Self-assessment tax. £9k!!

[FlyingGreenFrog]

Hi, can anyone give me any advice (reassurance!) about self-assessment tax?

I’ve just submitted my self-assessment and it’s given me a bill of £9k! Plus an extra payment of £3.5k in June.

But I only earned £16k self-employed. I also briefly worked for a company earning about £3.5k. So a £9 tax bill on a salary of les than £20k seems insane?? It must be wrong mustn’t it?

I’m genuinely terrified here. Hadn’t expected it to be more than a couple of grand.

grateful for any help or insights!

Ok, the problem here is that HMRC will be billing you for the 2022-23 tax year and also taking a 'payment on account' for the 2023-24 tax year. They assume that you will follow the same pattern again that year. Are you likely to do so?

That does not seem right, no
Have you paid PAYE on the bit you did for a company?

That's definitely not right.

On £20,000, you would be paying about £1500 tax in a year.

So you need to look at the calculations in the tax return

You have probably made a mistake somewhere.

Even if you paid no paye at all on the 3.5k, your total income is 19.5k. You get approx 12k tax free personal allowance, which leaves 7.5k taxable at 20% = roughly 1.5k and not 9k.

Obviously those are estimates, but I’d expect it to be in that ball park unless you’ve got some other income somewhere.

Check you haven’t double entered figures anywhere?

Definitely not right. I suspect you've somehow doubled up your income. You need to check what you've declared - you can view your tax return and you can view the detailed calculation via your online tax account. You need to view it all and check it to find where you've made data entry errors.

Are you sure you've not entered a number or decimal point wrong somewhere in the self assessment?!

Ok. Thank you for reassurances!!

I’ve definitely entered 16k and 3.5k.

but weirdly at the end of the form it say total income was 37k!! I don’t understand where that figure has come from though.

It's probably this. I've been scuppered by this several times, but my accountant applied to have the provisional tax (i.e. payment on account) lowered. HMRC simply assume you'll be earning the same again next year, and ask you for that up-front. Unfair, but true.

Tax doesn't have to be taxing...
Except when you are trying to get a self assessment tax form to match what you know is right.....
It sounds like you need to go back through and work out where it is double counting your income. Possibly just one small tick box somewhere!

yes I remember the ‘pay next year’s bill’ nonsense from last year too but figure was significantly lower!

I suggest a careful check!!

Have you actually submitted it?

Thanks. I guess I will go through it all and try to work out what the hell has happened!

Have you put in expenses as income somewhere rather than as deductions?

Go back and recheck what you've done. It's clearly wrong and there's something wrong in there. If you really can't find the problem it might be worth investing some money in asking a book-keeper to look at it for you.

You can also apply not to pay the amount on account. I have employed and small self-employed income (usually around £7K a year) and always ask not to pay anything on account and they don't make me. I also pay my tax as soon as it has been calculated, rather than waiting until now to pay it, as I don't like having a bill hanging over me.

Have you had any other taxable income, SEISS grant? Some benefits?

I’m sorry for being dense but what would this mean? My only expenses were £140 , presumably this can’t make that much of a diff?

I know it will cost but ask an accountant to help go over it just for a piece of mind

No, the £140 obviously isn't the issue.

Did you pay the tax due last time - it's not that they're charging you back tax?

To those saying about asking not to pay next year’s bill now (thank you!) - is it possible to do that somewhere online or do I have to speak to someone to be able to defer?

You don't have to call them, you can just ask on the form somewhere not to pay it. I can't remember exactly.

Most of my income is PAYE so the tax gets paid monthly so it annoys me that they also ask for payment on account, they get plenty from me!

I assume you don't have savings earning loads of interest (it would have to be a lot!)

What is the calculation including that shows income of £37k? You need to work out what has been entered wrong

Only reduce the payments on account IF you won't owe tax next year, otherwise, you need to work out what you will owe and reduce the payments on account to that

Otherwise you will be charged interest on the late payments on account

When did you submit your tax return? It takes about 48 hours for the real tax owing amount to be shown, and the immediate figure I think is based on 18 months - year + forward payment? If you’ve only just submitted your return, look again Tues/Weds and see if it’s reconciled down.
Gave me a panic one year when I looked the next day and it said £24k! Once the return had reconciled a few days later, it showed the actual amount which was around a quarter of that!

Where has the 37k figure come from? That’s the one it sounds like they are working from - so I’d start with questioning that. Don’t worry, if you can get this query sorted you should be able to work it out.

I hate accounts- I earn similar to you and I pay an accountant - might be worth taking away the stress for you and they might find other ways of lowering your tax bill that you hadn’t thought of (eg mine takes a % of my bills etc off my profit for when I work from home etc which i would never know how to do myself) Costs me £500 a year (tax deductible, obvs!) and worth it.

good luck!

Lowering payments on account.

https://www.gov.uk/understand-self-assessment-bill/payments-on-account#:~:text=If%20you%20know%20your%20tax,either%20online%20or%20by%20post.