Tax when self employed and employed

[unicornpoopoop]

Getting really confused trying to work out how much tax will be due. Any help would be much appreciated.

For the current tax year:

Spent 5 months in self employed work. Put aside 20% of this ready for tax return.

Then spent 3 months at an agency. Paid tax and NI on this.

Following that I am now sub contracted. So still self employed but they collect 20% for tax for me and I get receipts for this.

When it comes to doing my tax return, will the tax I've already paid be taken into account?

Income in total for the year after expenses will be about 18000

[Comefromaway]

Yes it will be taken into account. Both myself and dh used to be employed and self employed at the same time.

When you fill in your self assessment you will first fill in the employment pages with info from your P60 (or P45). This will include inputting the figures for any tax that has been deducted at source.

Is the sub-contracted work under CIS? Those figures will be entered too.

[ShadyLady53]

Where is your Personal Allowance coming out of? You’d only be paying 20% on the remainder. If your self employment is under the allowance limit, you wouldn’t have to pay tax on that.

My first year in employment and self-employment, I was employed under the wrong tax code and ended up getting a big tax bill but the following year, I got a rebate.

Are you completing last year’s return late (should have been in on Jan 31st) or this year’s mega early before the end of the financial year?

[unicornpoopoop]

I've done last years already. I'm just thinking ahead to this years. I know it's not due just yet, just trying to get my head around whether il have any money coming back to me.

The employed earnings were only about 3000 and self employed 15000. So currently tax has been paid on the 3000 and the current work is under CIS yes.

I didn't realise there was a bit to input employee earnings on. It seems so long ago that I last submitted a tax return that i can't remember what's in it.

Will class 2 and 4 NI need to be paid for the full 52 weeks even though class 1 NI was paid for 12ish weeks of this?

[Comefromaway]

Not sure about the NI.

[Comefromaway]

Make sure you apply to reduce your payments on account if you are currently a subbie on CIS or the system will assume you’re earning 15000 self employed next year and want tax up front.

[ShadyLady53]

Thanks for the information, just asked because the personal allowance is going up in April of this year to £12500 but just realised that will have an effect on the following tax year, silly me!

I may be wrong but I think you would have £630 to pay on your self employment...as your personal allowance should really come out of there. Do you know what tax code you’ve been employed under though? It should say on your P45/P60.

www.crunch.co.uk/knowledge/tax/freelancing-side-tax-implications/

This will explain a bit more about your NI contributions.

Have to admit I got so stressed doing my first tax return whilst also employed that I got an accountant (and a bill bigger than what I owed for tax ).

[unicornpoopoop]

Sorry comefrom - could you please explain this a bit more?

[ShadyLady53]

It’s looking like you’d pay your class 2 52 weeks of the year, then class 4 (9% of self employment earnings above £8424 so for you around £592) and class 1 on your employment.

I’m not an expert though!

[unicornpoopoop]

Il have to find my tax code out and have a look thank you.

I found a calculator online for being self employed and employed and it calculated that no tax would be paid on employment which isn't the case 🤷‍♀️

[Kazzyhoward]

You'll pay a week's worth of Class 2 NIC for each week you were self employed, according to the dates you put on your self employment pages. Do two separate self employment sections for each separate type of self employment so that you don't end up paying weeks of class 2 whilst you were employed, not self employed.

Class 4 NIC is based solely on self employment profits, so it doesn't matter how many weeks it was earned over.

[ShadyLady53]

What was the calculator? It could have been taking your personal allowance out of the employment instead of self employment in which case you wouldn’t have had tax to pay as its under £11850.

However, if you’ve already paid tax on your employment then your personal allowance isn’t coming out of there. I think this is the right move seeing as your self employment has earned you more than your employment.

[ShadyLady53]

Kazzy has just raised a very good point re Class 2 NI - in the weeks when you were employed were you also making money from self-employment?

[unicornpoopoop]

No I wasn't earning both at the same time. All in the trade industry.
It went from self employed (5 months worth of work)
That finished so I took on agency work whilst I looked for something else (3 months)
Then got sub contracted

[unicornpoopoop]

This was the calculator

www.employedandselfemployed.co.uk/tax-calculator

[ShadyLady53]

You’d only pay class 2 on the weeks you were self employed then. As Kazzy says class 4 are based on profits so you’d still have to pay those too.

[unicornpoopoop]

Ok found my tax code

Is
1185L W1M1

Looks like I paid about £150 tax whilst at the agency.
Also had to pay their NI contributions too and pay a fee to get paid each week so came out with very little. Guessing there's no way of recouping any of these costs?

[Comefromaway]

When I was first self employed it came as a nasty shock that when I submitted my first self assessment HMRC wanted not only the tax due but half of next years upfront in two interim payment on accounts one payable immediately (31st Jan) the next on 30th July.

However if you know next years tax bill is going to be less (less profit or you stopped being self employed) you can apply to reduce this up front payment.

[chocolatebrazilnut]

Probably not, although you may be able to claim them as expenses of your self-employment I suppose. Do you have an accountant?

Re payments on account mentioned by another poster, if they are asking for them you can apply to have them reduced. But I don’t think your case will trigger them anyway. They only have to be paid if you have earned over a certain amount and not paid tax at source. Since you are in the CIS you’ve already paid 20% tax on that chunk of your earnings through self employment. And you can deduct expenses so you probably have paid too much tax (especially since the personal allowance isn’t taken into account before deductions with the CIS) although you will owe some NI which may cancel out the overpaid tax.

[Kazzyhoward]

Probably not, although you may be able to claim them as expenses of your self-employment I suppose.

Neither tax nor NIC are allowable expense claims against self employment income

[chocolatebrazilnut]

I meant the fees she said she had to pay kazzy, not the tax and NI. Sorry if unclear.

[ShadyLady53]

Ok OP you need to get some more professional advice than on here because 1185L W1M1 is an emergency tax code and, as such, it would appear you haven’t paid tax on your employment. Are you sure the £150 isn’t NI? You should have been taxed £600 on £3000.

[unicornpoopoop]

It definitely says paye tax but yes you're right it's not a lot.

I had no idea about having to make payments on the account for the following year

Thanks for your help everyone. I was hoping that some of the money I have put aside for the tax I would be able to keep. But I think that's looking unlikely

[Comefromaway]

That’s not an emergency tax code which would be BR it’s a Week 1 code.

BR Emegency tax code means you are taxed on every penny with no personal allowance.

Week 1 is often used when you start a job mid year but your P45 hasn’t come through yet. It means your personal allowance is pro-rata ed

[ShadyLady53]

You’ll only pay tax on the amount over your personal allowance though. So total tax bill will be about £1230 based on £18000 - personal allowance of £11850.

[chocolatebrazilnut]

shady, I think she only had that tax code while she was at the agency for a short while. She’s now in the CIS which means tax is deducted before she receives her pay. She also would have had £11,800 personal allowance before any tax became due which isn’t taken into account under the CIS. So she may in fact be due a repayment. It will come out in the tax return anyway.