Accounting for Income
Posted: September 10th, 2017, 1:43 pm
Sigh!
I am posting this here as I don't know where else to put it on LMF. It might be moved as it is not a Tax question as such but it is intrinsically linked to the system of income taxation. Also, people here who are used to unpredictable incomes must have encountered the problem before. In addition, this board comes under 'MANAGING YOUR FINANCES'.
I have for years kept a regularly updated spreadsheet of my current share portfolio and overall financial situation, including showing expected annual income at that point. This was primarily for my own use and not itself for any tax reporting reasons.
A couple of years ago:
I was a basic rate taxpayer. My PAYE income was pensions only so was known and fixed at the start of the tax year. A Post It Note and one minutes work was all I needed to write out the gross income, tax to pay, nett income for the year and transfer nett PAYE income to the spreadsheet. Expected dividends (no tax to pay), expected interest (nett of tax) was totalled up along with tax free income from ISAs etc. This was all simply added up to give a total expected yearly post tax income for the year. Simple.
No longer. Since the changes to the income tax system I have struggled to convert my simple spreadsheet, ideally to give the same result of overall real income. I eventually settled on a sort of bodged hybrid, by totalling up gross received dividend and interest, adjusting the gross totals by applicable tax rates and then adding in two adjustment figures to compensate for the relevant allowance bands. But I no longer know what the nett PAYE income is and can't do until possibly over a year from the current(!) spreadsheet. I left this dangling with last year's figures in place but have recently been trying again to sort it all out.
Obviously the reality is I cannot continue to work with post tax figures (the real income), as I cannot know what they are. So the only common figures would seem to be the gross, pre-tax figures. But how then do I add in intrinsically tax free figures? Artificially gross them up? This is just silly. It begins to look as though I need to have two income totals, a tax free one and a separate gross taxable one.
But, my 'main' share portfolio consists of shares not in an ISA, a share ISA and cash in an interest bearing taxable account. So...
My question is how do other people deal with this, if they do? Or should I just give up on the whole thing?
I am posting this here as I don't know where else to put it on LMF. It might be moved as it is not a Tax question as such but it is intrinsically linked to the system of income taxation. Also, people here who are used to unpredictable incomes must have encountered the problem before. In addition, this board comes under 'MANAGING YOUR FINANCES'.
I have for years kept a regularly updated spreadsheet of my current share portfolio and overall financial situation, including showing expected annual income at that point. This was primarily for my own use and not itself for any tax reporting reasons.
A couple of years ago:
I was a basic rate taxpayer. My PAYE income was pensions only so was known and fixed at the start of the tax year. A Post It Note and one minutes work was all I needed to write out the gross income, tax to pay, nett income for the year and transfer nett PAYE income to the spreadsheet. Expected dividends (no tax to pay), expected interest (nett of tax) was totalled up along with tax free income from ISAs etc. This was all simply added up to give a total expected yearly post tax income for the year. Simple.
No longer. Since the changes to the income tax system I have struggled to convert my simple spreadsheet, ideally to give the same result of overall real income. I eventually settled on a sort of bodged hybrid, by totalling up gross received dividend and interest, adjusting the gross totals by applicable tax rates and then adding in two adjustment figures to compensate for the relevant allowance bands. But I no longer know what the nett PAYE income is and can't do until possibly over a year from the current(!) spreadsheet. I left this dangling with last year's figures in place but have recently been trying again to sort it all out.
Obviously the reality is I cannot continue to work with post tax figures (the real income), as I cannot know what they are. So the only common figures would seem to be the gross, pre-tax figures. But how then do I add in intrinsically tax free figures? Artificially gross them up? This is just silly. It begins to look as though I need to have two income totals, a tax free one and a separate gross taxable one.
But, my 'main' share portfolio consists of shares not in an ISA, a share ISA and cash in an interest bearing taxable account. So...
My question is how do other people deal with this, if they do? Or should I just give up on the whole thing?