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.

100% get an accountant. My DH earns a lot, lot less and it’s well worth it.

This^

Working as an expat can make for a very complex tax situation and requires specific expertise. I think Switzerland is particularly difficult. Much will depend on his residency status and whether he spent more than 180 days in the UK during the tax year, but even then it's not straightforward as other factors such as family ties are also considered when deciding residency status. Even counting the 180 days is nogt as easy as you might think!
Were HMRC aware that he was working abroad? What Swiss tax has he paid? Is he inadvertently paying double tax in CH and UK?
These are all questions he will probably need professional help to answer.
However, I agree that the current HMRC demand is probably for payment on account which will not reflect his current earnings. He should probably phone HMRC and explain the situation to hopefully remove the immediate pressure whilst you get fully. Whatever you do, don't ignore the situation or bankrupt yourselves to pay up immediatelyt.

Apologies for all the typos. Note to self - type more slowly and check before posting!

Good job that's not what I said then, isn't it? 🙄

I cannot believe that someone who earns enough to owe HMRC that much in tax (after paying Swiss taxes) doesn’t already have an accountant sorting this stuff for them. Nor that they didn’t have money set aside to pay their taxes. It’s not payday to payday living on that kind of money.

There’s much he’s not telling you here.

How much did your husband earn OP?

A self assessment is really easy to do when you earn over £100k and your sole income is from your job. But with the figures you allegedly owe, I’m wondering if he has filled it out wrong or whether he is a very high earner.

Agree, especially with buying a tiny house.

Something really doesn’t add up here.

I agree with the calls to get an accountant.

Self-employed tax is fairly complicated. I put half of everything I receive into a savings account for tax and NI (half is a bit too much but that's better than having too little).

Most self-employed people pay their taxes in two chunks in January and July, so you need to make sure you have the funds for those lump sums. As some of what you are paying is a payment on account, it can be tricky to get the amounts right if you have an irregular income. And the first year can be bloody awful as you are effectively paying two years of tax in one go.

Plus your husband has the added complication of tax residency issues.

Get an accountant!

Hi all, thanks for the advice. Sorry will clarify the following:

• DH had KPMG help him with the Swiss tax thing. He had some kind of Swiss residency whilst working for the Swiss company and loved out there and paid his taxes only to Switzerland.
• During the pandemic, he lived in the UK (middle of 2020 onwards) and continued to receive his salary in Switzerland to his Swiss account and pay tax on Switzerland.
• He officially moved to the UK in Jan 2021 and began getting paid in the UK. KPMG helped with the move and identified he would have to pay UK tax for the time he stayed in the UK (the £100k amount) whilst getting paid in Switzerland. He did indeed pay tax twice that year and Switzerland still owe him some kind of rebate.
• In Switzerland he made 250kCHF. When he moved over officially to the UK the company paid him £210k.

-DH was made redundant and unemployed Jan 2022-Dec2022. We got pregnant and in that time and bought our small house (in London). It's small because only I could get a mortgage given he wasn't earning but we used DH's savings for as much deposit as we could. (£150k).

• We're very transparent about finances but given we had a wedding (£65k), tax (£100k), deposit for new house plus fees (£160k), builders plus furniture (£75k) this new £70k amount is a bit stressful especially with DH's new salary being half of what he was on before and also just a 12 month contract AND me going on mat leave.
• DH is an excellent saver and main earner. I appreciate the scepticism but I'm asking on here because I wasn't really aware people would literally have to put money they receive from their salary aside to pay tax for the following year. DH told me as much but I was sceptical and just wanted to see what others earning similar might be doing differently.

Someone mentioned that the £70k demand from HMRC is because they have projected that amount from a previous salary when in fact he probably wasn't making anything that year - I am hoping that's the case. DH feels like it's because the UK taxes at a far higher rate than Switzerland.

Thanks for your helpful replies. He's sort of buried his head in the sand about it so I shall speak to him about getting an accountant.

I'm sorry for mentioning specific numbers - I know it isn't the etiquette but honestly I am sort of in disbelief this is happening. I feel like following the redundancy DH just can't get a break.

Agree, can’t he spare £500 for an accountant? Could be money well spent!!

And you’re right it could be payment on account but surely your DH is clever enough to understand all that, and he doesn’t seem to think it’s an error?

For my own understanding, what does payment on account mean?

He did have money put aside. And KPMG helped with the Swiss tax part (£100k).

Since his redundancy and lower salary he hasn't engaged with an accountant because he's been back in the UK permanently employed on a temp contract with a UK company and I guess DH imagined it would be straightforward. But then we got the letter a couple of weeks ago about not having paid the correct amount and still owe £70k.

HMRC demands payment on account from self employed people in advance of the end of the tax year. So a payment in July and again in January - you have to submit your return by 31 January 2024 for the year ending 6 April 2023 and pay all tax due for that year by then. The payment in July is estimated, based on the amount you earned in the previous financial year. Means you're actually paying up front for your tax 'as you earn it' . Previously you could just pay up at the end of January for everything you owed for the previous financial year

Payment on account means exactly that - if you are self-employed, you pay 50% of this year's tax bill up front for next year. It is due on 31st January, along with the final payment for last year. Which is why self-employed people are always encouraged to put aside approx 30% of whatever they earn as they go along - then they can pay their tax bill in January. Any self-employed person would know this.
And definitely get a proper accountant who understands international tax rules - it will be money well spent.

Payment on account means paying tax on earnings in the year following the one which he was assessed for. HMRC will assume he is still earning at the original high level unless you tell them otherwise.

They will therefore expect him to split tax which would be due on earnings from 22/23 between 2 payments in Jul23 and Jan 24 and will use previous years earnings to estimate what this would be.

The is a part you can fill in on the self assessment form to tell them if you think that this estimated assessment for a future year is not correct and it sounds like your DH may not have realised this. He needs to ring up HMRC and explain to them that he is now earning a lot less and see if they can adjust the payments or get an accountant to look at it if he is not sure what he is doing.

I would advise you DH to engage in the services of a tax accountant who is experienced in cross-boarder/expat working arrangements.
I'm not sure if Switzerland has a reciprocal tax agreement with the U.K. but I am aware that if you have paid tax in one E.U. nation your nation of domicile can claim any tax balance that would be due under it's rules. You won't pay tax twice but can be hit with any balance under the domicile nation tax laws.
Better to get advice than guess!

Sounds like you are high earners and high spenders. He needs more tax advice which may well save him money in the long run. £100k of tax on a £210k salary sounds about right. It’s probably closer to £90k.

Since his redundancy and lower salary he hasn't engaged with an accountant because he's been back in the UK permanently employed on a temp contract with a UK company and I guess DH imagined it would be straightforward.
Was it employment or self-employment; did DH put it in the correct box on the self-assessment form? It makes a huge difference.

But, anyways, it will all be explained on his tax calculation on his online account.

If your DH decides to speak to HMRC himself, is probably worth him looking at his HMRC account beforehand - if he has submitted a self-assessment form he will have a government gateway login. In fact it's probably a good idea to look at this anyway. It should help explain how HMRC arrived at its number and be a good starting point for a discussion with HMRC or a tax accountant. By the way, tax on account is not just for the self employed. If you earn a lot of interest/capital gains tax etc that is not covered by PAYE you will have to pay on account.

If KPMG have assisted in the past, are there any records of their calculations? Could he go back to them as they will already be familiar with his tax status.

If your DH is reluctant to get an accountant, though I can't imagine why he wouldn't, he could call HMRC.

I really would suggest an accountant though - definitely money well spent - just maybe not KPMG! I used to work at a larger firm (over 15 years ago) and the most junior members of staff then were charged out at over £100 an hour. Senior tax advisors with this level of expertise will be at least £500 an hour now in a firm of that size.

My company is small but has an excellent tax partner who charges £200 an hour. While having tax affairs spread across two countries makes life more complicated, the rules are pretty easy for a qualified tax professional to work it all out and advise.

If there are tax refunds due in Switzerland though I'd either seek a Swiss accountant also, or someone in the UK that is knowledgeable of both.

This bit did stand out though:

Since his redundancy and lower salary he hasn't engaged with an accountant because he's been back in the UK permanently employed on a temp contract with a UK company

So he has actually been working, just on a temp basis? As a PP stated, this temp work will need reporting on a tax return, but how it is reported depends on his tax status. If he's working through an agency, are they paying him his income as a salary and deducting tax and NI from it? Or is he a true consultant just charging for his time directly? If the latter then he is self-employed and the Payments on Account will be relevant.

Whatever happens I would recommend he prepare his 2022/23 tax return as soon as possible after 5th April 2023, so any overpayment can be dealt with quickly, or if there is no overpayment, at least you'll have plenty of advance notice of what is payable by 31st January 2024.

I really would say an accountant would be well worth the money.

Agree this is not KPMG, PWC, etc. levels of income. I work in Big 4 tax and my hourly rate is £1,200. For context I provide exactly this type of advice - tax for high net worth individuals with an international element. Someone on £200k wouldn't be able to pay the fees. Make sure the accountant though has international experience as there should be a credit mechanism so only one country taxes the income. When he moved back to the UK, Switzerland should not have taxed the income so a claim for refund is likely due in Switzerland.

Misses the point of original post
I just can't get over that you spent half a million pounds in a couple of years and don't own a property outright. I would have bought a house and then saved what I would have been paying in mortgage payments to pay for a smaller wedding.

Definitely needs a decent accountant with experience of double tax. The relief needs to be claimed as wont be automatic. FYI he should have taken advice before working in Switzerland - it was foolish not to.

Tax accountant who deals with expats is needed. You have to live outside the UK for a complete tax year or tax is payable on foreign earned income in the UK. For someone who leaves the UK on 10th April of one year it means they need to be out of the country almost 2 years but for someone who leaves on 1st April it's a few days over a year. The more years you're away, the more time you can spend in the UK without being classed as tax resident. Covid concessions were absolutely crap for people who got stuck in the UK. It was only possible to claim 60 additional days under exceptional circumstances so many people have been caught out working for foreign employers whilst stuck in the UK and the resulting tax nightmare.