HMRC ON Acount?

digi_d

Have a part time job (£12k a year PAYE) and also run a small business with 8 grand turnover 2011-2012 . Sent off SA form and was told I owe £1856 tax. I have a bookkeeper £400 a year doing books, but no accountant. Would it be cheaper to have accountant do books and EOY? Tax man said he will take my due tax in two hits the first at end of Jan 13. Beginning of Dec I get a statement and they have asked for it all in one lump (£1856 tax) and also a 1st payment on account of £900 for 2013. (£2785 in total) I tried to phone them but after 28 mins of digi music gave up and sent a letter asking why has it all changed and whats the on account bit? I have the money to pay it but a bit put out. They say if I dont pay by end of Jan i get fined so if they drag out answring the leter will this still apply? Thanks in advance

tyllwyd

It looks as if that might be right. Did you start your business in the 2011/12 tax year? Then you have filled in a tax return for that year, and the total payment for that first year is due to be paid by the end of January 2013 (which would be the £1856). Your tax bill for this tax year (2012/13) is paid in two payments on account, which are both half of the previous year's payment. The first payment on account is also due to be paid by the end of January 2013, so that is an additional £928. A second payment of £928 will be due by the end of July 2013. That means you will have paid £1856 towards your 2012/13 tax bill - when you fill in your tax return for that year, this will either be more or less than you owe in total, so you will either be due a refund, or you will have to make an additional balancing payment in January 2014, along with your first payment on account for the 2013/14 tax bill.

Does that fit with what has happened? Your bookkeeper should be able to explain it to you in detail. (PS I have no accounting experience or qualifications, only experience of being self-employed, so please don't rely on anything I say!)

Swirlygig

I am a Chartered Tax Advisor and what Tyllwyd said is roughly correct regarding the payments. I would add you can reduce the 2012/13 payment on account if you expect your profits to me less than the previous year.
I would also be wary of asking your bookkeeper to explain anything tax related in detail. Bookkeepers vary tremendously in their knowledge and experience.
Getting an accountant to do your bookkeeping and accounts/tax could be expensive, but you may not actually need the bookkeeper if you did get an accountant to do the tax return. If you have sufficient knowledge of excel you could keep your own tally of income and expenditure, just sort it into headings and post accordingly. Or get yourself an accounts book from W H Smiths. I would recommend you get someone to help with the tax return tho. Go off a personal recommendation if you can, as bookkeepers are not the only ones who vary.
They won't fine you if you don't pay by the end of January, but they will charge interest, and the 2011/12 portion is subject to a 5% penalty if unpaid by the end of February. This is irrespective of whether they answer your letter or not. Anyone who genuinely cannot pay the amount due can ask for time to pay, but be prepared to answer a lot of questions about your finances.

System

Here's some background information on 'Payments on Account' from HMRC's website. Hope it helps.

http://www.hmrc.gov.uk/sa/understand-statement.htm#5

Even though its paid on account - its arguable either way if the payment is 'in advance'. The first payment is due nearly 10 months into the tax year and is half of the expected bill. The balance is paid nearly 4 months after the end of the year and is the other half of the expected bill. So, in total its paid over about 16 months (from the start of the tax year).

In comparison (assuming the income is spread evenly throughout the year) if it had been PAYE income you would have paid the first half of the expected bill by month 6 with the second half by the end of month 12.

Its been a while since I last saw a paper SA calculation, but I'm pretty sure the old covering letter used to explain the Payments on Account due 31 Jan. Does anyone know if this has changed?

chrismac1

The first thing to strike me here is the 1,856 tax due. Either the PAYE people have messed up, or - much more likely - the self-assessment form has been completed incorrectly.

1,856 implies PROFITS of 9,280 which is higher than the sales figure you've quoted. So unless you had a taxable grant this seems very unlikely, especially as you must have some business expenses to claim. Even an internet business has some purchases, use of own home, possibly insurance, mileage normally.

As per earlier posters, the 1,856 gives rise to a payment due of 150% of that unless you put a lower forecast in for 2012-13. As we are 75% of the way through the tax year this is only 3 months of forecast and 9 of actuals, so for all SA clients I am currently entering forecasts which will turn out to be easily within £500 of the final tax due.

I sub-contract much of my book-keeping (I am an accountant) to an excellent local book-keeper with a high level of knowledge and accuracy. By the same token, some clients have come to me from really dreadful book-keepers and have ended up paying extra with me to sort out the mess created by the book-keeper.

If you want to PM me I will happily check that the tax return has not got any howlers in it for no charge. My feeling is something is going to be jumping up and down saying "wrong box" or "wrong number".

System

I suspect OP meant profit rather than turnover and there's probably an element of rounding in the figures quoted.

You'd also have to take into account that the £1856 will also include class 4 NIC.

suso

ceiberman wrote: »

I suspect OP meant profit rather than turnover and there's probably an element of rounding in the figures quoted.

You'd also have to take into account that the £1856 will also include class 4 NIC.

and potentially student loan repayments as well as now the combined income will be over 15,000

digi_d

Thank U to all who have taken the time to respond Much appreciated.