To ask how much I've fucked up? HMRC

It all depends on the business profit. There comes a time when corporation tax becomes preferable to being self-employed & paying higher rate income tax on the business profits.

I'm still amazed at the unlikely speed that the accountant has shown here, in producing draft figures only a week after the year-end.

For a lot of self employed there is no benefit at all to being a Ltd company, it offers of course protection against personal liability financially, but if your operation is solvent, you don't have loans etc. then there is no real protection, but more administration and complexity.

I can't think of a way any business is set up that all the profit counts as your income when you don't take it as income. That sounds like rubbish to me.

I purposely leave money in my business with a view to paying myself a salary in later years when I'm doing less. HMRC don't do performance appraisals and you don't have to have revenue to make salary payments, so of course you leave it in for the lean years, that's tax efficiency.

You pay corp tax on it though.

I can't think of a way any business is set up that all the profit counts as your income when you don't take it as income. That sounds like rubbish to me.

I purposely leave money in my business with a view to paying myself a salary in later years when I'm doing less. HMRC don't do performance appraisals and you don't have to have revenue to make salary payments, so of course you leave it in for the lean years, that's tax efficiency.

You pay corp tax on it though.

OP, you're getting some really confusing advice here. I'd ignore most of it and speak to your accountant. Ask about VAT, self assessment and mention that your income being under £100k is worth a lot in childcare to you.

In some ways its a nice problem to have

BUT

What might happen if the business went the other way - ie towards bankruptcy?

I suggest that you and/or the accountant need to get the finances under control, probably as suggested setting up a Company

OP isn't running a limited company, the OP appears to be a sole trader. It's a bit confusing for a sole trader to have a salary and profits, but it just sounds like the OP is splitting money into different bank accounts.

I don’t understand any of this. My DH and I run our own business and the profit that your business makes is not the same thing as your salary 😳

’Because of the structure of the business currently, any profit counts as my own income for SA purposes so even though I only "pay" myself a modest amount every month, my earnings are whatever profit the business has made’.

This is just nonsensical, is your accountant professionally certified? Do you not keep records of how much you are actually taking from the business as your ‘pay’? Are you paid by dividend or PAYE or a mixture of both, are you a director of the company, is your company registered? What accounting system do you use?

As pp have already said, you have much bigger issues than some free nursery hours, not being registered for VAT for a start is much more serious. Running a business is not some idle hobby, you have to be across the details and have a decent accountant, ignorance of the law and correct procedure is not a mitigating factor as far as HMRC are concerned.

I don’t understand any of this. My DH and I run our own business and the profit that your business makes is not the same thing as your salary 😳

’Because of the structure of the business currently, any profit counts as my own income for SA purposes so even though I only "pay" myself a modest amount every month, my earnings are whatever profit the business has made’.

This is just nonsensical, is your accountant professionally certified? Do you not keep records of how much you are actually taking from the business as your ‘pay’? Are you paid by dividend or PAYE or a mixture of both, are you a director of the company, is your company registered? What accounting system do you use?

As pp have already said, you have much bigger issues than some free nursery hours, not being registered for VAT for a start is much more serious. Running a business is not some idle hobby, you have to be across the details and have a decent accountant, ignorance of the law and correct procedure is not a mitigating factor as far as HMRC are concerned.

Tbh your bigger problem is that you're not registered for VAT (threshold is £90K) and HMRC are going to want their 20% (of everything) pronto. I'm guessing that you just give your accountant a pile of stuff once a year and let them sort it out. That won't do when you've more than quadrupled your turnover. If they've not mentioned VAT, bin them. Get it sorted quick because the fines will quickly add up. From HMRC...
"The penalties for failing to register for VAT on time depend on the degree of lateness in registering: Not more than 9 months late: The penalty is 5% of the due VAT. More than 9 months but not more than 18 months late: The penalty is 10% of the due VAT. More than 18 months late: The penalty is 15% of the due VAT"

Anything you’ve bought for the business comes off your profits and is not taxable. Which your accountant should know. Or they are not an accountant!

Self employed, done something a bit stupid.

Basically I admit that for the past 5 years of being self employed I have really no idea how much I've potentially earnt that year until my accountant sends me draft self assessments after 5th April. There are things I could do to keep better on top of this obviously but it's really never mattered that much because profits have never been massive. Because of the structure of the business currently, any profit counts as my own income for SA purposes so even though I only "pay" myself a modest amount every month, my earnings are whatever profit the business has made.

Basically business has boomed this past year, which I am not complaining about but our accountant has done my SA and I have earnt in the last tax year over 100k (and I'm talking about a jump from under 30k last year to over £130k). I really was not expecting it, I was obviously aware business had taken off but really I did not expect that. I do not "pay" myself anywhere near that sort of money per month and while the business does have a good float I certainly couldn't have extracted that all from the business for personal use.

Onto the issue...for the last tax year I have claimed free nursery hours for my son and tax free childcare. I am aware I will need to pay it back and I of course have no problems in doing so but I have obviously (unintentionally) been telling HMRC that I earn under 100k for a whole year when I have infact earnt over.

Will there be an issue? A penalty? I know i really should have an idea myself of profits and this has really shocked me into making sure I keep a better track of it but when I selected that I earnt under 100k I genuinely believed that I did.

Do I call them or will they contact me when my SA is submitted?

Self employed, done something a bit stupid.

Basically I admit that for the past 5 years of being self employed I have really no idea how much I've potentially earnt that year until my accountant sends me draft self assessments after 5th April. There are things I could do to keep better on top of this obviously but it's really never mattered that much because profits have never been massive. Because of the structure of the business currently, any profit counts as my own income for SA purposes so even though I only "pay" myself a modest amount every month, my earnings are whatever profit the business has made.

Basically business has boomed this past year, which I am not complaining about but our accountant has done my SA and I have earnt in the last tax year over 100k (and I'm talking about a jump from under 30k last year to over £130k). I really was not expecting it, I was obviously aware business had taken off but really I did not expect that. I do not "pay" myself anywhere near that sort of money per month and while the business does have a good float I certainly couldn't have extracted that all from the business for personal use.

Onto the issue...for the last tax year I have claimed free nursery hours for my son and tax free childcare. I am aware I will need to pay it back and I of course have no problems in doing so but I have obviously (unintentionally) been telling HMRC that I earn under 100k for a whole year when I have infact earnt over.

Will there be an issue? A penalty? I know i really should have an idea myself of profits and this has really shocked me into making sure I keep a better track of it but when I selected that I earnt under 100k I genuinely believed that I did.

Do I call them or will they contact me when my SA is submitted?

AFAIK, you’ll need to pay back the tax free childcare. The team that deals with the tax free childcare definitely do keep an eye as it’s linked to your NI number so I’d personally be upfront about this. Last time I had to reapply they wouldn’t let me do it automatically and I had to call to discuss my DH income and business dealings as he’s a higher earner and MD of a few companies and they said we’d have to repay what we’d claimed if he drew an income over £100,000. I was upfront and said I couldn’t possibly say how much he would earn as I don’t have a crystal ball. It’s different for you but you can always just say you didn’t realise you had been that profitable (well done btw)! Not sure about funded hours as don’t yet get those but hope that helps.

I’d also just like to add that you’re likely to have quite a high tax bill for this £130k you’ve earned as you also pay on account. Also, if you’ve got a student loan, they’ll be expecting a big chunk from you. Just things we’ve learned the hard way when you’ve gone from earning an average income to being a higher rate tax payer.

This