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Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12785
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Im having a bit of a hard time understanding UK income tax.

Customer Question

I'm having a bit of a hard time understanding UK income tax. Let's say I work in UK and earn 15,000 pounds from a job. Presumably through the PAYE system I pay taxes on 15,000 pounds minus 8,105 (personal allowance). Is that correct?

If "yes" then what happens if I file a tax return for the same year because I own rental properties? Do I simply pay 20% tax on the investment properties because I know (or the online system somehow knows) that I am in the basic rate band? I guess what I'm trying to figure out is how the PAYE and the tax return systems work in unison.
Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your question

 

PAYE ensures (as you have established) that tax is deducted each time you receive a payment, whereas incomes on which PAYE cannot be operated on, such as rental income, investment income and self employment, has to be reported on a self assessment tax return.

 

If an individual has to fill in a self assessment return then they declare ALL income, and if there has been PAYE income such as employment, then this would include the income earned and the tax deducted, and non PAYE income on which no tax has been deducted.

The reason ALL income is declared is because for tax purposes, you only have a entitlement to one set of personal allowances (The £8105) and as this has already been used against the PAYE income, if you did not include PAYE income in the self assessment return then the calculation of tax due, would offer another set of personal allowances, and also not take into account, whether combined incomes for the year, saw an individual liable to a higher rate of tax (as annual income of more than £42475 sees 40% tax being due on excess income, and then if an individuals income is more than £150,000 then excess income at 50% tax)

 

Si in essence if your PAYE income and your rental income is less than £42475 =- then yes, its the same as if you are just charged 20% on the rental income, but only through the fact that the WHOLE income position has been reviewed.

 

So self assessment just brings all income for the year into one streamlined review for HMRC to ensure the right tax is paid.

 

Thanks


Sam

Customer: replied 1 year ago.

Thanks for your answer. Two questions: I will have a job in the UK (PAYE income) and two overseas buy to let properties. The combined income before expenses is around 10,000 pounds and after expenses is around 5,000 pounds. Do I have to do a self assessment? If so - is this something relatively easy to do or should I pay an accountant? I'd prefer to save money and do it myself if not too complicated. Also: if I am having problems or issues is there a helpline I can call and speak live to someone who can help me?

Expert:  Sam replied 1 year ago.

HI

 

Thanks for your question


Yes you will have to do self assessment as you have foreign income, so regardless of its amount or whether you bring this into the UK, you will need to declare this untaxed income, and its not too complicated, but sadly HMRC do not provide helplines to assist with the completion of the self assessment forms, in which case you would need to engage a tax adviser or accountant to help you.

 

Thanks

 

Sam

Customer: replied 1 year ago.

Thanks. I believe I only need to do a self assessment because the rental income after expenses is more than 2,500 pounds. I know you don't know my entire situation but IF let to own properties was the only reason I need to do a self assessment that is only because the income after expenses is more than 2,500 pounds. Is that correct? I ask because I am OK with regards XXXXX XXXXX other item - my let to own income before expenses is less than 10,000 pounds. Please clarify. Thanks.

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your response

 

That is correct, although I should advise whether the rental income was below or above £2500 you would still need to declare the income ! Its just what remit determines whether this has to be declared through self assessment and the completion of an annual tax return.


Thanks


Sam

Customer: replied 1 year ago.

Thank you. What does remit mean? This is beginning to sound pretty complicated and I'm wondering whether i can do all this without an accountant? All i will have is two overseas rental properties and PAYE income in the UK but it is getting to sound pretty complicated. Let me know your thoughts. Thanks.

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your further question

 

Remit means, under which UK tax rules the income will be considered under (so whether self assessment or not)

 

Yes you can do this without an accountant, and its not complicated, you will have just to declare the rental income (foreign income) and employment income through the self assessment tax return.

 

Thanks


Sam

Customer: replied 1 year ago.

Thank you. By the way: i believe earlier you told me I could not call to get assistance in doing my self assessment. I believe that information was incorrect. Please check this link and let me know your thoughts:


 


http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=OILdX1VAnlM

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your response

 

I worked for HMRC for 26 years (and this is an integral reason why I left, as we were no longer allowed to help individuals complete their specific tax returns) and if you note - that link is for general enquiries re self assessment itself, not help to complete self assessment tax returns for individuals.

As it states help with "key steps, common mistakes and where to get help" which usually leads to a pointer towards a specific tax manual, or article on the HMRC website, but not actual assistance.

 

And also "How to correct a mistake or make an amendment on a tax return, how to claim a tax refund or correct an underpayment or overpayment"

 

So its all how the system works not an advise and completion of returns support line.

 

Thanks

 

Sam

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12785
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and other UK Tax Specialists are ready to help you
Customer: replied 1 year ago.

Are you sure the phone number we discussed doesn't eventually lead to help from a live person? All the menu options seem to point away from TECHNICAL help and seem to point towards help filling out forms and making calculations etc. I say "seem to" because i've been on hold for around 10 minutes.

Expert:  Sam replied 1 year ago.

Hi

 

The phone number does lead to speaking to a live person, but they will be unable to assist you with filling in your personal return, but can give basic guidance (as already advised) in what pages you need to complete, and under what manual that information falls (with income queries)

 

Its now 6.35pm - and I assume you were able to get through, were they able to talk you through your tax position and hep you fill in your actual tax return?

 

Thanks

 

Sam

 

 

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