A client just emailed to query his payments on account “I am a little confused as to the payment on account bit…I thought I was due the tax payment now and 50% of this payment in advance of next years tax by july? Am I having to pay 2 lots of advance payments being 100% of my tax figure…I’m sure I have missed something here..”
It is a little bit involved but if we look at accounts for the tax year ended 5 April 2012, ie the 2012 tax return:
For 2011/12, 31 January 2013 is when any balance of tax is paid, if you have not made any payments on account this will be the whole tax bill
If the tax payable is more than £1,000 you are obliged to make a payment on account for the following year so:
For 2012/13 there are 3 payment points:
31/1/13 1st payment on account (based on 50% of last year’s payment)
31/7/13 2nd payment on account (based on 50% of last year’s payment)
31/1/14 Balancing payment – if the profit and therefore tax is the similar to last year this will be small
On 31 Jan 14 you will also have to make a payment on account of the following year…
If profits are similar every year you will make payments of about the same every 6 months
Effectively you get a double whammy the first time you make a payment on account, as you are effectively making 3 of the “6 monthly” payments in one instalment and this catches lots of people out.
Although this might seem very unfair it actually does not collect the tax very soon in comparison to an employee whose tax is deducted every month. For 6 April 2012 to 5 April 2013, it will be paid on 31 January 2013, 31 July 2013 and the balance on 31 January 2014, ie 10 months into the year then 4 months and 10 months after the year – not bad payment terms.
This article only covers the basics so if you have any specific queries relevant to your personal circumstances you should seek professional advice before taking any further steps. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”