UK Tax Payments (part 1)
I have had a few enquiries this week about UK tax payments so I thought this blog post may be useful for others.
Sole Trader/ Partnership
(For Limited Companies see part 2)
If you are a sole trader or a partner in a business you will have two deadlines to make payments in the year; 31st January and 31st July. For example, with regards to the tax year 2014/2015 (6th April 2014 to 5th April 2015) you may have made a payment on account on or before the 31st January 2015. This will have been an estimated amount of tax due calculated by HMRC. This is calculated simply on 50% of your final tax bill for the previous tax year (they assume your tax bill will be similar). If you did not pay any tax last year then you would have paid nothing on account for 2014/2015.
If you did make a payment on account on or before the 31st January 2015, you will be asked to pay the same again by 31st July 2015 if you have not yet filed your tax return. When you do file your tax return (after 31st July 2015) you will either get a tax refund or be given another payment to make by 31st January 2016, in addition to the 50% estimated for the current tax year 2015/2016.
If you have filed your tax return before 31st July 2015, you will be due the balance by 31st January 2016. This will be the calculated tax less the payment you made on account on or before the 31st January 2015. So if you do not want to make an estimated payment to HMRC by 31st July 2015 I advise you to get your tax return filed! However, by 31st January 2016 you will have the balance to pay for 2014/2015 and an estimated 50% due for 2015/2016 so it can get a bit tight on cashflow. January is hard enough as it is!
You can request to make adjustments to the payments on account via your online account. However,they must only be requested if you genuinely believe you do not owe as much tax as HMRC think you do. If you make a request to reduce the payment on account purely for cashflow purposes you are just stalling the inevitable. If you are in this position please request an appointment with your accountant or a finance coach to discuss ways to improve your cashflow.
Also look out for my ebook coming soon that identifies 15 steps to improve your cashflow!
© Helen Monaghan
