Payments on account?

tyllwyd

I'm self-employed, and I didn't work in 2003/04 but in 2004/05 I earned about £10,000.

When I paid my tax bill in January 06, I obviously paid the tax for 2004/05 and the first payment on account for 2005/06. At the time, I wasn't sure how much I was going to earn in the next few months, so I didn't ask for my payments on account to be reduced.

As it turns out, I earned something like £7,000 in total, so obviously I'm not going to owe anything like as much tax as in the previous year.

If I get my tax return submitted before the July deadline for the next payment on account, do I have to pay the full amount calculated on the 2004/05 figures, or can I just pay the balance of what I actually owe?

goodscams

If you know what your correct tax is for 05/06 file for a reduced payment on account in July. All that will happen in January is they will look and see what tax is owed and if both payments on account cover the tax bill you will be fine.

If they find that you have underpaid for some reason they will charge you interest at roughly 6.25% on the balance not paid.

hope that helps

tyllwyd

That's great, thank you! My accounts are pretty straightforward, so I should be able to get my final tax return sorted by July, so it looks like I can just pay the right amount, which would be much better.