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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15944
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have filled in my UK tax form and find, rather surprisingly

Resolved Question:

I have filled in my UK tax form and find, rather surprisingly that I owe rather a lot (£4700) in tax this year. This is despite my company deducting my taxes as I go. I would like to get someone to look over my tax return quickly and give me advice on how I might be able to mitigate that or whether I've done something wrong. Is there someone who can help?

Many thanks,

Xenia
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you give the income and tax deducted figures for the relevant tax year please. I may need more infirmation but this will suffice for now. What was your final tax code for the tax year you are completing a tax return for?
Customer: replied 3 years ago.

Income was £106313


Tax paid was £28662


Trying to find tax code now.

Expert:  TonyTax replied 3 years ago.

Thanks.

I assume we are dealing with 2013/14. The tax code will be shown on your P60. Did you make any pension contributions other than via a deduction from your monthly pay which will be shown on your payslips and which should be reported in your tax return?

Customer: replied 3 years ago.

Tony, I might have to get back to you tomorrow. My P60 is at home. I did make pension deductions but they came from my monthly pay.


 


Most of the money (£97772 came from my salary). Then an additional £8541 came from my private consulting business. So, I know I have some tax to pay on the private consulting but it seems that £4700 is a little steep.


 


Aren't there any deductions I can make? Or, do I need to go to a professional accountant?

Expert:  TonyTax replied 3 years ago.

Thanks.

I assume we are dealing with 2013/14. The tax code will be shown on your P60.

 

As you had an income in excess of £100,000 in 2013/14, you are not entitled to the full personal allowance for the year of £9,440 as you will read here. You lose £1 of the allowance for every £2 of income over £100,000 so,assuming you made no pension contributions other than via a deduction from your your salary or any charitable donations through the gift aid scheme, your personal allowance for 2013/14 should have been £6,284 (£9,440 - £3,156 (£106,313 - £100,000 / 2).

 

On an income of £106,313 and with a personal allowance, your tax liability is £33,609.60. As you paid £28,662, you would appear to be underpaid by £4,947.60 for 2013/14.

 

You can claim expenses against your consulting income if you incurred any but you cannot backdate any such expense incurred after 5 April 2014 now to reduce your tax for 2013/14. Once the tax year is over, thats it. Take a look here for information on self-employed expenses.

 

An accountant or tax adviser might be able to give you some advice based on your circumstances to help you mitigate your tax exposure. To keep your income below £100,000, you could increase your pension contributions.

 

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.

Dear *****,


 


If it makes a difference, turns out my tax code was 982T/1.


 


From what I understand of the above, the effective result is that for anything I earn above £100,000, I am paying more than 50% tax on it.


 


Does that basically sum it up?


 


Thanks

Expert:  TonyTax replied 3 years ago.

You lose all your personal allowance at £120,000 (the PA for 2014/15 is £10,000) so that means it will cost you £4,000 in tax. On £100,000, you would pay £29,627 in tax so the extra £20,000 in salary suffers tax of £12,000 which equates to 60%.

If your income was £150,000, you would pay tax at 20% on £31,865 (£6,373.00) and at 40% on £118,135 (£47,254.00). The total tax liability would be £53,627 so your effective rate of tax would be £35.75%.

You pay tax at 45% on income above £150,000 per annum.

Customer: replied 3 years ago.

Dear *****,


 


Thanks for this, but I'm afraid it confuses rather than clarifies. I'm not at £120,000 or even £150,000 but just over £100,000. So, for the part thats over £100,000, I'm paying closer to 60% tax by the looks of things. Is this right?


 


And/or, is it that my tax code was wrong?


 


So, should I just pay it or is it worth me talking with a specialist (and paying for that)?


 


thank you


 


Xenia

Expert:  TonyTax replied 3 years ago.
I was just telling you what the situation would be if you lost all the personal allowance which may happen in the future depending on your earnings. You are paying 60% on a small part of your income at the top end. There is nothing you can do about it now I'm afraid. As I said earlier, once the tax year is ended, that's it. Any action to reduce income to £100,000 or less to preserve the personal allowance has to be done before the end of the tax year.

Your tax code should have been 628L (£9,440 - £3,156). Many people who earn over £100,000 have fallen foul of the allowance restriction as it is not always possible to predict earnings before the start of the tax year and have the tax code changed. Your tax code was based on your having an income of no more than £100,000 in 2013/14.

Any tax due for 2013/14 will be payable on 31 January 2015. No tax specialist which is what I am can change that now.
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