untied's tax calculation - what it means

The tax in untied is a guide but it's only after you submit that HMRC actually tells you formally what is due (this may come by letter or email).

When we were designing tax summary at the top of the transaction screen, we had lots of discussions what people wanted to see. It's important to know what is and is not taken account of.

What the tax number at the top of your screen means

The calculation is what will appear in your tax return. It's based on a year's standard personal allowance, without adjusting for your own allowance or amended tax code (because this all happens at HMRC's end after the return is submitted). This is what we found the majority of people expected from the figure in our research.

While it's an indication during the year, it's worth understanding how we do it.

It doesn't take account of where you are in the year - so midway through the year if you've earned £13,000 as self-employed for the six months from April to September, you will see only a small amount of tax due (the personal allowance is just over £12,500, noting that national insurance is also due). And that tax will increase during the following six months in the lead up to the end of the tax year.

If you also have a salary that is effectively "taking up" the personal allowance, again that won't show until you enter the details.

Traditional Self Assessment

When you file, HMRC check the calculation based on the data submitted. This doesn't take account of anything that may sit on your HMRC account, but looks to make sure that the internal logic matches theirs. In some cases you will get an error and will need to contact us.

In MTD

If you are in MTD, then there is a separate MTD calculation that HMRC prepare - this appears in the MTD section of untied. HMRC do spread out your personal allowance over the year - so if you have earned £4k after three months, you'll see tax due in HMRC (since 4x£4k=£16k ... above the personal allowance), but not in untied's summary (as you haven't yet reached the personal allowance).

Paying tax

After you submit, HMRC will tell you what tax is due - see Paying your tax to HMRC.

If there is a small amount due, it is unlikely that you will need to pay anything as the adjustment will be made again through your tax code.