Self Employed For 4 Months Rebate??

[Imbera27]

Hi

My husband was self employed for 4 months (April -August2012)he has paid £1106 CIS deductions total earnings £4424 from Aug 2012 he started working for Tarmac who pay his tax & NI estimated earnings by 5th April 2013 will be £10560 gross will he be entitled to a tax rebate. obviously i have recepits for food, fuel, clothing, mobile and had to purchase a new van while self employed

Hope you can help

Thanks

[Flyhalf]

The new employer should use the P45(3) figures from his last employment, and that should sort out the situation on employment.
He has paid 25% tax on the S/E, and will be overpaid only if his total income for the year doesn't render him liable to higher rate tax.
He might be asked to complete a Self Assessment, but if this is his only foray into S/E may be allowed to complete a simpler form.
SA return SHOULD include all the necessary sheets and notes, but if he's only asked for a statement of income, expenses allowable (almost certainly not as many as you may think) are covered in the attached link.

http://www.hmrc.gov.uk/worksheets/sa103f-notes.pdf

[1eyedjack]

I speculate that £4424 was the net amount of income received after CIS deductions, and that the gross income from self employment was £5530 less 20% tax. But I could be wrong. The CIS deduction rates tend to be either 0%, 20% or 30% depending on whatnot. I suppose he could have changed from one to the other part way through, giving rise to an average 25% rate but I would bet not.

He almost certainly does not have a P45 to present to Tarmac. To be valid it would have to have been issued by a previous employer for which the employment ceased in the current tax year. So, without a form P45 I would expect tarmac to have required from him a P46 on which he would have made a declaration regarding whether this is his only or main job, etc. That would have determined his initial PAYE coding notice with Tarmac, which HMRC may subsequently have amended for any number of reasons. That coding notice may have been on a cumulative or month 1 basis.

The short answer is: without knowing his PAYE code applied by Tarmac, it is not really possible to state whether he will be entitled to a tax rebate. That said, I would guess that he almost certainly will be entitled, mainly because his net taxable income after allowable deductions will be rather less than the £5530 that has been taxed in full at 20% and on which there should be no NI charge at that level.

Not quite sure of his class 2 NIC liability. Strictly he should register as liable, but then maybe can claim exception on the basis of low earnings. Registering for class 2 NIC would put him on the self assessment tax return radar, despite that he probably has no statutory requirement to notify chargeability to Income Tax under S.7 Taxes Management Act 1970, by reason of the CIS deductions. Interesting, not really thought of that before. However, filing a self assessment tax return is the obvious route to getting the refund.

[dotty.]

and do that as early as possible to get any rebate back may or june, don't wait for the big rush in october. forms are available early april,

[dotty.]

oh and also remember that unless you tell the tax office he is no longer Self employed they will continue to send an annual self assessment form which if he ignores will lead to being fined for not returning, even though he is paye and paying tax that way

[Imbera27]

His tax code is 810L on his payslip

[1eyedjack]

Code 810L gives him a standard personal allowance, but it remains relevant to know whether it is on " cumulative" v "month 1" basis. The code 810L is designed to give you the full Personal allowance of £8105 (+ £4 roundings) but you normally get the allowance "on the drip". If paid monthly, you get about £675 allowances per month. Thus if you are employed for the full year you get full whack. If your PAYE code is on a "cumulative" basis you still get the full amount at source even if you start half way through the year. But if you are on a month 1 basis you just get £675 x the number of months that you are paid. THAT (ie month 1 basis) would increase your claim to a refund at year end as there would be unused personal allowances to set against the self employment income.

Anyway, As I said earlier, taxing the gross earnings from self employment at the full CIS rate of 20% would likely give rise to an overpayment in its own right, which could be reclaimed, regardless of the above issue, because there would be no NIC charge and there would be business expenses deductible.