posts
    • 6,686 Thanks
    theoretica
    • #4
    • 3rd Aug 18, 8:59 AM
    • #4
    • 3rd Aug 18, 8:59 AM
    I agree it seems high for income tax - is it just income tax and not NI too?


    That looks like 20% tax on all her earnings, rather than tax on only her earnings above her personal allowance. Has she entered her tax code correctly and what is it?
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
    • oligopoly
    • By oligopoly 3rd Aug 18, 9:20 AM
    • 314 Posts
    • 77 Thanks
    oligopoly
    • #5
    • 3rd Aug 18, 9:20 AM
    • #5
    • 3rd Aug 18, 9:20 AM
    Yes it's roughly 20% of everything with no tax-free allowance factored in.. I'm not sure on her tax code - i just wanted to clarify whether others thought this looked wrong - and if so we will look into further before submitting.
    Increasingly money-conscious
    • Nearlyold
    • By Nearlyold 3rd Aug 18, 9:47 AM
    • 1,148 Posts
    • 982 Thanks
    Nearlyold
    • #6
    • 3rd Aug 18, 9:47 AM
    • #6
    • 3rd Aug 18, 9:47 AM
    Is £3.6K the amount of Tax and NI showing as due for the 2017-18 tax year or the amount you are being asked to pay in Jan 19.
    • oligopoly
    • By oligopoly 3rd Aug 18, 9:51 AM
    • 314 Posts
    • 77 Thanks
    oligopoly
    • #7
    • 3rd Aug 18, 9:51 AM
    • #7
    • 3rd Aug 18, 9:51 AM
    Don't quote me too much on this as i'm away from the screen but i think it was asking for something like £2k tax plus a £1.6k contribution towards 18/19? something like that. She's actually on mat leave so earnings this financial year will be minimal...
    Increasingly money-conscious
    • comeandgo
    • By comeandgo 3rd Aug 18, 9:57 AM
    • 2,201 Posts
    • 2,986 Thanks
    comeandgo
    • #8
    • 3rd Aug 18, 9:57 AM
    • #8
    • 3rd Aug 18, 9:57 AM
    That's the way it is with the first self employment tax figure. You pay the year s tax and NI you are due and another half of it as first payment on next year's tax.
    • oligopoly
    • By oligopoly 3rd Aug 18, 10:03 AM
    • 314 Posts
    • 77 Thanks
    oligopoly
    • #9
    • 3rd Aug 18, 10:03 AM
    • #9
    • 3rd Aug 18, 10:03 AM
    The first? She's submitted previous year's tax figures... If what you say is correct then why isn't this year's payment less as surely we should have similarly paid half in advance last financial year?
    Increasingly money-conscious
    • comeandgo
    • By comeandgo 3rd Aug 18, 10:07 AM
    • 2,201 Posts
    • 2,986 Thanks
    comeandgo
    Yes, it does happen every year, was the profit very low last year and she is now playing catch up?
    • oligopoly
    • By oligopoly 3rd Aug 18, 10:11 AM
    • 314 Posts
    • 77 Thanks
    oligopoly
    was the profit very low last year and she is now playing catch up?
    Originally posted by comeandgo
    No - it was her best year. My belief is that should there be a mistake and she pays too much tax then HMRC will correct it. I'm just worried what knock on effect this might have as we're in a mortgage application...
    Increasingly money-conscious
    • Nearlyold
    • By Nearlyold 3rd Aug 18, 10:15 AM
    • 1,148 Posts
    • 982 Thanks
    Nearlyold
    You need to post up the exact figures as per the tax statement otherwise we are all just guessing what it might be.
    • Tarambor
    • By Tarambor 3rd Aug 18, 2:33 PM
    • 3,642 Posts
    • 2,702 Thanks
    Tarambor
    The first year you reach a profit sufficient enough to be above the personal allowance and actually pay some income tax you pay 150% of what is due, 50% being added as an advance payment on the following tax year. There will then be another 50% due in the June. If the tax bill if it was PAYE income would have been £2400 and she is being asked to pay £3600 then this is what has happened. She would then have to pay a further £1200 in June 2019. When she fills in her SE for the 2018-19 tax year then the amount she has overpaid in Jan and June 2019 will be deducted from the bill and she will pay or be refunded the difference depending if she has ended up overpaying in advance.

    There will also be an element of Class 4 NI to pay as well.
    Last edited by Tarambor; 03-08-2018 at 2:35 PM.
    • Dazed and confused
    • By Dazed and confused 4th Aug 18, 10:01 AM
    • 2,991 Posts
    • 1,485 Thanks
    Dazed and confused
    Tarambor is pointing you in the right direction but isn't quite correct.

    Going over the personal allowance has no bearing whatsoever on this and Self Assessment payments arent normally payable in June.

    The need to make payments on account only starts when the Self Asessment bill for one tax year exceeds £1,000 and even then there exceptions which mean payments on account towards the next year aren't required.

    The first thing you need to do is understand that Self Assessment has two distinct elements, the tax due for a particular tax year (shown on her Self Assessment tax calculation) and your (wife's) ongoing Self Assessment account with HMRC.

    If you confused the two you will get in a pickle.

    So the first thing you need to do is look at the 2017:18 tax calculation again and check what the tax, NI and student loan (if applicable) amount due for 2017:18 is.

    Then check her statement of account and this should show if she made any payments towards 2017:18 in January (first payment on account) and July (2018).

    If she has then the amount she has to pay in January 2019 to finalise 2017:18 is the total 2017:18 liability less those payments on account.

    If no payments on account were due for 2017:18 then she will have all of the liability for 2017:18 to pay in January 2019.

    Next you need to consider payments on account for 2018:19, if required these will be payable on 31 January 2019 (same time as any balance for 2017:18) and 31 July 2019.

    A few days after the tax return is sent to HMRC her statement of account should be updated to show the payments which will become due next January.

    Without some proper details of what happened after filing the 2016:17 return it is impossible to say with any certainty but my gut feeling is that she hasn't previously needed to make payments on account and therefore January 2019 will be a tricky month for her as she will have to pay all of the tax, NIC and student loan (if applicable) for 2017:18 AND a payment on account for 2018:19.

    The second payment on account for 2018:19 will be payable in July 2019.

    There's lots of permutations with this so if you provide some actual figures it will be easier to provide examples of what might happen over the next year, including when she files her 2018:19 return.
    Last edited by Dazed and confused; 04-08-2018 at 10:03 AM.
    • phill99
    • By phill99 5th Aug 18, 12:50 PM
    • 8,218 Posts
    • 7,404 Thanks
    phill99
    This is why the thing you CANNOT afford NOT to have is an accountant. He would sort this out and reduce your overall tax bill. Self employed people not employing an accountant is one of the most short sighted and naïve things they can do.
    Eat vegetables and fear no creditors, rather than eat duck and hide.
    • GreenTreen123
    • By GreenTreen123 5th Aug 18, 10:05 PM
    • 105 Posts
    • 39 Thanks
    GreenTreen123
    Yes get an accountant!
    • oligopoly
    • By oligopoly 6th Aug 18, 12:17 PM
    • 314 Posts
    • 77 Thanks
    oligopoly
    Thanks all. The issue and how this came about for me to post on here is that my wife is on mat leave and consequently won't be earning this year. Therefore it seems incorrect for her to pay for half of this year's estimated costs when her earnings will be £0 or certainly minimal.

    I think we'll need to speak to an accountant. Or just pay it and see what happens...
    Increasingly money-conscious
    • comeandgo
    • By comeandgo 6th Aug 18, 12:44 PM
    • 2,201 Posts
    • 2,986 Thanks
    comeandgo
    Get in touch with HMRC and explain that she will not be working and that the profits will drop. They will reduce the "on account" amount.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,150Posts Today

8,063Users online

Martin's Twitter
  • Today's Twitter poll: Should fracking be allowed in the UK? A test site reopened this week to much local protest.? https://t.co/orpNJN6Bf9

  • Lovely package on #newsnight just now about Brexit hitchhiking, livened up what has been not the most exciting show.

  • Is this is a serious tweet or a joke? Why did I mention he was a cyclist - because he was a cyclist. Eh? https://t.co/F1SP7UJZkH

  • Follow Martin