Payments on account

crystaltips_68

My accountant has just told me my tax bill for next Jan, and i that i will have to pay half of the next years tax too, (and the other half in July) based on Januarys payment. I am a single mum (2 kids), and will live in poverty for 2011 if this is the case. Is there any way to avoid this??

fengirl_2

You can apply to reduce the poa if your profits this year are likel yo be less. But if they are not, you will pay interest on any underpayment on account.

ceeforcat

Although the system, particularly at start up, is not ideal, there is no alternative. However, from your post, it would appear that you have been self employed since April 2009 (at the earliest) - you have not had to pay any tax since then. I would presume that you would have some knowledge of tax payable at some stage in the future.

crystaltips_68

My profits for this year will be about the same, but i would rather postpone the POAs for a year and pay the interest, if this is possible! How much is the interest likely to be?? I am renovating a house and need to get it to a reasonable standard asap. At the mo it is horrid to live in, so it is my priority, not extra tax.

I have been self employed for about 5 years, gradually building up.

BoGoF

A fruadulent request to reduce your POA's can incur penalties (rarely enforced however). I'm sure a lot of us would like the luxury of using HMRC as a bank but for the majority of us that's not possible.

And how do you figure it's extra tax ?

Mikeyorks

crystaltips_68 wrote: »

not extra tax.

It's not extra tax ...... it's how SA has worked ever since its inception in 1997. As soon as your liability for a year exceeds £1k (used to be £500) you have to make payments on account (Jan and July) of the following year. Those payments are then offset against the tax due the following Jan ..... and so the cycle continues.

More detail (a few paras down) on POAs here :-

http://www.hmrc.gov.uk/sa/understand-statement.htm

But you can't just unilaterally decide not to join in paying POAs - you have to give a reason and sign a declaration to that effect (SA303). Your only legitimate out is if you're also on PAYE and more than 80% of the income is derived via PAYE? That obviates POAs.

crystaltips_68

Ok, i understand now, thanks. Guess i will just have to live off baked beans for the next year