Self Assessment on other income (Property)

[platforminc]

Hi All,

I have a question with regards to completing the self assessment process, If as a contractor working through a PSC and earning around £8k or so in a year and the rest through dividends, do I have to pay tax at a higher rate @ 40% please confirm


Secondly, for the self assessment process is it from January to December, so for example income from January 2011 till December 2011, tax will be due on it and one has till December 2012 to pay it. Please confirm.


Thanks in advance.

[Clare@InTouch]

You may pay higher rate tax, it depends on what your other income is. How much will the dividends be? If they are higher rate, they will be 32.5%, not 40%.

The tax year is 06/04/2012 to 05/04/2013, with the tax and the return itself being due 31/01/2014.

[platforminc]

You may pay higher rate tax, it depends on what your other income is. How much will the dividends be? If they are higher rate, they will be 32.5%, not 40%.

The tax year is 06/04/2012 to 05/04/2013, with the tax and the return itself being due 31/01/2014.

For the purpose of calculating the income for the year 2011, which dates do I need to work with ?

Also in terms of the income, my understanding is as follows, I may be wrong please feel free to correct me.

Lets assume Joe Blogs is a contractor working though a limited company and make a gross takings of £80k.

He then decides to take a low salary of say £8k. In 2011 he lets a property making a profit of £2k. How much does Joe B pays to the tax man both on the property and also income from limited company. The most tax efficient option please.

[Nathan SJD Accountancy]

Hi,

In addition to what Clare said. Based on the limited information you mentioned and assuming you received no other income in a tax year (6 April - 5 April) besides the £8,000 salary. The first £31,027.00 dividends that you received would not be subject to additional tax at all.

However, this is assuming you received no other income at all in a tax year. Any other income received (possibly from a previous employment in the same tax year) would push part of your dividend income into the higher tax bracket, and you would be required to pay effectively 25% to HMRC in additonal tax on those dividends.

We could of course be more precise if you mentioned further details (e.g. the tax year it relates to, and any other income you may have received in the tax year). As I have made quite alot of assumptions about your tax affairs.

[northernladuk]

What does your accountant say? Not knowing your tax dates and the make up of your tax profile are pretty basic things.

[Clare@InTouch]

For calculating income you need to look at the tax year - 06/04/2012 to 05/04/2013.

If you have salary, property income and dividends then you have no choice about how it's taxed. Your tax code is used against the salary and property income, then dividends are taxed last.

By £80,000 gross takings, what do you mean? £8,000 salary and then £71,000 in dividends? Or £80,000 sales?

[platforminc]

For calculating income you need to look at the tax year - 06/04/2012 to 05/04/2013.

If you have salary, property income and dividends then you have no choice about how it's taxed. Your tax code is used against the salary and property income, then dividends are taxed last.

By £80,000 gross takings, what do you mean? £8,000 salary and then £71,000 in dividends? Or £80,000 sales?

Hi

£8,000 Salary and £72,000 dividends.
If I read correctly, 06/04/2011 to 05/04/2012 will be the tax date, and the property income will follow same schedule too, so if the property started to rent in May then you assess based on income from May 2011 till 05/04/2012 ? .

Thanks in advance.

[ASB]

For the purpose of calculating the income for the year 2011, which dates do I need to work with ?

Also in terms of the income, my understanding is as follows, I may be wrong please feel free to correct me.

Lets assume Joe Blogs is a contractor working though a limited company and make a gross takings of £80k.

He then decides to take a low salary of say £8k. In 2011 he lets a property making a profit of £2k. How much does Joe B pays to the tax man both on the property and also income from limited company. The most tax efficient option please.

Just knock 1 of the year numbers that Clare gave.

In terms of the question you ask. And I assume it is for the y/e April 2012, and I also assume that your have a standard code then you will have gross income of 10k.

Here's a really simple calculator. UK PAYE Salary Wage Income Tax Calculator 2012 UK. Updated for 2012/2013 inland revenue tax year. Calculate wages pension national insurance and student loan repayments online.

The tax due will be 505.

10,000.00 - 7,475.00 = 2,525.00 @ 20% = 505.

However it seems safe to assume you will also be taking some dividends. For basic rate taxpayers this involves no additional tax. For higher rate tax paxpayers it will involve a payment of 25% of the net dividend ( x 10/9) which falls into the higher rate band.

For the year in question Income Tax - Tax Rates 2011 / 2012

The basic rate band was 35,400. So once your income exceeds 42,875 additional tax will need to be paid of 25% of the net dividend.

The maximum dividend you can receive is going to be 32,875 including the tax credit = 29587.50.

e & oe

[Clare@InTouch]

Hi

£8,000 Salary and £72,000 dividends.
If I read correctly, 06/04/2011 to 05/04/2012 will be the tax date, and the property income will follow same schedule too, so if the property started to rent in May then you assess based on income from May 2011 till 05/04/2012 ? .

Thanks in advance.

That's correct.

Say £10,000 in salary & property, then £72,000 in net dividends. That would be gross dividends of £80,000. So total income of £90,000.
Assuming a normal tax code, that would leave £47,525 in higher rates, which would be tax around £10,500.

Edit - plus the tax on property & salary as per ASB above.

[northernladuk]

Hi

£8,000 Salary and £72,000 dividends.
If I read correctly, 06/04/2011 to 05/04/2012 will be the tax date, and the property income will follow same schedule too, so if the property started to rent in May then you assess based on income from May 2011 till 05/04/2012 ? .

Thanks in advance.

These questions are bordering on scary!