- June 6, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Inquiries about Tax Calculation Discrepancy and Tax Return
Hello,
I am in a situation where I divide my time between salaried contracted employment, where I pay tax through PAYE, and self-employed income, for which I file my tax return.
In the previous tax year, my earnings totaled 48k, with 29k coming from salaried work and 19k from self-employment. Additionally, I have incurred £4.6k in expenses.
For my salaried income, I have paid £5315.57 in tax and National Insurance contributions (NI), which is more than the £4,728.94 indicated by the government’s tax calculator. The discrepancy seems to mainly stem from the £600 higher NI payment. My tax code is 1257L.
I am wondering why my NI contributions are higher than expected, and I am curious if my tax-free allowance will be considered when I file my tax return for the £14.4k net self-employed income (19k – 4.6k expenses). I am uncertain if my tax-free allowance has already been utilized by my salaried income.
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In terms if NI, is the amount you have paid higher than the calculator shows because NI rates have dropped twice recently, meaning that you’ll pay less in this tax year than you did last year?
As for self assessment, your personal allowance is for all employment combined – if you have a code of 1257L for your job then that’s the entire thing – all of your self employed income will be taxed at the relevant rate (20%).
You say you have more than one employment role via PAYE, you can tell HMRC to allocate your full allowance to one and have zero on the other (tax code BR) or you can split it between the two. Either way won’t change how much you pay.
Not sure about NI, but it is not cumulative but based on what you pay in a period. The self assessment will add you employment and self-employment profits together, deduct your personal allowance and then calculate your tax liability (bandings adjusted for any pension payments). What has been paid for tax under PAYE will then be set against the income tax liability (the NI amount is not part of the calculation) to give you the balance owing or refundable.
Don’t forget class 2 and class 4 NI on the self-employment earnings, also student loan repayments and payments on account for 24/25 will show on the calculation .
Is it class 4 NIC? And if it’s the 2023/24 return you’re doing there’ll be class 2 as well.