Tax question - so disappointed if this is true

(14 Posts)
scattercushion Fri 24-Apr-15 12:48:52

For many years I have been earning under the personal allowance amount of £10,600 and thus haven't had to pay tax. Last tax year I earnt £13 thus needed to pay tax. Now, in my blithe little world of sunshine and flowers I had assumed that you only have to pay tax on the amount after £10,600 eg £2,700 but no, I was taxed for the whole amount and giving a whopping great tax bill I struggled to pay - and the blinking half you have to pay towards next years. Argh yowch and blimey. Is this true? Or was my tax incorrectly calculated? I just did the online assessment form. Please say it was wrong.

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ginmakesitallok Fri 24-Apr-15 12:52:33

Your tax has been calculated wrongly. You DO only pay tax on the amount over your personal allowance.

MajesticWhine Fri 24-Apr-15 12:52:53

It sounds wrong. I'm not an expert. But the 10600 is your tax free allowance. And this amount is still tax free unless you are earning a very high amount, eg 100k, and then you lose the personal allowance.

It's explained on this page

QueenBean Fri 24-Apr-15 12:53:23

Your tax has been incorrectly calculated - you do only pay tax on the amount over your personal allowance

Takver Fri 24-Apr-15 12:53:49

That's totally wrong. You pay on the amount over the personal allowance. Give the tax office a ring!

(So, going for round nos. to make it easy, if tax allowance is £10,000, you've earned £11,000, then you pay tax of 20% on £1000, ie £200.)

Takver Fri 24-Apr-15 12:54:47

X post with everyone!

Also, if you're self employed and expect to earn less next year, you can apply to have the part towards next year's tax reduced, as well.

scattercushion Fri 24-Apr-15 12:56:00

Well the world has returned to sunshine and flowers again! Thank you. Only trouble is I rang the tax office to enquire and they assured me it was right. I mustn't have enquired firmly enough. grin

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Trapper Fri 24-Apr-15 12:56:01

You would need to pay Nat Insurance and Employers Nat Ins too

Lancelottie Fri 24-Apr-15 13:01:33

Yes, I think you've been hit by not previously needing to pay NI contributions -- and they DO apply to the full amount, not just the amount over the tax-fre allowance.

Here you go:
"You usually pay 2 types of National Insurance if you’re self-employed:

Class 2 if your profits are £5,965 or more a year
Class 4 if your profits are £8,060 or more a year
You work out your profits by deducting your expenses from your self-employed income.

How much you pay
ClassRate for tax year 2015 to 2016
Class 2£2.80 a week
Class 49% on profits between £8,060 and £42,385
2% on profits over £42,385"

which sadly means you still pay 9% if you squeak in at £8060 profit...

Lancelottie Fri 24-Apr-15 13:05:06

Hence (roughly!) 9% of 13000 = £1170; plus the £500 or so tax on your £2700; plus another £800-ish 'payment on account' for next year, about £2500 in all.


TheGirlFromIpanema Fri 24-Apr-15 13:07:23

I suspect that if tax office have confirmed its correct that you have not figured NIC's or the payment on accounts due for the following year.

If you PM the rough deatils I'll work it our for you <<off work and bored and immobile>>

scattercushion Fri 24-Apr-15 13:10:57

How kind are you, Lancelottie and TheGirlFromIpanema? So the clouds have come over again and the flowers are wilting. The amount was right. Ouch indeed. It seems like punishment for earning more, somehow. Now, can I ask about my persistant sinusitis? You lot are so helpful.

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TheGirlFromIpanema Fri 24-Apr-15 13:16:21

It does get better!

If this was your first tax return you will have had the bill for the whole first year, plus 50% of next years, then at the end of July you pay the second 50% for next year (estimated at this years earnings.)

Next year you will pay less if you earn exactly the same as you will have already made your payments on account, plus the allowance has increased, so you only pay a balancing payment (if earnings have increased) and the first payment for the following year... if you get my drift?

Trying not to talk accountant speak to you, probably failing grin

scattercushion Sat 25-Apr-15 12:44:39

Well that's a ray of sunshine thegirl - to continue my meteorological metaphor to tortuous levels.

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