Paying tax in advance? help needed

[JennaRichards]

Today i got a self assesssment statement of account throygh, saying i owe them £550 by 31st July this year.

 

I thought this was a bit odd since i havent even filled in my tax return and sent it off yet ( i'm self employed, so i cant talk to an employer about this).

 

I rang up inland revenue and they explained to me that i pay in advance for the following year.

 

Basically last year my tax was £1100, but i was charged £1650 (which i thought was right, since i couldnt understand the form etc).... so i paid the £1650 and thought nothing of it. However it turns out the extra £550 was part payment towards this years tax return and the second payment of £550 is due now in the next two weeks, or else it will incur interest.

 

All this is done on them assuming i'll make enough money this year to be paying £1100 tax again or higher. They'ev said if i owe more tax i just pay the extra, if i owe less tax i get a refund.

 

However my problem is thus... due to various factors i have had a very very bad business year and as such, my profits are very low and so is my tax (as i've worked that out roughly already)... my tax this year is only going to be about £345 at the most and i dont have that aside, as i was earning so little it had to be used to pay the rent and i figured i'd have until jan now to save that up while business gets back on track... so now i'm supposed to find £550 of which i dont have in the next two weeks or i get charged interest for money i dont even owe them!

 

Does anyone have any constructive advice? or can point me to another forum that deals more with tax issues etc?

[dw190]

Does anyone have any constructive advice? or can point me to another forum that deals more with tax issues etc?

 

If you send in your accounts together with a Tax Return and payment of the amount you have calculated, they then have to reassess from the the figures you provide.

 

I had this problem when I was S/E but started to do my own acounts within a month of the end of the tax year and always requested a Tax Return if there were any changes to notify.

[Discordian_Front]

If you phone your Tax Office back and explain you want "reduce your payments on account" they will be able to make the necessary adjustments to your record ,so you won't have to pay anything 31-07-06.

 

It may also be worth sending in your Tax Return as soon as possible. Your have already paid £550.00 towards your 2005/2006 Tax bill in Janaury. If you are correct and your Tax for that year is only £345.00 you will be due a refund of £205.00

[Seminole]

Yep, you can apply to reduce your payments on account but you should bear in mind that if you get it wrong you will be liable for interest on the unpaid tax. Also if your income has fallen, it probably is a good idea to get your tax return in early.

[Rich44]

This is very interesting as my partner will be earning a lot less this year as will be claiming Maternity allowance for 6 months (starting now) and the IR told her that you still have to pay as if you were working then get the money back and that she has to declare the MA and pay tax on it.

 

Will look into this further now thanks too

[JennaRichards]

Thanks everyone that has replied... i ang the tax office and they suggested the reduction of payments, but didnt explian it very well. She was basically saying if she did that, id then be in credit, but i'd still be paying them interest... made no sense to me, but its my own fault for not reading up on this kind of thing.

 

I suggested i fill in my return online and get the instant calculation, then give them the ref number and they can then see that my tax is less than the £550 i've already paid and clear the statement they sent me. I may be due a refund, but i'll most likely have to pay class 4 NI and if they are doing this 'in advance' thing, probably a further £150 odd.

 

I dont know why they do the in advance thing, its a bit cheeky... and im guessing its in part to make it all more complicated for people to understand so they get money quicker or something.

[Rich44]

I suspect its more to do with sitting on the money for an extra year multiply that by all the self-employed people and add the interest its a fat whack of cash

[stacymason]

Hi Jenna,

 

No payments on account will be due for next year if tax due this year is under £500. I'd suggest filling in the return on line and ignoring the july payment for now.

 

Stacy