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Where Taxpayers and Advisers Meet

Help with future...SOO CONFUSED

Del101
Posts: 5
Joined: Sat Jan 19, 2019 10:17 am

Help with future...SOO CONFUSED

Postby Del101 » Sat Jan 19, 2019 10:22 am

I received a redundancy payment last June and I haven't worked since. I was planning on claiming back my tax in April but have got offered a job. Money isn't too good and he wants me to be self employed...plus I'd be in the 40% tax bracket. A job isn't important to me at the minute as I have health issues. Question is... Would I be better not taking a low paid job and just waiting to claim my tax back.? (The benefits I receive are income reliant). I would lose the reclaimable tax for just the months I would work or would this affect payments for months gone by? If I took the job at say £10 per hour I'd lose £4 every hour to tax plus have to get myself insurance of some kind? He can lay me off at anytime if I'm self employed?
Thanks for any help.... Tax etc is a total unknown to me

Del101
Posts: 5
Joined: Sat Jan 19, 2019 10:17 am

Re: Help with future...SOO CONFUSED

Postby Del101 » Sat Jan 19, 2019 11:18 am

Correction......Benefits AREN'T income reliant

robbob
Posts: 2818
Joined: Wed Aug 06, 2008 4:01 pm

Re: Help with future...SOO CONFUSED

Postby robbob » Sat Jan 19, 2019 11:33 am

You are in the same boat as everyone else - if your annual income exceeds the 45k - you will pay the 40% tax on the extra income - as you say if you lose benefits too and have to pay for some liability insurance and it costs you to get to work - that doesn't seem a very attractive option - but hey ho i would go with whatever suits your personal wellbeing first - unless the numbers mean you will be struggling financially. You are pretty unlucky timing wise though to be stuck in the benefits trap and higher rate tax trap at the same time - that normally takes some doing.

There is some light at the end of the tunnel though so lets try and get some good news into play and turn your earnings into tax free cash.

First up there is the new £1,000 trading allowance - that means you can commence as sole trader and if your income is less than £1,000 then the income is tax free. If your income is over £1,000 you can deduct £1,000 from your income providing you claim no other expenses. Tax year ends 5/4/2019 so potentially this could slot in quite nicely if you only take the work part time. Worth checking the benefits side of things to see if you can do some work without being screwed in that regard.

You also have the option of using the cash basis which means you get taxed when paid - so potentially if you bill monthly at the end of the month and get paid 7 days after that then your March income would be paid 7th April and taxed next tax year when presumably higher rate tax won't be an issue. If you did 1k of work in March and stopped 6/4/19 with o further work that 1k could be covered by the trading allowance the following year :)


So potentially 2k income from now to 5/4/2019 - if 1k was paid after 5/4/19 - the other 1k is covered by the trading allowance so you have zero income for tax purposes. Note you would have to check with benefits bods as to whether they ignore income covered by the trading allowance.

https://www.accountancyage.com/2017/10/09/new-trading-allowance-simplicity-not-know/

You do also have the ability to claim tax deduction for allowable sole trader related expenses - providing you don't claim the 1k trading allowance - i would have though actual expenses would be less than 1k though unless you are buying some plant or equipment though.

robbob
Posts: 2818
Joined: Wed Aug 06, 2008 4:01 pm

Re: Help with future...SOO CONFUSED

Postby robbob » Sat Jan 19, 2019 11:59 am

It's good that benefits aren't income related

For posterity though here is the hmrc advise in this regard ref the trading allowance.


https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income


Benefits and credits
You may need to calculate your income to work out what benefits you’re entitled to.

If you calculate your taxable profits by deducting the trading allowance instead of actual expenses incurred then your income will be reduced by the allowances, for:

tax credits
high income child benefit charge
student loan repayment
married couples allowances
Income for Universal Credit purposes is not affected by the allowances.

Del101
Posts: 5
Joined: Sat Jan 19, 2019 10:17 am

Re: Help with future...SOO CONFUSED

Postby Del101 » Sat Jan 19, 2019 2:24 pm

Thanks for the replies. My situation is difficult. I was widowed and have 2 kids at school.. 6 weeks later (jan2017) is was diagwith cancer..so had to take a year off from work,which had already stated it would be shutting in June 2018. They paid me for 6 months full pay then droped to half pay. I got treatment and operation then returned to work to see out the last few months so my pay went back up. They gave a good package and I got my house etc paid off with insurance so financially we can live on the benefits I get ATM. I get bereavement,child and pip payments..these aren't affected by how much I earn. I'm not a lazy person and like working but I think I should just wait until the new financial year then can think of a job. I can then hopefully claim back my tax from last year's tax windfall the government got from me (pay, redundancy etc)...? Then after April I can start anew regarding tax ? ? Looking at it ,if I do take a part-time job, with tax AND loosing the tax I could claim back, I would basically be working for petrol money to get me there and back?!?!
Tax is just too complicated.., sorry for seeming stupid but I am...lol

D&C
Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: Help with future...SOO CONFUSED

Postby D&C » Sat Jan 19, 2019 11:00 pm

Nothing you have posted so far suggests you wouldn't still be entitled to a refund even if you did take this low paid job (or self employment).

If self employed the timing of any repayment would largely be down to you - how quickly you choose to register as self employed and file your Self Assessment return.

What makes you think taking a job now would stop you getting a repayment of any tax overpaid?

In fact if it was a PAYE job and you have your P45 it is possible (but not guaranteed) that your new employer would make a repayment to you the first time they paid you. So before April.

But without some hard facts it is difficult to be certain. Tax is all about the detail and to be honest you haven't provided any information about your actual income so it is hard to know why you come to the conclusion a tax refund is an all or nothing outcome.

Del101
Posts: 5
Joined: Sat Jan 19, 2019 10:17 am

Re: Help with future...SOO CONFUSED

Postby Del101 » Sun Jan 20, 2019 12:50 pm

The only income I have is from the benefits I mentioned before plus child benefits. I guess I was confused that if I had earnings for February then the amount of tax I could claim back would be affected. I know one guy that has already claimed his tax back and they took his P45 off him so he couldn't work to this April...or so he told me.
More so is the realisation of a low paid job with no security and weighing that up against health... If it was a job with a bit more of a future I think I would be tempted but atm I don't think it would be worth the hassle. These are things I need to work out but I just wanted to be sure that I wouldn't be doing myself more 'harm' (claiming tax back) by taking a job.
As u said before,tax is a big unknown to me..the company I used to work to took care of it all and I didn't need to know.
Thanks for your answers...

robbob
Posts: 2818
Joined: Wed Aug 06, 2008 4:01 pm

Re: Help with future...SOO CONFUSED

Postby robbob » Sun Jan 20, 2019 1:11 pm

In summary your first £1,000 of earnings up to 5/4/2018 will be tax free if you claim the £1000 allowance, plus also if you use cash basis anything unpaid at 5/4/2018 would not be taxed till next tax year - and presumably tax rate then would be no more than 20%.

This is presuming you have no expenses as such to claim or you are happy that expenses falls within 1k and you understand no claim will be made if you claim 1k fixed deduction.


if we say your income now to 5/4/2019 is 2k - 1k tax free and 40% on 1k = £400 - your effective tax rate is 20% - anything above that and you would pay 40% tax on the rest.

Hopefully that's enough of an idea to help you make up your mind whether its worth the effort.

If you can manage your income so its below 1k in total there is no need to even register with hmrc ye 5/4/2019 - as the amount would treated as fully tax exempt.

Del101
Posts: 5
Joined: Sat Jan 19, 2019 10:17 am

Re: Help with future...SOO CONFUSED

Postby Del101 » Sun Jan 20, 2019 7:10 pm

Thanks you for all the help. Much appreciated.


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