Self assessment tax for over £100k salary - is this real!?

[HappyButHangry]

Hi folks,

I'd like to understand something as this turn of events has me quite worried.

DH was working abroad in Switzerland before the pandemic (we were engaged back then) and he ended up remotely working over the pandemic. A year later when doing his self assessment tax return it turned out he owed the UK £100k tax on top of what he had anyway paid in taxes in Switzerland. So he paid it in £30k installments over the year.

Towards the end of that year (2021), he was made redundant. And he was unemployed for the majority of 2022. He now has a contracting job. He completed his tax return the January just gone and the other week we got a letter saying he still owes an additional £70k in taxes.

DH says he must have miscalculated something and HMRC are probably right. But I'm in disbelief. Is this what it's like for people that make over £100k? Do the government really expect you to just have these sums of money sat in your account? DH is unhappy about it but says it's normal. I feel like something has been badly miscalculated here.

I don't need exact figures, but would like to know whether this sounds normal and if that is indeed how much people pay in taxes?

Many thanks!

As an aside: following his year of redundancy, and having just bought a (tiny) house, and with DC1 on the way, we really could have done with having some back up cash and I just feel like this is such bad luck. DH's new job pays half of what he was on before and I only get SMP for maternity leave.
Also, none of this is to brag. I myself am on a very average income far below £100k and so I'm really not familiar with the above tax situation.

Morning! Would I be correct in assuming that your DH tried to complete his self assessment for the year ending 05/04/22 by himself? If I was earning enough to potentially be paying £100k in UK tax in one year, I would seriously consider engaging with a qualified accountant to complete your tax return, especially with the Swiss double tax element too.

They could then review your Apr 22 submission to ensure it was done correctly and if necessary, correct it.

Off the back of that, they may also be able to help with tax planning, by explaining where your tax liability arises.

Without further information, I can only speculate about the most recent £70k demanded by HMRC, but given the timings, it could be HMRC demanding the 2nd payment on account for the year ending 05/04/23, which would be due in July. This would currently be based on the April 22 submission as HMRC assumes your tax liability will be the same, unless you inform them otherwise.

in a nutshell, seek professional advice😀.

Unclear from your post if DH earns 'over 100k' or owed over 100k, in which case his income would be a great deal more.

When you have income which is not taxed at source, the government does indeed expect you to put aside the money to pay your tax at the end of the year. However, the sums here are vast, and there is the added issue of whether he was tax equalised across his Swiss and UK tax returns, or if both countries have taxed him separately on the same income. As @WeeFinbar says, he needs professional advice.

Agree he needs proper advice. Especially re the Swiss aspect. In the meantime he can look online at his tax account and phone them. Is the £70k a payment on account. Basically because he earnt highly the year before, it predicts that you will earn the same this year. If he hasn't you can inform.

The January just gone, Jan 22 the return he submitted is for the previous tax year 2021, so they won't yet know that he hasn't earnt much in 2022. Because the tax year of 2022 doesn't end until April 22, (runs from 6th April 21 to 5th Apr 22) and wouldn't normally be submitted until he submits in Jan 23.

You need to get a tax accountant on board. One, which understands the implications of tax status and living abroad or working for an overseas company if it is relating to work during the time spent in Switzerland or working for the Swiss company whilst living in the uk. I know Price Waterhouse Coopers work in this area. I’m sure there are other accountancy firms.

Sorry, forgetting we are in 23! Yes the Jan 23 tax return submitted is for April 21 to April 22, submitted Jan 23.

If you're earning enough money to owe £100k in tax you should be paying for an accountant, not asking MN

Was he UK tax resident if he stayed in Switzerland during the pandemic? It may be that he wasn’t taxable at all in the UK in 2020/21 if he wasn’t here much.

Has he claimed double tax relief for taxes paid in Switzerland?

Has he applied to reduce his payments on account if his income has now dropped?

You probably do need proper advice from an international firm.

I earn so much less than your husband and I budget £300.00 a year for my accountant to work out all the goings on I mean I have an idea and it’s usually in the ball park but the accountant sorts it all and usually saves me money somewhere. If I was looking at this objectively maybe your husbands reluctance to employ an accountant is because he feels he has messed up big time and may owe even more tax? Either way get an accountant asap admittedly yours will probably cost more than the one I use as I’m a small turnover self employed and very part time. Good luck 🤞

Presumably in CH you had a B permit where the employer takes all necessary taxes at source, if you had a C permit then the Federal taxes are paid are not taken by the employer but by the individual (who will have saved up so they have the amount ready).

100k (additional) tax bill does sound reasonable for someone earning say 400-500k. (Depending on which Kanton you were in)

Accountant here. Get an accountant. Especially for the overseas element. There are so many nuances. I’m assuming he paid tax overseas so there is likely a double tax credit that can be used.

There’s also likely a payment on account for 2022/23 within that payment which if his income for 2022/23 is lower than it was for 2021/22 then he could have the payment on account reduced.

Get an accountant

If his is tax is complicated he probably needs to get a tax accountant to check everything, the revenue get things wrong sometimes. We have one he costs about £700 per year. Would save you a great deal of stress and worry

I agree with PP you need to pay an accountant for this. we do our own taxes but that's with paying less than £15k each, and the maths is relatively simple. I would expect to start paying for professional tax accountancy services if it was any higher than about £40k due as a good accountant should be able to identify efficient structures to make savings at least equal to their fees once you are at that level.

You need an accountant. One with Swiss knowledge. That is a phenomenal amount of tax, so get it right. They will likely save you more than their fee.

I'm guessing it is the residency status which is complicating things. Was he paid in UK? When dh worked in CH the company had an accountant to manage tax both there and in UK. You don't pay twice on same income.

He needs an accountant that understands how to deal with this situation- many accountants won’t know how

Any of the big firms like PWC, KPMG, EY will be able to assist

Or look at smaller firms who specialise in expats like Zebra Accountants zebraaccountants.com/

He needs a tax advisor who can review his self assessment form as submitted and who can advise on double taxation treaties.

As for the letter he recently received, is your DH now self-employed? Where this applies HMRC taxes you for the year gone but then also expects you to pay tax on account of the year you are currently in, based on your previous year's earnings. This might be the case here- you need to look at the dates in the letter. As he'll need to pay tax on this year's income eventually he ought to be setting it aside as he goes. If his earnings are lower this year a tax accountant should be able to discuss with HMRC and I believe there is some wriggle room where earnings have reduced.

You need an accountant who deals routinely with these two countries (Switzerland and UK) I’m surprised he doesn’t have one tbh.

As an ex expat tax advisor, you need one of them!
Lots to unpick. I am assuming you were tax resident in both countries they both want there bit. However you might get credits in one country for taxes paid in the other.
But yes if you earn £100k and don't pay tax at source then you are expected to save it or pay payments in account (effectively the same thing but HMRC take it),
This I also highlights the perils of mobile working. Both countries want to tax you!

Their!

Rubbish. Most people on £100k dont need an accountant.

The £100k tax is easy. The working abroad and residency status for taxation isnt. He needs an expert on overseas taxation. sadly he should have consulted them before he ever set foot out of the country to work.

Rubbish. Most people on £100k dont need an accountant.

The message you've quoted doesn't say earns 100k. It says anyone who earns enough to owe 100k

It's complicated because you've got so many changes going on - changing countries, changing from employed to self-employed, changing from PAYE to self-assessment. Get professional advice.

Dear god, get an accountant. Part of their job is to warn you of what you will owe so you can plan.

Contact HMRC tell them that you think it may be an overestimate and are getting an accountant (with Swiss knowledge) to look it over.

And then if you do owe more, agree a payment plan. HMRC are reasonable about this.

Not using an accountant is insanity.

If your husband was employed (rather than contracting) whilst working in Switzerland did the company not provide tax advice and support, specifically to avoid this situation? This would be normal (we have an entire accounting group to do this) and even though he was made redundant they may well be able to help as a recent employee who was working abroad on behalf of the company. They should still have the records.

Either way you need professional advice on dual country taxation.