Being An Employee And Self Employed And Taxes

[Thunderchild]

I work full time as an employee (well maybe not for much longer), and I am also self employed.

As self employed if I make a loss does that count against my total income for tax purposes and reduce the overall amount of tax i have to pay ?

[factor-fiction]

I don't think so. I think the two types of employment will be treated separately.

[boxtops]

Agree with factor. You need to talk to your tax office. I have several sources of income and the tax office has been very helpful.

[Thunderchild]

ok thought that was the case but would have been nice if yes. Talks of redundancy are going on and they reckon they'll take offers of people reducing their hours so was thinking of making a proper stab of my self employment and having that little "break" would help soften any blows but sadly not.

[factor-fiction]

I think having one PAYE job and one self employed 'job' is treated in a different to having two PAYE jobs. But TAX is a funny area- we have some specialists who may know

[factor-fiction]

If you get redundancy pay your first £1- £30000 will be tax free, so that may help, and you'll probably get a fair amount of the income tax you've paid to date this tax year (although you may have to wait until April for it)

[pixie373]

I was self-employed and with a job and the tax office told me they could split my tax codes between them. My tax was based on all my income wherever it was from. I was worried i would be taxed extra with two jobs, but it doesn't work like that. It's worth ringing your tax office.

[ummmm]

Do you do a self assessment?

[Thunderchild]

yes, but I'm taxed as i go on my employee earnings

[Thunderchild]

I've been self employed only since last november so have only done it once with a loss of £1000 (so that could potentially take £200 off my tax bill)

[boxtops]

I still think a phone call to your tax office will help. I have PAYE income, pensions and other paid income and so on, and they were able to sort it out over the phone for me. Provided you have your NI number to hand, they have all your records on screen. OK some of it may be predictive until the end of this tax year, but they've given me different codes for each source of income, in an attempt to balance it all out at fiscal year end. If it's not quite right, they'll sort it at the end of 2013-14.

[FredPuli43]

I'm self employed but can have income as an employee. My accountant divides them up, and shows each business which is not a company viz Fred Puli "trading as [Puli Farm,Puli hairdressers, or whatever]" as separate, with its own business accounts showing receipts and expenses etc

[Thunderchild]

yes well unfortunately I can't afford an accountant and at the moment as it's just stock bought and stock sold minus fees and postage I guess it's fairly simple to work out

[Skyline D]

Ignore the above. The answer is yes. If you make a loss in your self employment then you can claim a tax refund for the PAYE already paid through employment. You don't have to claim it (you can carry the self employed loss forward for use against future profits if you prefer) but you CAN claim it if you want to.

[furrypusscat]

Speak to tax office and ask for your tax coding to be split as pixie has suggested. That was how my coding was done when I was in similar position.

[Thunderchild]

Ah i see, yes i ticked claiming against future years, didn't realize I could cash in now. I'll do that next time. they never explained how else the money would be recovered from a tax point of view.

[Peter Pedant]

O damn it all, I wasnt quite expecting this
Skyline is wrong on fact and Revenue Law, whether or not he does it himself.

You will need to fill out a tax form and particular the PAYE pages - the only deductibles are [recognised] subscriptions and [recognised ] personal insurance for malpractice, and very little else. Travel to and fro work isnt for example even tho it may be for self-employment.

You will also need Self Employment pages (SE) and you need to keep accurate records. WIth your income, you only need to declare 'three line accounts' to the taxman which is income-expenses-profits. You are not allowed to deduct this against PAYE or else we would all do it. You can carry this over from year to year within the SE account. Make two losses consecutively and you will get awarded a tax investigation as everyone stops trading if that occurs....
Expenses on the SE account are much more - travel to and fro, postage for the business, computers used solely for the business.

and er that is just about it.

Once you get up and running - keep your own books and hire and accountant - his fees are tax deductible against SE.


You certainly need to check Skyline's advice with the tax office
they will tell you he is wrong (and then ask for his name and address)

I am sorry TC you have had 15 responses of wildly varying quality
and you are gonna have to sort out which is which
for what is quite a simple question.

[Thunderchild]

Well either way it won't matter much. Hm two consecutive loss years and I'm in for investigation, an independent business would probably stop trading but it's obviously being fueled by my full time job. I'm hoping to make a profit this year as it's picking up but when i take just short of £1000 and then spend as much on a franking machine it does not look hopeful.

[Skyline D]

Please ignore Peter Pedant who clearly has not got a clue what he's talking about. Nor did Thunderchild ask for a tutorial on what does and doesn't count as allowable expenses for self employment. And no, we wouldn't "all do it" because we don't all have a self employed sideline which in turn happens to have made a loss. In fact very few of us are in that position but when we are, we can reclaim tax paid on employment for that year.

Presuming that the self employment is a genuine attempt to actually make profit then any losses suffered would indeed be deductible from employment income in arriving at a tax liability for the year and any tax consequently overpaid will be repaid.

I do this professionally and I obtained a repayment of about £4,000 for a client last year in exactly such circumstances so please do not tell me I'm wrong Peter. I have also obtained a repayment for myself on this basis in the past (though in my case it was about £10!).

[hjd]

I disagree with Peter Pedant and agree with Skyline.
You are not claiming the losses against your PAYE income. You are adding together all your sources of income; if one of them is an allowable loss then that is deducted from your other income to give your taxable income.
Tax is calculated on that; if you have overpaid tax you will be eligible for a refund. You must tick the relevant box on your tax return.
The loss can be carried forward against future self-employed profits (the default position) or it can be relieved against other income of the same tax year, or (if it is the first year of self-employment) the loss can be carried back against income of the previous 3 tax years, earliest first. This could also create a repayment.

[hjd]

posted about the same time as skyline, making the same point!