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Sam
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Hello Sam, Due to a recent redundancy Ive been thrown into

Resolved Question:

Hello Sam,
Due to a recent redundancy I've been thrown into the murky world of self employment. I work in the film industry and have just completed my first job. I received my payslip after I invoiced for the job. I can't really make sense of it as to whether I have to keep money bad for tax purposes or not.

It has my tax status as Schedule E and the tax code is NT. Taxable pay is £1100 and my NI has been taken so I'm left with £1016.

Can you shed any light on if I should keep 20% back etc. I'm really lost with all of this and finding it all overwhelming.
Submitted: 10 months ago.
Category: UK Tax
Expert:  Lindie-mod replied 10 months ago.

Hello,

I'm Lindie, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.

If I can help further, please let me know. Thank you for your continued patience.

Best,

Lindie

Expert:  Sam replied 10 months ago.

Hi

 

Thanks for your question and for asking for me, and apologies that I was not online earlier.

 

Its very unusual to say that least that only National Insurance is deducted and not just as well, and as a self employed individual neither should have been deducted.

 

Usually what would happen is, with self employment, is that all work you undertake is paid gross (without any deductions) You then register with HMRC the fact you are self employed and will pay Class 2 National Insurance, either by monthly direct debit OR quarterly bill - and this costs £2.70 a week.

You then after each 5th April complete a self assessment tax return, declaring all self employment income and all expenses incurred, and any other income (such as employment, rental income investment income etc and HMRC calculate

1) The tax you owe

2) Any Class 4 National Insurance due on self employment only

Which then is paid to them the following 31st January following the tax year in question.

 

I would have understood is tax had been deducted only, or both (as some jobs might see you being treated as an employee (in which case you would declare this as employment within the self assessment tax return, but never solely National Insurance,


I would approach the company for whom you undertook this work, and establish with them why this deduction was made, as you will pay any National Insurance due under the regime of self employment.

They should either

1) refund this back to you - if deducted in error OR

2) confirm this was employment - and then advise why no tax was deducted.


Do feel free to ask any follow up questions

 

Thanks


Sam

 

Customer: replied 10 months ago.

Hello Sam,


 


Thank you for getting back to me. I've done a little research and there's something called the 7 day rule whereby I'm not taxed by them if engaged for less than 7 days. This still doesn't explain whether I owe tax on that money or not?


 


Thanks

Expert:  Sam replied 10 months ago.

Hi

 

Thanks for your response

 

I am not sure where you get the 7 day rule position from - as this does not allow the income to be paid free of tax, and just a charge of National Insurance to be made.

See link here http://www.hmrc.gov.uk/working/intro/casual.htm

 

But yes you should withhold at least 29% (20% for tax and 9% for Class 4 National Insurance) on each payment you receive for work undertaken (although in this case the National Insurance has bizarrely been with held already - so just 20% tax on this payment)

 

Thanks


Sam

 

 

Customer: replied 10 months ago.

Hello,


 


The Union website has a link to HMRC film documentation explaining the 7 day rule.


 


http://www.bectu.org.uk/advice-resources/library/978


 


I have e-mailed HMRC to see exactly what this means as it is as clear as mud. It states that NI should be taken but no tax but then I do not fully understand where and when I pay my income tax if I'm classed as employed rather than self-employed?


 


Thanks,


Steven

Expert:  Sam replied 10 months ago.

Hi

 

This all suggests you are being treated as an employee rather than freelance and self employed, and clearly this is something the film industry has agreed with HMRC as it does not fall within the normal legislation that employers must apply, but a concession for the industry.

 

But as you have been treated as an employee - then this is employment income and should be recorded as separate from true self employed freelance work.

So at the year end you will have income you have earned as self employed, and evidence of expenses incurred for that work.

Then you may have several casual "employments" which you will complete an employment page for each "employer" declaring the income, and NIL tax, so the tax position can be reviewed fully for the employment and self employment combined, and for Class 4 National Insurance just for any self employment.


Thanks


Sam

 

 

 

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12834
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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