Reduced payments and a better cash flow could be waiting round the corner for well-organised Shropshire taxpayers.
Under self-assessment, taxpayers may need to make payments on account of the current year’s tax liability.
However, our Accounts Manager, Susan Relf, says careful planning and attention to detail could help reduce the amount the taxpayer is required to pay.
“Payments on account are generally based on the previous year’s tax bill and, where relevant, Class 4 National Insurance contributions.”
“You will not be required to make payments on account if your total net tax bill for the previous year was less than £1,000 or if more than 80% of the previous year’s tax was deducted at source.”
“Standard payments are set at 50% of the previous year’s tax and Class 4 NICs liability and are payable in two equal instalments – on 31 January in the tax year, and on 31 July after the tax year.”
Susan said the payment on account calculation assumed that the current year’s liability would be the same as the previous year.
“But if you suspect that your tax liability for the current year will be lower than last year – maybe your income has fallen due to a downturn in business – then you can apply to have your payments on account reduced.”
To claim a reduction, your Accountant will need details of income, expenses and deductions for the current year (in essence everything you use to complete your Tax Return).
They will also need estimates of any figures that are not yet available in order to prepare draft figures and make the claim.
You can make a claim to reduce your payments at any time – if the claim is made after a payment on account has been made, the excess will be refunded.
“Remember though that interest will be charged, and you could face penalties if your actual liability is more than the reduced amount paid on account.”
Our Accounts Manager, Susan Relf