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Why Is My Self Assessment Tax So High?

JAFA Accountancy

Updated: 5 days ago


An individual writing in his notepad as to why his self assessment bill is so high

Is your self assessment tax higher than it should be? You’re not alone. In this article, we’ll explain why and share tips to help you manage it better.


Why Is My Tax Bill So High?

We understand how daunting it can be when your self-assessment tax return turns out to be higher than expected. However, there can be several reasons for this, which you should know of, so you can take the right steps:


  1. Payments on Account


Payments on Account can make your tax bill feel high because HM Revenue and Customs (HMRC) asks you to pay half of next year’s estimated tax in advance.


These payments are based on your previous year’s tax bill - 50% by 31st January and 50% by 31st July. If your income was higher last year, your advance payments may seem steep, even if you’re earning less now.


You can learn whether payments on account are compulsory for you here


What to do: Request HMRC to reduce your payments on account if you expect lower income this year.


  1. Reduction of Personal Allowance


When your income exceeds £100,000, your Personal Allowance, the amount you can earn tax-free, begins to decrease. 


Specifically, for every £2 you earn over £100,000, you lose £1 of your Personal Allowance. 


This means that by the time your income reaches £125,140, your Personal Allowance is completely eliminated. 


For example, if you earn £110,000, you're £10,000 over the £100,000 threshold. Dividing that excess by 2 gives £5,000, so your Personal Allowance is reduced by £5,000 (from £12,570 to £7,570). 


This reduction increases the portion of your income that's subject to tax, leading to a higher Self Assessment tax bill.


What to do: One way to lower your taxable income below the threshold is to increase pension contributions.


  1. Underpaid Tax from Employment


If you've underpaid tax through your employment, it can lead to a higher Self Assessment bill. This often happens when your employer uses an incorrect tax code, resulting in insufficient tax being deducted from your salary. 


HMRC will identify this shortfall and include it in your Self Assessment, increasing the amount you owe. 


What to do: Regularly check your tax code to ensure it's accurate and reflects your circumstances.


  1. Additional Income Sources


When you earn additional income beyond your regular employment, such as from freelancing, renting out property, or selling items online, this income is often untaxed at the source. 


HMRC requires you to report these earnings through the Self Assessment system. Since this extra income hasn't been taxed yet, declaring it increases your overall taxable income, leading to a higher Self Assessment tax bill.


What to do: Set aside a portion of your untaxed income throughout the year to cover your tax liability.


  1. Missed Deadlines or Errors


Another reason why your self-assessment tax calculation might be much higher than expected is missed deadlines or errors. 


If you don't file your tax return by the deadline (usually January 31 for online submissions), HMRC imposes an initial £100 late filing penalty. Delays beyond three months can incur additional daily penalties of £10, up to a maximum of £900. 


On the other hand, mistakes on your tax return can incur penalties ranging from 0% to 100% of the unpaid tax, depending on whether the error was accidental, careless, or deliberate.


What to do: File your return on time and review it carefully to avoid penalties and unnecessary charges.



What We Think


Let’s be honest - self-assessment can feel overwhelming, especially when your tax bill turns out higher than expected. 


Payments on Account, while designed to make tax collection smoother, can be a real headache for anyone with fluctuating incomes, like freelancers or small business owners. 


Then there’s the confusion around underpaid tax and additional income. It’s easy to miss details in tax codes or underestimate the impact of untaxed earnings, which often leads to a nasty surprise. And let’s not even start on the penalties for missed deadlines or errors - they’re necessary, sure, but they can feel harsh if you’re genuinely trying to get it right.


We think the self-assessment system could use a little TLC. Simplifying the process, improving tools like the HMRC app, and offering clearer guidance would make a world of difference for taxpayers. Having better ways to predict and plan for liabilities, especially when things like Payments on Account come into play, would save a lot of stress.



How JAFA Can Help


At JAFA Accountancy, we simplify self-assessment taxes for you while you focus on your business. Our AI-powered technology helps with bookkeeping, so you can track your income and expenses, reduce errors, and plan for things like Payments on Account. 


We provide clear financial insights to help you forecast your liabilities and plan ahead, so there are no unpleasant surprises. And if your income pushes you into a higher tax bracket, we’ll highlight ways to optimise your finances, like pension contributions, to ease the burden.


From decoding complex tax codes to ensuring every allowance and deduction is claimed, JAFA is here to take the guesswork out of your self-assessment. 


Contact our expert accountants in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277

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