Starting and Running a Business All-In-One for Dummies by Barclay Liz

Author:Barclay, Liz [Barclay, Liz]
Language: eng
Format: epub
Tags: Business
ISBN: 9781119996002
Barnesnoble:
Goodreads: 20988803
Publisher: John Wiley & Sons
Published: 2007-09-14T00:00:00+00:00

Book IV

Paying on Account

How Not

to Cook

the Books

The self assessment tax system works with two formal payment dates a year.

On 31 January you have to pay anything still outstanding from the tax year which ended on the previous 5 April, plus half your likely tax bill for the year which will end on the forthcoming 5 April. So on or before 31 January 2008

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320 Book IV: How Not to Cook the Books

you should have paid any outstanding balances for 2006–07 plus half of what you are likely to owe in 2007–08.

You do not have to make payments on account if 80 per cent or more of your income tax bill (but not capital gains tax) is covered by tax deducted at source – PAYE and automatic deductions from savings interest are common deductions. It’s up to you to work this out. It is best to ignore this concession if you are a ‘borderline’ 80 per cent case.

There is no interest benefit if your payment arrives early (but at least you know you’ve done it and won’t get penalised!)

Asking for a reduction in payments

If your tax liability for this year is likely to be significantly lower than the previous year, you can ask for a reduction in your payments on account.

Otherwise, you could end up paying more than you need until it is corrected in the following year’s tax return.

You can claim a reduction on your payments on account on a tax return, or by writing to HMRC. You must give valid reasons to back your claim. HMRC

adds interest to your repayment, but the rate is far lower than the interest they charge you if you owe them money.

Adding up the potential penalties

You face an automatic £100 penalty if you fail to get your return in by 31

January. And there is a further £100 if you have still not filed by the following 31 July. In addition, there is a 5 per cent surcharge on tax unpaid on 28

February, and a further 5 per cent if it is still unpaid (plus interest on the first surcharge). This is a painful sum!

Penalties cannot be greater than the tax owed. If you discover you owe nothing or are due a rebate, the 31 January deadline does not apply.

Some people who cannot fill in their form properly make an estimate and then pay over more tax than needed. If you pay more than you owe, you cannot be fined. You can claim any excess back later.

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