Tax return 'Payment on account'

Easypd

I have started my tax return for the first time ever :think: I need to add in some benefits when i get my P11D, but the summary is as follows below. I have removed the actual figures. I get that i need to pay £A, But what is payments £B and £C and why is £C due July 2014?

It looks like they are asking me to pay toward what they think my tax will be next year in advance? If so, does that mean my actual liability this year is £A and in paying £B and £C, my bill on my next return will already be mostly paid?

I thought i had been clever this year by putting the tax back into an isa to earn a bit of money for christmas. Next year i will be paying in advance and losing out on that. Can i opt out of payment on account and keep the interest for myself?


Or have i completely misunderstood?? Any advice appreciated

Apologies the formatting below goes a bit odd, hop you can make it out....
Jamie

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Summary


This section provides you with the result of your calculation. Please check the figures and amounts due carefully.
Please note: Unless you are viewing a previously submitted return you must click the 'Next' button at the bottom of this page to save then submit your return.
Total tax, Class 4 NIC and Student loan due for 2012-13 £A

Plus

First payment on account for 2013-14

£B

Payment due by 31 January 2014

£A+B

This amount does not take into account any 2012-13 payments on account you may have already made Second payment on account for 2013-14 will be due by 31 July 2014

£C

newbie1980

they always ask for money upfront so u dont have to make such a large payment when next yrs accounts are in
someone will explain it better but thats how it works

Easypd

Thanks for that. I stand to get a nice bit of christmas money from my isa this year for all the tax money i put back. next year the tax man will get it :mad:

00ec25

if you are an employee you have no option but to pay tax as you earn your income, aka ... PAYE

but
if you are self employed the taxman has no idea what he is due until you do your first tax return. However, once he has that the taxman then wants to make sure he does not have to wait as long again for any more from you, so he asks for payment B on account as 50% of what you paid last time (ie 50% of payment A). payment b therefore covers approx half what you would have owed by the end of the next year. Clearly however your exact earnings in the next year may not be the same as the last time so payment C is a balancing amount ie what is actually due at the end of year 2 minus B, the amount paid on account

this system means a non PAYE person still gets to keep at least half their tax for half a year before they have to pay it. A PAYE person does not have that luxury...

tiger_eyes

Yep, basically they assume that you'll make roughly the same amount of money this tax year as you did last tax year, thus you'll owe roughly the same amount of tax, and they want payment in various stages. You settle up when you fill out your next tax return.

Easypd

Thanks all. That makes sense.
Jamie