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TonyTax, Tax Consultant
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Hypotectically: If some one is a partner in a Limited Liablity

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Hypotectically: If some one is a partner in a Limited Liablity Partnership.
Very small share-2%
Gets £700 PCM-basic. Before 2013 was PAYE. From 2013/4 tax year ->self employed.
Plus overtime average ; £500 PCM and earned as self employed.
Is recorded as a partner and gets about £1800 per annum share of profits. Entered on an individual partnership page on SA.
Completes SA with partnership page. All income is now self employed income.
Fot tax purposes,
Is this person better off earning the basic £700 per month as PAYE rather than as a self employed person?
If yes, why?


Can you just clarify the figures please. What was your salary as an employee? Did you earn any overtime? As a partner, do you earn £700 basic per month plus £500 per month in overtime and about £1,800 annual profit share?

Customer: replied 3 years ago.

As an employee. Yes earned same £700 per month. After tax about £600. Did not do any overtime then. When manager decided it would be best for the firm to change PAY status to self employer. Took on overtime hours. Average earning is £500.

Yes profit share is around £1800 per anumber.

THE REASON for my question is I have just done but not submitted my SA on line and it sure looks like I am in a worse position tax wise for now having to log all this income as self employed. Am I now missing out on the annual Person allowance.?


Leave this with me while I draft my answer.

Hi again.

If you earned £1,200 per month as an employee, that would be £14,400 per annum. The first £10,000 would be tax free and you would pay tax at 20% on £4,400 (£880.00) and Class 1 employee national insurance contributions of £773.28. Your total deductions would be £1,653.28 so you would be left with £12,746.72 or £1,062.22 per month.

If you earn £14,400 per annum on a self-employed basis, you will pay the same amount of tax, £880 per annum. You will pay Class 4 national insurance contributions of £580 per annum. So, in total you would pay £1,460 and be left with £12,940.

When you are self-employed, you pay tax and NIC twice a year on 31 January and 31 July.

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

Customer: replied 3 years ago.

I understand. Did not earn any overtime as an employee. But I understand your response. Please confirm is the second payment in July payment on account in advance of the tax HMRC expect I will be liable to pay as self employed?

Also when TAX form says when your cash basis period starts and ends

all they mean is your tax year /year end right? So if I use the 6 April to 5th April standard that's what I state?

The tax year runs from 6 April to 5 April. Whatever year end the LLP has will be your year end. Hopefully, that will be the same as the tax year or 31 March which can be treated as the same as the tax year. Your first period will run from the day you joined the LLP to the date the LLP draws up it accounts which, as I said above, will be the tax year end. The LLP's accountants should be able to tell you what your basis period is and the share of profit that will be reported in the partnership tax return and which you should report in your personal tax return.

If your first year in the LLP was 2013/14, then all your tax and NIC for that year will be payable on 31 January 2015. You may also have to make a payment on account of half as much again as the first payment on account for 2014/15 and another payment on account for 2014/15 on 31 July 2015. Any further tax and NIC for 2014/15 will be payable on 31 January 2016.

Customer: replied 3 years ago.

Okay thank you. The partnership tax year and my personal tax year are different. I report other income from rental properties. So I apportion the profit share. Thank you so much. You have been a great help. I have no further questions.

The tax year always runs from 6 April to 5 April for all taxpayers. Speak to your LLP accountants who will tell you what dates to put in your partnership pages and what profit to report.

Rental income is always reported on a tax year basis for individuals.
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