PAYG Self Employed Tax

adarynefoedd

Any thoughts about whether this is a good idea.

Current tax position
Self employed since 2003, tax and tax forms completely up to date, expensive accountant, usually pay £5200 every six months as earnings have been quite stable. (thought highly intermittant). Issue about 16 - 20 invoices each year.

Concerns Credit crunch so far not affecting business but may do, so I thought as my income tax is usually about 21% of my gross earnings I would pay 21% of any invoice paid directly to the Inland Revenue. I can easily do this via BACS as the money comes in.

The argument in the past has been 'pay it into a savings account' but I thought as the interest irate are so derisory it might as well go straight to Alistair thus hopefully avoiding the big bills in January and July which I regard with dread.

Any Tax Inspectors reading this or anybody else who understands how the system works, please point out the disdvantages.

Thanks/diolch yn fawr

Cook_County

The answer is in your signature line. You need to reduce more expensive debts first before loaning money to the UK government ... this is not a tax comment but a money-saving one!

Mikeyorks

adarynefoedd wrote: »

the interest irate are so derisory

I like the Freudian slip. I'm a bit irate about the interest rates as well .... but it's not cutting any ice. And I trust you've inadvertently also added an extra 'zero' to the Mtge outstanding in your signature?

There's no real reason why you can't pre-pay your SA tax. But there's no credit interest (unless the payment is subsequently repaid at a later date when it might attract a mild supplement) .... so why would you want to? Even the relatively derisory rates of interest, currently on offer, still make it beneficial to keep the money until circa 31st Jan and 31st July. And it acts as a fallback if you suddenly have an unexpected and short term cashflow issue?

However if you're determined to pre-pay ... there's no real impediment. But ... provided you've no Return being processed and where there may be a repayment due and you've ticked the re-payment box? In that case any advance payments would also be returned to you .... as the SA system is liability rather than year focused when it comes to payments. But if there's nothing to cause your SA record to go into activity ... then the pre-payments will happily sit there.

But I would still keep the money until adjacent the due date! And pay off the Comet loan ... unless 0%!

cosyc

If you are registered with hmrc for SA online you can now set up a monthly direct debit so at least then it's automatic, no worries.