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Where Taxpayers and Advisers Meet

Trading Allowance & estimating first payment

Neab1987
Posts:3
Joined:Mon Mar 11, 2019 11:32 pm
Trading Allowance & estimating first payment

Postby Neab1987 » Mon Mar 11, 2019 11:44 pm

Hi All

I understand the £1k trading allowance means you can't claim other business expenses but does this also mean one cannot utilize other allowances like use of home office or does the use of trading allowance prevent all other expenses being captured? Does it mean he cannot claim accountant fees either?

I have a friend who has worked 1/3 of the year as employee and the remainder of the year self employed and advised he use the trading allowance as he has so little expenses but wanted to check if he can take advantage of any other allowances available too?

I also wanted to check, once the tax liability is adjusted after tax paid has been deducted, will the first payment be 1.5x the adjusted tax liability or 1.5x the tax liability before accounting for tax paid via PAYE? If that makes sense? For example if an individual paid £1,000 tax in the year as employee then has a tax liability of £2,000 leaving £1,000 due will the first payment be £1,500 (£1k x 1.5) or £3,000 (tax liability pre tax paid)?

Sorry for such basic questions but can't find the answers online.

Many Thanks

Neab1987
Posts:3
Joined:Mon Mar 11, 2019 11:32 pm

Re: Trading Allowance & estimating first payment

Postby Neab1987 » Mon Mar 18, 2019 2:01 pm

Hi

Is nobody able to assist me?

Jholm
Posts:360
Joined:Mon Mar 11, 2019 4:22 pm

Re: Trading Allowance & estimating first payment

Postby Jholm » Tue Mar 19, 2019 9:26 am

The £1,000 trading allowance takes priority over any other expenses.... so, no you couldn't claim use of home, accountancy fees or other such on top of the £1,000. You would claim the higher of; i) all expenses or ii) £1,000 allowance.

Re: the payments on account, they will be calculated based on tax UNPAID per the previous tax return, therefore after PAYE tax. E.g. if £1,000 is due after PAYE deductions, then each POA would be £500.

Neab1987
Posts:3
Joined:Mon Mar 11, 2019 11:32 pm

Re: Trading Allowance & estimating first payment

Postby Neab1987 » Wed Mar 20, 2019 4:17 pm

Hi Jholm,

Thanks for advising.

Great, so given my friend's expenses are so little, it will make sense to use the £1k trading allowance.

On the payment on account. Are you sure it's £500 for the first payment? I understand from your reply that it does take into account the tax paid under PAYE.

I thought the first payment a self employed individual makes is 1 and a half times the liability? There was no previous tax return as the individual was always paying tax through PAYE before.

Thanks for your help.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Trading Allowance & estimating first payment

Postby robbob » Wed Mar 20, 2019 8:02 pm

I thought the first payment a self employed individual makes is 1 and a half times the liability? There was no previous tax return as the individual was always paying tax through PAYE before.
That is correct

Jholm
Re: the payments on account, they will be calculated based on tax UNPAID per the previous tax return, therefore after PAYE tax. E.g. if £1,000 is due after PAYE deductions, then each POA would be £500.
That is also correct

what Jholm is saying is that £1,000 will be owed for ye 5/4/2019 and £500 will be due as the first poa for ye 5/4/2020 - both payable on the same day being 31/1/2020- total due being £1,500 being 1.5 times the tax 1k tax bill. Note only £500 of the payment due 31/1/2020 is a payment on account the rest is a balancing payment (or tax due for year) . the next 50% poa for ye 5/4/2020 will be due 31/7/2020

Note you might have some sort of get out in that any class2 ni that forms part of the tax liability is removed when deciding if payments on account are due - albeit based on 6k sole trader income (1k tax ) there wouldnt be any class 2 ni that needs to be paid.


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