Employed to Self Employed, and overpaid tax

Owen

Hoping the boardsies can help on this one. Traditionally, I've exceeded the lower tax band and paid the higher rate of tax annually, but this year I've literally just gone self employed. So, my employer was charging me 40% tax, but my earnings to Friday only reached 31k.

So, I probably should have been on the lower rate of tax, can I claim back the tax I've overpaid - and if I can, how long would it take to get it back?

Thanks in advance guys.

gillo_100

I'd imagine you'll have to wait until end of year when you know how much you have earned from your self employment and do your tax returns. Depending how much you make you may not be claiming anything back might even end up paying more tax.

Owen

gillo_100 wrote: »

I'd imagine you'll have to wait until end of year when you know how much you have earned from your self employment and do your tax returns. Depending how much you make you may not be claiming anything back might even end up paying more tax.

I don't think so ... self employment wages aren't taxed, only the profit from my business. Please guys, if you don't understand the technicalities of what I'm asking, don't guess.

I'll probably phone the revenue tomorrow just to confirm, but would appreciate the input of the tax gurus here on boards.

gillo_100

I don't really understand what you mean by self employed wages aren't taxed. You are taxed on your income wheter it comes from wages or profit from a company.

With regards to claiming money back the normal route is the P50
google it and you'll find a sample. However according to it you are entitled to a refund

"If tax has been deducted from your pay since 1 January and you are now unemployed you may be entitled to a tax refund"

As you are self-employed and not unemployed it would appear you are not entitled to a refund. Depending on if you have registered as self employed yet on not you may be able to claim back the tax.

It should take no more than 4 weeks to get the return from the revenue.

Owen

gillo_100 wrote: »

I don't really understand what you mean by self employed wages aren't taxed. You are taxed on your income wheter it comes from wages or profit from a company.

I don't think you understand how self employment works. As an employee of a regular company, you pay PAYE. That's what I've been paying at the higher rate. As self employed, I don't pay any tax on the wages I pay myself, these are called drawings. I do however pay income tax at the end of the year on the profit the business has made - which is separate to PAYE tax. So essentially, as I've finished paying PAYE tax for the year, at the higher rate, and didn't exceed the higher rate threshold, I think I'm entitled to tax back. I'm just curious to know if I can claim that now, or do I have to wait until the end of the year.

If it's all the same to you, I'll wait until someone with more experience with PAYE logs in and can give advice.

misspiggy40

So you are subcontracting for someone then who is with holding 40% because you do not have a C2?????

misspiggy40

I think some of the answers you need are on page 15 of the below leaflet

http://www.pfsgroup.ie/documents/IT64%20Guide%20for%20Sub%20Contractors.pdf

I am just a bit confused because the amount to be held by the main contractor.....as opposed to employer as you are self employed......is 35%.

Are you getting your Form RCTDC each time you get paid??

Total apologies if I have picked you up wrong and it is not an RCT situation.

Bye for now and good luck.;)

Owen

No, I'm not subcontracting for anyone. Ack ... the whole point of this thread has been completely missed. Twice.

Could people who don't know what I'm talking about please refrain from posting?

misspiggy40

Paintdoctor, if two people misunderstood you is it poss you have phrased it in an unclear manner. :rolleyes:

Owen

No, no it's not. Nowhere in my OP did it mention anything about subcontracting - you jumped to that conclusion. Likewise, the first responder clearly doesn't understand how self employment works either.

Last time, and I'll ask really nicely now before I get the Mod of this forum to close the thread, please please please please do not post in this thread if you don't know what I'm asking, or have the necessary training to provide an answer.

CDfm

In practice what happens is that you register for tax on a self employed basis is that your assessed for tax in arrears but you cant get a tax refund back the way you want as the tax credits are not available.

Currently you have paid tax and prsi as an emplyee and your allowances and tax bands have been apportioned to you on a monthly basis. So you have recieved your full allowances for the year to date. You are not entitled to a refund as you havent overpaid.

Now you are self employed and your profit will be taxable but in Yr 1 this will be done on an arrears basis based on your profit.

So next January you can complete a Form 11 Tax return form 2009 and based on your taxable income from self employment and as a PAYE worker you will pay tax or get a refund for any overpayment based on your total income.

Its not all bad news as you will recieve your PAYE allowance for the whole year and that will be worth around 6-700 euro to you.

In your 2nd year you will have to make a provisioin for preliminary tax (the self employed equivalent of PAYE)which basically an estimate for income tax which you can pay monthly so its a good idea to get an estimate of what your income expenses and profit will be.

misspiggy40

Although you are very cross, LOL, I am very thick skinned.

You said 'This year I literally just went self employed', then that you had earned 31k, so yes I assumed you were in an rct situation. The answer is often in the question and the the wrong answer likewise.

Is it that you paid PAYE up to Friday? If that is the case then Gillo 100 is correct. Revenue will not assume that that is the sum total of all the tax you will pay in PAYE this year. You might take up some other employment later on in their estimation. So when you do your 11e at year end for your self employment you will also enter paye figures and they will take this paye tax paid off your self employed bill for tax.

If you were unemployed you can claim it back after a cetain number of weeks on a week by week basis ie. not in a lump sum. You may be able to do something different but in 12 years of working in payroll (hence I would like to offer my opinion as somewhat valid) I have never actually seen that done.;)

Owen

CDfm wrote: »

Its not all bad news as you will recieve your PAYE allowance for the whole year and that will be worth around 6-700 euro to you.

Great stuff, thanks for taking the time to post CDfm, you've cleared up a lot of questions I would have had additionally. You're a star!