self assessment
Discussion
Left this to last minute as usual.. and looks like i'll be needing to pay several K as my employer screwed up my PAYE and I didn't notice.
Questions to those in the know, if you don't mind:
Is it usual for a PAYE employee to have to pay toward their account next year? According to the SA website I have to pay 50% of the several K bill onto account - even though I am a PAYE employee. I think HMRC must think i'm running a business or something.
Second question, during work i sometimes use my car and get reimbursed - is that supposed to be declared on a self assessment? It is not income but reimbursed out of pocket expenses for mileage and parking.
Thanks!
Questions to those in the know, if you don't mind:
Is it usual for a PAYE employee to have to pay toward their account next year? According to the SA website I have to pay 50% of the several K bill onto account - even though I am a PAYE employee. I think HMRC must think i'm running a business or something.
Second question, during work i sometimes use my car and get reimbursed - is that supposed to be declared on a self assessment? It is not income but reimbursed out of pocket expenses for mileage and parking.
Thanks!
bmwmike said:
Thank you, will speak to HMRC and see if they agree. Spoke to someone via chat a few moments ago and he seemed to think it wasn't out of the question, but wasn't normal as such.
I can stomach paying money owe, but not paying taxes on money I haven't earnt yet!
Actually,you have earned the money already as the end of this month is 10 months into tax year 2015/16.I can stomach paying money owe, but not paying taxes on money I haven't earnt yet!
And yes, if your total tax deducted is less than 80% of the total liability, then you WILL have payments on account to make.
Were you aware your coding was wrong as you should receive a breakdown from HMRC when changed - sounds like you accepted the cash flow benefit thinking you will pay it off 10 months after the tax year, but it has now come back to bite you on the bum!!
David
For tax year 2014/15, was the element of your total tax liability for that year paid through PAYE and other deductions at source more or less than 80% of the total tax bill?
If the answer is more, then no Payments on Account would be required.
If the answer is less, then, the initial assumption would be that Payments on Account are required.
However, is the income that generated the Self Assessment tax liability for tax year 2014/15 lower in 2015/16 than it was in 2014/15? If it is, it is likely that your 2015/16 Self Assessment tax liability will be lower than for 2014/15. If this is the case, you can apply to have the Payments on Account reduced to a more realistic level.
As has been mentioned, we are now more that 2/3 of the way through tax year 2015/16 so you should have a good idea already as to what your 2015/16 Self Assessment income and related Self Assessment tax liability should be. You can do some quick projections to work out your potential 2015/16 Self Assessment tax liability and work out if an application to reduce the Payments on Account is appropriate.
If the answer is more, then no Payments on Account would be required.
If the answer is less, then, the initial assumption would be that Payments on Account are required.
However, is the income that generated the Self Assessment tax liability for tax year 2014/15 lower in 2015/16 than it was in 2014/15? If it is, it is likely that your 2015/16 Self Assessment tax liability will be lower than for 2014/15. If this is the case, you can apply to have the Payments on Account reduced to a more realistic level.
As has been mentioned, we are now more that 2/3 of the way through tax year 2015/16 so you should have a good idea already as to what your 2015/16 Self Assessment income and related Self Assessment tax liability should be. You can do some quick projections to work out your potential 2015/16 Self Assessment tax liability and work out if an application to reduce the Payments on Account is appropriate.
sumo69 said:
Actually,you have earned the money already as the end of this month is 10 months into tax year 2015/16.
And yes, if your total tax deducted is less than 80% of the total liability, then you WILL have payments on account to make.
Were you aware your coding was wrong as you should receive a breakdown from HMRC when changed - sounds like you accepted the cash flow benefit thinking you will pay it off 10 months after the tax year, but it has now come back to bite you on the bum!!
David
If you're suggesting I did it on purpose you are wrong. I didn't notice.And yes, if your total tax deducted is less than 80% of the total liability, then you WILL have payments on account to make.
Were you aware your coding was wrong as you should receive a breakdown from HMRC when changed - sounds like you accepted the cash flow benefit thinking you will pay it off 10 months after the tax year, but it has now come back to bite you on the bum!!
David
From speaking to HMRC my new employer didn't carry over a P45 or something.
Sorted anyway, am going to reduce the payment on account to zero and exit self assessment this year.
Sounds like you did the right thing.
There are lots of people who are mainly taxed through PAYE but still have a requirement to submit Self Assessment tax returns. This is because they have sources of income or pay tax at high rates which makes the correct deduction of tax at source on this income impossible. The only way that HMRC can get a full picture of the person's tax affairs is by the person submitting a Self Assessment tax return. Examples of people who are mainly taxed through PAYE but who would be expected to submit a self assessment tax return are -
those with other non taxed at source income such as sole trader income or rental income
those who have additional higher rate tax to pay on income which is taxed at source at basic rate only - such as bank interest or dividends
those who receive child benefit but who earn over £50,000 and therefore have to pay some or all of the child benefit back
those who have had a capital gains tax event in the year
those who have had some other sort of "taxable event" in the year (such as cashing in a bond or some other form of investment) that can only be taxed through self assessment
The whole landscape is changing over the next few years as the government moves towards people having their own "on line tax account" where it will probably be expected that individuals update the "account" every time some "self assessment" type income arises in the year - a kind of "Real Time Information system for everything.
There are lots of people who are mainly taxed through PAYE but still have a requirement to submit Self Assessment tax returns. This is because they have sources of income or pay tax at high rates which makes the correct deduction of tax at source on this income impossible. The only way that HMRC can get a full picture of the person's tax affairs is by the person submitting a Self Assessment tax return. Examples of people who are mainly taxed through PAYE but who would be expected to submit a self assessment tax return are -
those with other non taxed at source income such as sole trader income or rental income
those who have additional higher rate tax to pay on income which is taxed at source at basic rate only - such as bank interest or dividends
those who receive child benefit but who earn over £50,000 and therefore have to pay some or all of the child benefit back
those who have had a capital gains tax event in the year
those who have had some other sort of "taxable event" in the year (such as cashing in a bond or some other form of investment) that can only be taxed through self assessment
The whole landscape is changing over the next few years as the government moves towards people having their own "on line tax account" where it will probably be expected that individuals update the "account" every time some "self assessment" type income arises in the year - a kind of "Real Time Information system for everything.
Thanks Eric
I pay into a private pension plan so I was claiming the additional tax relief via self assessment but I think I should be able to do that via PAYE coding anyway.
Do you happen to know if I can retrospectively increase pension payments for 2014-2015? Didn't use my full allowance and wondering if it's worth increasing pension for that year to reduce the tax liability a little.
Thanks
I pay into a private pension plan so I was claiming the additional tax relief via self assessment but I think I should be able to do that via PAYE coding anyway.
Do you happen to know if I can retrospectively increase pension payments for 2014-2015? Didn't use my full allowance and wondering if it's worth increasing pension for that year to reduce the tax liability a little.
Thanks
bmwmike said:
Thanks Eric
I pay into a private pension plan so I was claiming the additional tax relief via self assessment but I think I should be able to do that via PAYE coding anyway.
Do you happen to know if I can retrospectively increase pension payments for 2014-2015? Didn't use my full allowance and wondering if it's worth increasing pension for that year to reduce the tax liability a little.
Thanks
I am not a great fan of using tax codes to get additional reliefs as HMRC invariably don't get it right. I'd prefer to have the "control" that completing a Self Assessment tax return gives. The important thing is getting the tax return submitted early rather than late.I pay into a private pension plan so I was claiming the additional tax relief via self assessment but I think I should be able to do that via PAYE coding anyway.
Do you happen to know if I can retrospectively increase pension payments for 2014-2015? Didn't use my full allowance and wondering if it's worth increasing pension for that year to reduce the tax liability a little.
Thanks
I dread to think that the new "on line account" system will be like when Self Assessment as we know it is abolished.
Regarding making use of pension contributions allowances - here's what the Pension Advisory Service says -
Making use of unused annual allowances
Carry forward allows you to make use of any annual allowance that you may not have used during the three previous tax years, provided that you were a member of a registered pension scheme. You can use carry forward is you’re an active member currently building up pension benefits; a deferred member with paid-up pension benefits; a pensioner or a pension credit member, where you have a share of your ex-partner’s pension.
Carry forward may be particularly useful if you are self-employed and your earnings change significantly each year, or if you’re looking to make large pension contributions.
To use carry forward, you must make the maximum allowable contribution in the current tax year (£40,000 in 2015-16) and can then use unused annual allowances from the three previous tax years, starting with the tax year three years ago.
Thanks again - I missed the bit about maxing current FY pension contributions first! That's a no go then as I won't be hitting the limit this year unless I win the lottery haha.
Not sure it's worth my staying in self assessment for pension alone but will have a think.
Btw expenses.. if an employee gets reimbursed for mileage and parking etc is that supposed to be declared on self assessment ? I find the hmrc guidance around this confusing. As it's not a benefit I can't see why it would be declared. OTOH I may yet claim the difference between the 45p and what I actually get reimbursed as it'll reduce my tax bill.
Not sure it's worth my staying in self assessment for pension alone but will have a think.
Btw expenses.. if an employee gets reimbursed for mileage and parking etc is that supposed to be declared on self assessment ? I find the hmrc guidance around this confusing. As it's not a benefit I can't see why it would be declared. OTOH I may yet claim the difference between the 45p and what I actually get reimbursed as it'll reduce my tax bill.
HMRC allows an individual to receive up to 45p per mile for the first 10,000 business related miles and 25p per mile thereafter WITHOUT any requirement to declare this income and WITHOUT any tax liability arising.
If the employer is paying less than these statutory mileage rates, HMRC also allows the individual to make a tax relief claim for the shortfall.
As you are receiving 23p per mile from your employer, you can make a further claim directly to HMRC for the additional 22p up to 10,000 miles and additional 2p for over 10,000 miles. As you are completing a self assessment tax return, the obvious course of action for you is to make this claim as part of your self assessment submission.
Note that HMRC does not pay you the actual mileage. What they do is reduce your taxable income by the additional mileage claim you are making. So, if you made a claim for additional mileage worth (say) £1,000, you would receive a tax reduction of £200 if you are a basic rate taxpayer or £400 if you are a higher rate taxpayer.
If the employer is paying less than these statutory mileage rates, HMRC also allows the individual to make a tax relief claim for the shortfall.
As you are receiving 23p per mile from your employer, you can make a further claim directly to HMRC for the additional 22p up to 10,000 miles and additional 2p for over 10,000 miles. As you are completing a self assessment tax return, the obvious course of action for you is to make this claim as part of your self assessment submission.
Note that HMRC does not pay you the actual mileage. What they do is reduce your taxable income by the additional mileage claim you are making. So, if you made a claim for additional mileage worth (say) £1,000, you would receive a tax reduction of £200 if you are a basic rate taxpayer or £400 if you are a higher rate taxpayer.
Has anyone else submitted their tax return today? I submitted mine this evening, and I have a balance to pay, but it's not updated on the HMRC account page (still showing as nothing to pay).
I think in previous years it updated immediately, but I think they have moved away from the old payment system this year, so things might be slightly different this year.
I think in previous years it updated immediately, but I think they have moved away from the old payment system this year, so things might be slightly different this year.
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