View Full Version : Can you work out how much you owe based on day rate?

notsofun

29th June 2015, 10:24

Hey guys ,

I earned £80k in 2010-2011 based on my day rate. The discovery leter I got was for £22k . Is this correct ? I never thought to query it as people said the amounts HRMC were sending were about right , but meeting up this weekend with people in the same scheme (WC) their numbers are significantly lower.

I'm just after an estimate based on £80k

Thanks all.

notsofun

29th June 2015, 11:08

I should have made it more clear. The £80K was gross based on a day rate of £325 per day. It was not the loan amount.

BrilloPad

29th June 2015, 11:30

Were you limited, via umbrella or sole trader?

How did you pay yourself? What amounts did you pay yourself? What tax and NI did you pay?

Did the discovery letter give any calculations?

notsofun

29th June 2015, 11:43

Were you limited, via umbrella or sole trader?

How did you pay yourself? What amounts did you pay yourself? What tax and NI did you pay?

Did the discovery letter give any calculations?

Was via white collar, umbrella. I'll have to check the notice I received. How much tax should you pay on the Loan amount? I can probably find the loan amounts.

BrilloPad

29th June 2015, 11:48

I found this CUK thread http://forums.contractoruk.com/hmrc-scheme-enquiries/87442-hmrc-enquiries-schemes-through-asmg-white-collar.html

So looks like you took out about £80k as a loan and paid no tax?

w ww.taxpenny.co.uk/news/2009/11/20102011-tax-calculator/ - 2010/2011 Tax Calculator*|*TaxPenny News gives £21822 and £4814 of NI.

chubacabra

29th June 2015, 12:14

I was with WC and with mine they factored in the amounts earned from the PAYE part of it. If I remember the salary part was about 15k per year...

So you need to include that in any calculations because the salary element would have eaten into your personal allowances.

Bear in mind income tax would have been paid on the salary element also.

If you've received the discovery letter from HMRC there should be a breakdown of how they have worked it out.

notsofun

29th June 2015, 12:48

I was with WC and with mine they factored in the amounts earned from the PAYE part of it. If I remember the salary part was about 15k per year...

So you need to include that in any calculations because the salary element would have eaten into your personal allowances.

Bear in mind income tax would have been paid on the salary element also.

If you've received the discovery letter from HMRC there should be a breakdown of how they have worked it out.

looked at the notice and it said Pay, pensions ,profit £44300 @ 50% = the 22K

so looks like the loun amount is £44K? Do these loans get taxed at 50%?

chubacabra

29th June 2015, 13:00

10/11 tax year allowances were:

Personal Allowance: £6475

Basic Rate (20%) £35000

Higher Rate (40%) up to £150000

Even Higher Rate (50%) over £150000

Only reason you'd be taxed at 50% is if your income was over £150,000 for that year not including the loan.

If not look at your overall income for that year - that includes income from anywhere else that you put on your tax return - e.g. rental income from a property and then use the above allowances to see where you're at.

famousfive

29th June 2015, 13:03

When I spoke at White Collar the rough formula I got was: take your daily rate in your case £325 * 45 weeks – 12.5% fees - £15k salary gives you the outstanding tax according to HMRC … then go to w ww.listentotaxman.com/ to see tax due

THEN add interest

HMRC Calc Tax Due = (Loan amount for open years x 0.375)

Interest = HMRC Calc Tax Due x 0.25

Thanks again White Collar :devil

famousfive

29th June 2015, 13:04

It might be worth checking if the £22k discovery letter covers all the years you were with White Collar, and before them ASMG and not just 2010/11

notsofun

29th June 2015, 13:22

When I spoke at White Collar the rough formula I got was: take your daily rate in your case £325 * 45 weeks – 12.5% fees - £15k salary gives you the outstanding tax according to HMRC … then go to - w ww.listentotaxman.com/ to see tax due

THEN add interest

HMRC Calc Tax Due = (Loan amount for open years x 0.375)

Interest = HMRC Calc Tax Due x 0.25

Thanks again White Collar :devil

So using my example,

325 (day rate) x 225 (45 weeks) = 72150 - 9018 - 15000 = 48,132

and using the calculator here based on 48, 132 w ww.listentotaxman.com - ListenToTaxman Tax Calculator 2016 / 2015 / 2015 UK Salary Calculator / Tax Calculator / Income Tax Calculator. Incorporates PAYE, national insurance, tax code, pensions and student loan repayments[/url]

The amount i should own should be

£9,184.80 + interest?

Have I got this right? or did I mess up the logic?

notsofun

29th June 2015, 13:25

10/11 tax year allowances were:

Personal Allowance: £6475

Basic Rate (20%) £35000

Higher Rate (40%) up to £150000

Even Higher Rate (50%) over £150000

Only reason you'd be taxed at 50% is if your income was over £150,000 for that year not including the loan.

If not look at your overall income for that year - that includes income from anywhere else that you put on your tax return - e.g. rental income from a property and then use the above allowances to see where you're at.

No, my total income for the year was under £80K. No other sources of income. Good to know that I should not be taxed at 50%

BrilloPad

29th June 2015, 13:28

Have White Collar commented on how much you owe?

notsofun

29th June 2015, 13:54

Have White Collar commented on how much you owe?

They would not commit to an amount, though said I should use the above calculator, and it comes to over £9K.

Cannot believe all this time I thought I owned double what I actually did. At least that makes it somewhat better....

chubacabra

29th June 2015, 14:16

No, my total income for the year was under £80K. No other sources of income. Good to know that I should not be taxed at 50%

Yep much better!

Whichever route you decide to go try to get copies of your bank statements for all of the years you've potentially got coming. Reconcile them and get the totals for each tax year broken down by salary element and loan element.

If your figures don't match what HMRC say they will want some form of proof.

webberg

29th June 2015, 14:56

So using my example,

325 (day rate) x 225 (45 weeks) = 72150 - 9018 - 15000 = 48,132

and using the calculator here based on 48, 132 w ww.listentotaxman.com - ListenToTaxman Tax Calculator 2016 / 2015 / 2015 UK Salary Calculator / Tax Calculator / Income Tax Calculator. Incorporates PAYE, national insurance, tax code, pensions and student loan repayments[

The amount i should own should be

£9,184.80 + interest?

Have I got this right? or did I mess up the logic?

Assuming that in this example your salary was £15,000, then after PA of £6,475, you have taxable income of £8,525 from which tax should have been deducted of £1,705.

If you have "other income" of £48,132 you would pay tax of 20% on £28,875 and 40% on £19,257 = £13,476 (and change).

I can see where you got £9,184 from BUT the salary of £15,000 is taxable and has already taken up all your allowances.

You get a better answer if you enter £63,132 as salary and deduct what should have taken from the PAYE amount.

Sorry to burst the bubble

webberg

29th June 2015, 15:00

Interest will be around 10% for a 2010/11 liability assuming:

1. Due date is 31/1/12

2. No surcharges

NIC? Arguable.

IHT? Arguable.

notsofun

29th June 2015, 15:19

Assuming that in this example your salary was £15,000, then after PA of £6,475, you have taxable income of £8,525 from which tax should have been deducted of £1,705.

If you have "other income" of £48,132 you would pay tax of 20% on £28,875 and 40% on £19,257 = £13,476 (and change).

I can see where you got £9,184 from BUT the salary of £15,000 is taxable and has already taken up all your allowances.

You get a better answer if you enter £63,132 as salary and deduct what should have taken from the PAYE amount.

Sorry to burst the bubble

Thank you so much you have actually been really helpful. That makes sense.

My bubble is still a lot happier knowing that its is not £22500 :) which is what the letter was for.

And looking into it the exact loan amount is £43K . when you say deduct the PAYE amount, is that the tax due on 15K?

so is that £58K (43+15) which is tax = £13132 - £1700 (from what I would have paid on 15k)= 11432

creativity

30th June 2015, 23:25

Thank you so much you have actually been really helpful. That makes sense.

My bubble is still a lot happier knowing that its is not £22500 :) which is what the letter was for.

And looking into it the exact loan amount is £43K . when you say deduct the PAYE amount, is that the tax due on 15K?

so is that £58K (43+15) which is tax = £13132 - £1700 (from what I would have paid on 15k)= 11432

Guys it really is quite simple to calculate your liability for any given year. Simply add your salary and loans together and use an online tax calculator for that year to work out your tax. It's as Webberg described.

Remember you would have paid some tax already so you need to negate that from the calculators tax value - use your P60 to find out what tax you have paid already.

webberg

1st July 2015, 08:31

Thank you so much you have actually been really helpful. That makes sense.

My bubble is still a lot happier knowing that its is not £22500 :) which is what the letter was for.

And looking into it the exact loan amount is £43K . when you say deduct the PAYE amount, is that the tax due on 15K?

so is that £58K (43+15) which is tax = £13132 - £1700 (from what I would have paid on 15k)= 11432

Yes I think that's a viable calculation.

Be aware that HMRC calculation often says loan = £43k, top marginal rate = 40%, therefore due = £17,200.

Muppets.