Self Employed, Pregnant and Tax!

keggsy

HI All,
I am just after some advice really,
I am self employed and last tax year (2010-2011) I turned over just under £22k with around £6k in expenses. It’s my second year of trading and I turned over a little more than £1700 compared to my first year.
I pay my tax on account on Jan 31st and July 31st and so far this year I have paid £2600 towards my 2010-2011 tax bill.
Basically, I am pregnant and I am due Nov 1st, I am stopping work on October 1st and then return on March 5th 2012. I have calculated that my turnover for this tax year (2011-2012) will be around £8K without taking into account any expenses.
From March I will not be working hardly at all compared with what I do now due to being a full time parent. I plan to work in the early mornings, evenings and weekends when my husband is home to look after the baby. I have done some calculations and I think we will be lucky if I turn over 10K.
Ok, sorry to rabble on but here is my question. Can I ask (or my accountant) HMRC to reduce my on account payment?
Otherwise HMRC will be expecting me to make £22K this tax year (instead of the £8k I will be turning over) which means I will have to pay a lot of money in Jan (which we won’t have). My accountant says I should be careful as any shortfall I will have to pay interest on, but the jump from £22k to £8k is enormous.
I hope this makes sense, thank you for reading.
Keggsy

steve1980

You've lost me a little.

You pay your tax over the year in two instalments so you want to know if you can reduce the payment in January because you won't earn as much next year?

Is that right? Surely the best thing to do is to ask your accountant? That is what you're paying him/her for.

martindow

I would speak to HMRC who can be very helpful. Btw, you will not be asked to pay 22k! That was your turnover not your tax bill.

Regshoe

Ok if I understand it the situation is as follows:

You've paid £2600 towards your 2010-11 tax liability, half in January and half in July. By my (back of a fag packet) calculations that should be about your full liability for 2010-11 (£22k-£6k = £16k profit, around £2.6k in tax and class 4 NI).

You would normally make a payment on account of £1300 next January 2012 and £1300 in July based on HMRCs assumption that you would be earning at least the same again next year (for the benefit of Steve1980 - the payment in January will be for this years tax liability (2011/12) for which a self assesment and any balancing charge would be due in January 2013)

As you say you won't be then earning nearly as much next year, so want to know if you can avoid paying the payments on account, or reduce them. Answer yes you can!

Quick google appears to have found the right form - SA303
http://www.hmrc.gov.uk/sa/forms/sa303.pdf

You can revise your payments on account to be based on your anticipated profits.

As your accountant points out you will be liable to interest if you end up making more profit than anticipated. Though the interest charge on even the full £2600 wouldn't amount to all that much. So it seems reasonable for you to reduce your payments on account. If you are only going to make £8k then if your expenses are proportionately the same you wouldn't even be liable to Income tax or Class 4 NI.

I'm assuming by the way that you draw up accounts to 31st March otherwise your total income assessed in each year may not match the estimates you have prepared.

Hope that helps