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Where Taxpayers and Advisers Meet

80% tax for property income on self assessment tax return

PedroB
Posts: 1
Joined: Sat Jan 12, 2019 12:02 am

80% tax for property income on self assessment tax return

Postby PedroB » Sat Jan 12, 2019 12:13 am

I think I have something fundamentally wrong on my self assessment tax return and am hoping i can get some guidance.

I have a job that has paid me around 150k this year. I also have a small property that i rent out that earnt me 12k with around 2k deductibles.

When i fill in my self assessment tax return I'm pretty sure my employer has dealt with all tax owed on the £150k (hopefully I'm not wrong here)

Assuming I am right, when I fill my self assessment tax return in, it tells me i have 10k of taxable income on the property (seems correct) l...and that I owe 8k in taxes, which represents an 80% tax rate!

Am i doing something wrong? What am I missing?

I'm on the verge of paying for an accountant to help me as I don't trust myself to do this properly.

Any advice would be greatly appreciated.

Thanks

someone
Posts: 360
Joined: Mon Feb 13, 2017 10:09 am

Re: 80% tax for property income on self assessment tax return

Postby someone » Sat Jan 12, 2019 10:59 am

What's your tax code? A normal code would mean your employment income tax was too low. Assuming no pension (watch out for pension allowance tapering at incomes over 150K) and no gift aid contributions then your tax code ought to be close to 0T for your employment tax to be correct.

between 130 and 150K your marginal rate of tax is 40% - which would mean around 4K underpayment on employment and 4K on your rental income (assuming a normal tax code)

When HMRC get your tax return they'll probably adjust your tax code for this year - expect some hefty extra tax deductions for the last couple of months of the year.

robbob
Posts: 2764
Joined: Wed Aug 06, 2008 4:01 pm

Re: 80% tax for property income on self assessment tax return

Postby robbob » Sat Jan 12, 2019 11:22 am

80% tax rate isn't a record its relatively simple now to achieve 99% tax marginal rate if you want to be generous to hmrc - i am presuming you are not of that ilk though so lets see whats up.
When i fill in my self assessment tax return I'm pretty sure my employer has dealt with all tax owed on the £150k (hopefully I'm not wrong here)
Generally speaking one should never presume the paye tax code corrects the correct amount of tax during the year - not sure why hmrc don't advertise this fact much but it is often impossible to correctly predict how the number will pan out.

This is particularly common with individuals who go over the 100k / 150k threshold and have coding notice adjustments - hmrc will often not know what marginal rate you will end up in come the end of the year. The main losers in this regard are individuals who go over the 100k in a tax year when they were previously below and receive personal allowance via tax code they were not entitled to (hmmm are they losing by underpaing tax in year ??)

Best bet if you are unsure is enter employment related details first only and do the calcs and see how things end up.

You should always pay particular attention to your tax code too - you need to look at what was included in your tax code and see whether it was cumulative or not. (Ie not w1/m1)
Note your tax code should not include any personal allowance

Note as you earn over 150k potentially you could have additional pension related tax charges if you put more than 10k into a pension (from all sources) or your pension pot grew by more than the limit allowed if that is how your pension restrictions and calculated - presumably this additional restriction is not an issue - NHS staff are often have problems in this regard.

I would not expect the tax rate on the property income itself to be more than 45% of the 10k as long as deductibles are not finance fees -if deductibles are finance fees - then at most this would add an extra £125 to your bill (25% of 25% of the finance costs)

tax rates available here
https://www.gov.uk/income-tax-rates

It deffo sound like you have messed up or there is something paye related here - more likely a paye related issue
feel free to post tax code details here and secondly check that tax deducted at source matches up with hmrc tables.

you may want to double check you haven't made a numpty mistake like entering gross salary rather than p60 taxable pay total - (reminds me of my numpty bike clown fixing days when my bike pedal fell of when i was far from home - i screwed it back on with my fingers carefully only to find out i now had a clown type bike with both pedals pointing up or down at the same time)

bd6759
Posts: 3069
Joined: Sat Feb 01, 2014 3:26 pm

Re: 80% tax for property income on self assessment tax return

Postby bd6759 » Sat Jan 12, 2019 8:09 pm

It seems quite clear that insufficient tax was deducted via the PAYE system. To test this, fill out your tax return without entering the property pages and see what is owed. Then fill it out using the property page. The difference is the tax due on the property income.


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