ClearSky, liabilities shock and poor advice.

[RonBW]

The only thing I did wonder is what kind of tax planning might they have given the OP to avoid hitting thresholds which trigger this extra tax. If the tax is triggered at a certain level I'd be telling the accountant who might suggest only taking a certain amount in Divis to keep under it or something. That said I'd still be aware it's up to ME to take the right amount of money out even though the accountant advises what the maximum available is so it makes me come round to thinking that the OP is very much responsible ultimately.

The threshold for student loans is either £17495 or £21000 depending on when you took out the loan (mine is the lower one, my girlfriend is the higher). So anything over that and you start repaying the loan - very little to avoid paying it.

But unless you tell your accountant about it, they can't tell you that you need to repay the loan. Not much they can do to reduce / remove the payment, but they could remind you - but only if they know about it first.

One thing that confused me is that the tax bill only came in recently - my tax bill gets calculated and paid in January / summer, not in November.

[radish2008]

One thing that confused me is that the tax bill only came in recently - my tax bill gets calculated and paid in January / summer, not in November.

SA is around now, I've just done mine. My year end is in October as well so my tax bill has been done, Corp Tax etc. However, your personal finances are your problem, not your accountants. And at the end of they day you are running your business, not your accountant.

[pr1]

If you had made them aware that you have a student loan I would absolutely expect them to AT LEAST have a "beware you may need to set aside some money for higher rate income tax and/or student loan repayments" on your monthly thing, preferably be able to give you a rough amount to put aside

Don't agree with "they're your business's accountant, not your personal accountant" - if that's how an accountant specialising in 1-man companies wants to act they're not going to be remain popular for long, especially as a lot of twentysomething contractors will have student loans now



however
regardless of what you told them, YOU knew you had a student loan, did you think you could earn 30, 40, 50, 60k without having to pay anything back? It shouldn't have been a shock that you needed to pay something

[ASB]

In terms of the student loan my understanding was that these were supposed to be declared to the employer and the repayments were calculated as part of payroll and handed over to SLC by some kind of magic.

So, whoever is doing the payroll should be responsible for asking about the loan. Somewhat remiss not to. They are also responsible for the admin of it. That's a bit of a greyer one. But nevertheless if a payroll service, or even calculation is being covered I do personally think the accountants have some (limited) accountability.

For the other personal tax bill, the OP has not given any indication of how it has arisen. Again the accountants should have advised something along the lines of "if you are a higher rate taxpayer there will be additional tax to pay" or "don't forget they new dividend tax will also have to be paid".

Equally if the OP has any OP from any other sources whatsoever then this is potentially going to affect their overall combined tax liability. But their accountants could know this. Whilst it is no the accountants responsibility I would have expected a bit of warning and explanation. Especially with a "hey, you can draw this" type of service.

But an expectation ones accountant will know everything about ones personal situation and be able to deal with it by some form of magic is unrealistic.

[Lost It]

Have to admit...

I feel a lot more "in control" since I changed accountants. FreeAgent has a lot to do with it.

Because I truly hate nasty surprises of the tax kind.

[Maslins]

I advise the OP to switch accountants to one that supports FreeAgent, this kind of thing can be shown in real time (providing FA has all the information it needs of course) on the FA pages.

Whilst I don't in any way disagree with this, it's worth stressing that personal tax is very separate to the company's affairs. Purely looking from a company perspective, the "Carried forward/distributable" figure in the very bottom right of the overview page is great, it factors in all company tax liabilities on the horizon (as well as other possible liabilities) giving you a figure for what you can take in dividends. However it doesn't in any way factor in personal taxes, and there's no realistic way that it can.

I'd suggest most contractor accountant's should be there to advise not only on company taxes, but also the personal tax impact. In previous years many modest earning contractors will be used to taking ~£8k salary, ~£30k divis and suffering no personal tax at all. Going forwards all but the lowest earners will be suffering some personal tax, and it's important accountants flag this so it doesn't come as a horrendous shock.

[Maslins]

In terms of the student loan my understanding was that these were supposed to be declared to the employer and the repayments were calculated as part of payroll and handed over to SLC by some kind of magic.

So, whoever is doing the payroll should be responsible for asking about the loan. Somewhat remiss not to. They are also responsible for the admin of it. That's a bit of a greyer one. But nevertheless if a payroll service, or even calculation is being covered I do personally think the accountants have some (limited) accountability.

Most contractors will be taking a low enough salary that there's no student loan deductions taken from that in isolation. It'll only be when their personal tax return is done and other income (typically primarily dividends) is factored in that a student loan repayment will arise.

[Alan @ BroomeAffinity]

I suppose I have a bit of sympathy with both camps on this one. While we take the view that anything within the remit of HMRC is something we should be helping clients with - that would cover SLC repayments and Child benefit for example - the individual has to accept a little responsibility. It's fairly common knowledge that Student Loans need repaid when your start earning a certain amount, so the OP must have kinda expected it. There needs to be a level of individual responsibility.

[Lance]

There needs to be a level of individual responsibility.

which applies to more than just contracting

[contractUKonline]

Thank you for all your replies, I’ve been trying to gain some advice about this for a while and this has been helpful.
There seems to be a split between those that agree that I should have been advised and others that believe it’s my role to have known. However the fact there is a split makes me believe that I do have a case.

They are your company accountants not your personal one and you are confusing two separate entities. You and your company.

@contractukonline company accountants are not your personal financial advisors. In other words it is up to you to understand your personal tax and other liabilities.

Ok, but my stance is then tell me upfront that you don't provide personal advice instead of replying to my emails in a way that either offers part of the information I need or suggests that you do offer personal advice. If I was told clearly "we don't offer personal tax advice you would need a different service to provide this information to ensure you were fully informed about all of your liabilities" I would have gone to a different accountant / system.
I don't understand tax law, in my mind this is what I'm paying for - to be advised clearly I've been paid X I need to put aside Y. When I've directly asked my accountant "what can I withdraw to cover everything?" and the figure fails to consider personal tax / student loan, I feel completely let down.

The only thing I did wonder is what kind of tax planning might they have given the OP to avoid hitting thresholds which trigger this extra tax. If the tax is triggered at a certain level I'd be telling the accountant who might suggest only taking a certain amount in Divis to keep under it or something.

Exactly, NONE! I received none of this advice, this is what I was hoping for, advice about when to leave money in the company vs taking it out. I was expecting they would be proactive and advise me when the situation presented itself. I thought I might have got advice along the lines of: Next month you'll be going over your threshold and will start paying tax, these are your options / this is what you need to put aside. I've had none of this.

I might have been tempted to ask another couple of friendly accountants for advice rather than taking mine to task on a public forum first.

I've tried. Without all my paperwork (or unless I pay them) they only offer very top-level advice. However, what I've learnt from speaking to other accountants is £200+ a month for contractor accounts is expensive. I've been advised that £70 is about the going rate for the work that is being done. I was (initially) happy to pay extra to avoid exactly this type of situation.

If you are going to hit your tax breaks surely you can just ask them to help you with a directors loan to pay the extra tax and pay it back in the next tax year?

^^ THIS, exactly, this is the type of advice I would expect. I have no idea but I will ask. They know my circumstance so I would expect this type of thing to be suggested to me. However, from my current experience I'm not surprised I have no idea whether this is an option.

I can understand the OP's concerns. Most, if not all of this will be settled when he does his personal tax return. Are Clearsky doing this for the OP? It is the OP"s duty to give Clearsky the complete picture when (if) they do his personal tax return. I don't think the OP has much to worry about at the moment.

Yes, they are, they complete it all, I complete the relevant forms or answer the relevant questions and they file it for me. It's a huge worry, these bills are only presenting themselves to me now. I've not been able to pay myself at all for last month at all as I believe this will all get sucked up into paying these shock bills.

I advise the OP to switch accountants to one that supports FreeAgent, this kind of thing can be shown in real time (providing FA has all the information it needs of course) on the FA pages.

I feel a lot more "in control" since I changed accountants. FreeAgent has a lot to do with it. Because I truly hate nasty surprises of the tax kind.

I wish I knew about this sooner. There’s so much I would do differently; this software looks like exactly the type of thing ClearSky attempt to have. There’s this dashboard that tells you information but none of it is real time, doesn't state personal liabilities and often it’s over a month old so is pretty much useless.

I agree that you as the person responsible for your own personal taxes should be more aware of potential liabilities, however I also feel it's our job as accountants to make clients aware of this. Pointing out if dividends are going over thresholds, what taxes will be paid in certain thresholds etc

^^THIS, thank you.
Exactly, I’m not given this vital information, I feel like their entire system is automated, I get given these generic PDFs and advice, that a lot of the time have incorrect information or graphs and that’s it.

The monthly statements/slips are all ok but they need clarity and explanation around it rather than extracting everything from the company without any further details such as personal liabilities, etc.

My entire sentiment.

However, your personal finances are your problem, not your accountants. And at the end of they day you are running your business, not your accountant

I would understand this if I was running a typical company and dealing with a typical accountant, but they’ve been pitched as Contractor specialists the whole point of my going down the limited route was for a company / service to advise of all finance related dealings.

Don't agree with "they're your business's accountant, not your personal accountant" - if that's how an accountant specialising in 1-man companies wants to act they're not going to be remain popular for long, especially as a lot of twentysomething contractors will have student loans now

THIS^ Exactly, that’s why I’ve used them instead of any other accountant, in my mind they specialise in the nuances of tax law and finance when it comes to contracting.

If you had student loans you needed to pay back then the fact you were unaware of them is your fault not theirs. The Student Loans Company makes it very clear to those who took out the loans the criteria for paying it back.

however regardless of what you told them, YOU knew you had a student loan, did you think you could earn 30, 40, 50, 60k without having to pay anything back? It shouldn't have been a shock that you needed to pay something

It's fairly common knowledge that Student Loans need repaid when your start earning a certain amount, so the OP must have kinda expected it. There needs to be a level of individual responsibility

I was aware, as far as I was aware they were also aware. SLC take money directly from your payslip, it's not something that's usually managed by the individual. Honestly, I thought I would be advised once I reached a threshold and told to put aside money for it per month. I was expecting a breakdown similar how it’s taken out of your payslip. I didn’t expect it be hit with a lump sum.

For the other personal tax bill, the OP has not given any indication of how it has arisen. Again the accountants should have advised something along the lines of "if you are a higher rate taxpayer there will be additional tax to pay" or "don't forget they new dividend tax will also have to be paid".

From what I can tell, this is because I’ve been told I can take dividends out from the company but not told the tax I will need to pay on this monthly, despite asking. I’ve not been given clear advice that I’m approaching the thresholds, my options and if I withdraw X of dividends then I need to put aside Y of personal tax.

I'd suggest most contractor accountant's should be there to advise not only on company taxes, but also the personal tax impact.

Exactly what I’ve wrongly assumed, I have no idea why on earth it wouldn't be setup like that

..and it's important accountants flag this so it doesn't come as a horrendous shock.

They didn’t and it really is.

There needs to be a level of individual responsibility.

I’m not sure how much responsibility I’m willing to accept for this situation. In my mind, I pay a good chunk of money for a service to manage my finances while I’m a contractor. I feel like it's reasonable to expect a clear simple breakdown of “you’ve been paid X you need to put aside Y”. That’s all I’ve been asking for. I feel like not only has this not been done but I've not received personal advice about thresholds and my options (like a directors loan someone mentioned). I feel like the fee I paid over the past year should be refunded or partially refunded and I will use this to cover these costs.