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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I havent paid any tax or ni for approx 7 years, my maximum

Customer Question

I haven't paid any tax or ni for approx 7 years, my maximum annual earnings have been £7800 & minimum annual earnings of £3600
I need advice/ help as I don't know what to do or where to start, to put this right.
Regards
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please provide some background to why you have not paid Tax or NI over this period.
Are you self employed or employed?
When did you last complete a tax return?
Are you a UK national and resident in the UK?

Many thanks
Customer: replied 3 years ago.

Hi, I am a uk national living in the uk, i last paid tax & ni in 2006, I started to do some part time self employed work after my children started school, I didnt think I was earning enough to pay tax & wasn't sure how to go about it,

Lazy on my part I know, but i am keen to correct the situation now.

Any info/help with penaltys / fines, etc.

Regards.

 

Expert:  taxadvisor.uk replied 3 years ago.

Julie, thank you for your reply. Please accept my apologies for the delay in writing to you.


You have stated your maximum annual earnings have been £7,800 and minimum annual earnings were £3,600 over the last 7 years.


Personal allowances and Class 2 NIC small earnings exemption for the past years were

Tax year PA Class 2 NI Class 2 weekly rate

2007-08 £5,225 £4,635 £2.20

2008-09 £6,035 £4,825 £2.30

2009-10 £6,475 £5,075 £2.40

2010-11 £6,475 £5,075 £2.40

2011-12 £7,475 £5,315 £2.50

2012-13 £8,105 £5,595 £2.65

2013-14 £9,440 £5,725 £2.70

Depending on income per tax year...your maximum exposure to income tax is on taxable income of (7,800-5,225) = 2,575 in tax year 2007-08 and the tax on it is (2,230 x 10%)+(345 x 22%) = £298.90 say £300.

 

If you have earnings over the small earnings exemption limit for Class 2 NIC then you should have paid a weelky contribution as shown above for the year your earnings exceeded the exemption limit.

How to correct the situation ... a practical advice

You should preparea statement of income and expenses for each year you had earnings . I presume you were self employed. If you were not self employed then these would be regarded as casual income not taxed at source.

Ascertain whether your income exceeded the personal allowance or not ...

Example -Tax year 2009-10

Income tax

Casual earnings = 5,050

Allowable expenses = 450

Casual earnings after expenses = 4,600

Personal allowance = 6,475

Taxable income = £nil

Class 2 NIC

Income = 5,050

(small earnings exemption) = 5,075

Class 2 NIC payable = £nil

Write to HMRC advising you had casual income in the tax years (state what they are) as shown in the schedule and ask if you need to complete a tax return. If HMRC decide you should have completed a tax return then they would issue you with a Unique Tax reference number (UTR) ..it is ten digit reference number (if you don't already have one) and also advise for which years you should complete a tax return.

You may find HMRC decide there is no need for you to register for self assessment and to file a tax return as your income is

a) Casual income and that they don’t see you as self employed in the true sense
b) The earnings are below personal allowance and within the small earnings exemption limit for Class 2 NIC

More information on who needs to complete a tax return and registration for self assessment can be found here

http://www.hmrc.gov.uk/sa/register.htm#3

If HMRC decide you should have registered for self assessment then you may have to pay a penalty for late registration etc. More information on late registration etc can be found here

http://www.hmrc.gov.uk/undeclaredincome/gettingstarted/tax-affairs.htm

I hope this is helpful and answers your question.

 

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.