Payments on account to hmrc

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  • Payments on account to hmrc
  • poolman
    Member

    Anyone got any tips for softening the blow? I was braced for paying 2016/17 tax year in jan 18 but not half of 17/18 as well.

    Is it best to set up a separate tax account and pay in as you get paid, then when you get the bill its there in a separate account?

    Also, i see if you underestimate you get charged interest on the balance, so i assume you overestimate.

    Premier Icon rone
    Subscriber

    This was one of my pet pains and half the reason we became a company. It’s a fairly logical way to do it but seems unfair at the same time.

    If you can make a case you’re not going to earn as much in the forthcoming year you can get I reduced?

    Premier Icon jimdubleyou
    Subscriber

    1) Put at least 30% of your income into your “tax” account. Never, ever, touch it unless you’re paying tax.*

    2) It’s only a PITA the first year – if you don’t have a wildly varying income, your payments on account cover subsequent years.

    *your accountant might well be able to give you a running total of how much you should have put away.

    poolman
    Member

    Ok thats brilliant thanks, so its a year 1 only pain paying half the current year on account, years 2 and thereafter you just pay the annual due.

    Thanks, much appreciated

    Premier Icon rone
    Subscriber

    Ok thats brilliant thanks, so its a year 1 only pain paying half the current year on account, years 2 and thereafter you just pay the annual due.

    Thanks, much appreciated

    You always have to pay on account, but you only pay the balance for the end of whole year if more than what is already on account.

    coomber
    Member

    Tax liability £1000

    Following January pay £1000 + £500 = £1500

    Following July pay £500

    Then pay £500 every January and July ongoing until taxable profits/tax liability goes up or down.

    First year is worst though as you pay 1.5 x tax in one go, but ongoing does even out.

    Sorry if patronising, but your reply read like it’s a one year thing whereas you’ll have payments on account ongoing unless your tax liability goes down.

    rone – Member

    You always have to pay on account, but you only pay the balance for the end of whole year if more than what is already on account.

    Spot on. As an example:

    I.e tax liability £1,500, payments on account made 2 x £500, you’d have £500 to pay the following January, and payments on account that January and July of £750.

    You can set up a payment scheme with HMRC to pay ad hoc if that helps remove the temptation to take from a seperate account.

    poolman
    Member

    Ok thanks i understand, its a new venture and i thought i just paid in arrears, its the 50% current year on account due in jan 18 that surprised me.

    I m not complaining of course, as if i were paye i d be paying monthly.

    houndlegs
    Member

    I had this a few years ago, it also put me over some threshold which meant I owed a pile of NI as well. Was all good the year after though, cos my earnings dropped off a cliff, so I got a nice rebate 😀

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