To ask how much I've fucked up? HMRC

[ohshit89]

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?

Don’t panic OP, your income is what you have taken out, not what has been put in. Yes speak to your accountant and well done on building your business.

You made over £130k profit after subtracting the investments you made and after your expenses etc?

I'm puzzled by that as well.

VAT returns are quarterly. I'm not talking about self-assessment returns.

Has OP mentioned her line of work? There may be no VAT involved at all. I’d imagine her accountant would have mentioned it if she were liable for VAT.

I really do need a better income. I'd love not to notice 70k... and happy to change jobs!

I think the figures could be made to add up OP? Good luck in the new business

You’re fine with HMRC because you haven’t paid yourself that wage. Since you have a business account, I’m assuming your business is set up as a limited company? In which case it’s a separate entity to you as an individual. It’s you who is claiming the tax free, not your business.

Anyone can open a business bank account, it doesn't mean she's a limited company, from what she's said I'd bet she's a sole trader

@Didimum Since the op said "Because of the structure of the business currently, any profit counts as my own income for SA purposes", it sounds like they're setup as a sole trader, not a ltd company.

you'll pay what you owe on the next due date, dunno about how child benefit works

I do want to know how you've grown the business and become so successful so quickly. I mean seriously. I could learn a lot from you.

A person can’t be a limited company.

They can start and own a limited company.

Get ready for a huge tax bill next January, as you will no doubt need to pay a payment on account as you owe a lot more tax than you have paid in previous years. You will probably need to pay 150% of the tax you owe in Jan 26 and then another 50% in July 2026.

You need a decent accountant to make sure you’re deducting all the expenses you are entitled to. You also need to register for VAT and pay any VAT you owe.

Once you’ve deducted the expenses and VAT, there’s a strong chance you’ll be under the £100k.

You should also consider becoming a Ltd company, it’ll be easier to shield yourself against any tax cliff edges.

Sounds like a shite accountant

Really? You think that informal language means that posters don't know the basics?

Not if he hasn't seen her books for 24/25 yet. We're only six days into the new tax year.

@ohshit89 get the accountant to sort out the VAT registration and payment for you as a matter of urgency. Then ring fence income monthly for this and your income tax.

Good luck.

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!

Not sure the investments can just be subtracted.

Get a better accountant. Put £30k minimum into your pension, then you're under the £100k you've told the childcare account about. Though, you might as well send over £48k, so once relief is added you max out 60k contributions, to lower tax.

Set up another bank account, transfer money across each month ear marked for the tax bill.

The use of “profits” in the OP suggests costs have been deducted.

Impossible to tell.

I’m a tax accountant and the tax free childcare thing is a non-issue. You mark the box for the next quarter based on what you ‘expect to earn’.

When your self employed profits are so exposed like this you should do a draft SE accounts/tax return start of March every year so you can make pension contributions/buy anything the business might need to control your profitability for a particular tax year to prevent these cliff edges like others have said.

The accounts and tax return can be easily finalised the next month and you have good foresight of the following January’s tax bill.

Your accountant has prepared a draft self-assessment return just one week after the tax year-end?

Blimey, that's a world first.

The OP says that draft figures have already been prepared.