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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Good evening, I am employed part time and I also run a small

Resolved Question:

Good evening, I am employed part time and I also run a small farming business. For the tax year 2012-13 my business made a loss of £53. From my employment I earned around £27500. The Tax from my employment is deducted at source. My Accountant has calculated that I have to pay £1100 approx. of Tax. I cannot understand why I have to pay Tax when my Business has made a Loss. The profit from the business in 2013-14 was approx. £4800 and my Tax Bill is approx. £1300 which I can understand. Please could you give me some advice on why my 2012-13 bill is what it is. Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me how much tax was deducted from your salary in 2012/13 and what your tax code as shown on the P60 for that year was please.
Customer: replied 2 years ago.

I don't have the figures in front of me as it is all still with accountant, but it would be approx. £3400. Tax code isEMP/GZ05830

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

OK, Thank you

Expert:  TonyTax replied 2 years ago.

Hi again.

Assuming you were entitled to a basic personal allowance for 2012/13 which was £8,105 (under 65 years of age), you had no taxable employment benefits such as a company car and private medical insurance and no other sources of income other than the farming business, you should have paid tax of £3,879.00. The tax relief on your business loss of £53 would have been worth £10.60 in terms of tax (£53 @ 20%) so that makes very little difference, reducing your overall tax bill to £3,686.40.

You could be underpaid for any number of reasons and if I were acting for you instead of your current accountant, you would know why. You could have owed tax for an earlier year which was collected through your 2012/13 tax code. Tax codes are meant to be checked and should never assumed to be correct. Your accountant should have checked your tax code and made sure it was correct, getting it changed if necessary. Most taxpayers in my experience don't check tax codes and if a tax code is wrong, at the end of the tax year, a taxpayer will probably be underpaid or overpaid.

If I had your accountant's tax file, I would be able to tell you in minutes what the problem is or was. Without the history of your tax codes, all I can do is give you a few ideas as to why the underpayment may have occurred but I'd also advise you to ask your accountant why it happened.

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

Customer: replied 2 years ago.

Thank you for your help, I will question my Accountant in the morning, I just thought that when a business made a loss then I would have no Tax liability for that year.

Expert:  TonyTax replied 2 years ago.
You had a loss of £53. Your salary was £27,500. You deduct the loss of £53 from the salary and you left with £27,447. You deduct the personal allowance of £8,105 from that to leave net taxable income of £19,342 on which you pay tax at 20% (£3,868.40).

If your business loss had been £19,395 or more that would have meant you had no tax to pay and you would have got back the tax deducted from your salary through PAYE.

There has to be a reason why you appear to owe £1,100 and that is what you should ask your accountant about.
Customer: replied 2 years ago.

Thank you for that I will ask for a Tax Computation for 2012/13 to see where this figure has come from. Just one more thing if the tax liability is £3868.40 I thought that the tax paid on my employment £3400 approx. would have been deducted from this figure. I have no Tax Liabilities from other years. I will mark your service as excellent. Thank you.

Expert:  TonyTax replied 2 years ago.
Tax is deducted from salaries through PAYE but if the tax code is wrong, then the tax deduction will be wrong. It's as simple as that.

You didn't tell me exactly how much tax was deducted in 2012/13 and I gave you an idea of your gross tax liability based on the information provided. Whatever tax has been paid through PAYE will be deducted from that. As I said earlier, there could be any number of reasons as to why you appear to be underpaid by £1,100.
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