best place to put tax money

Polk

Hello everyone,

towards the end of November last year I decided to quit my full time job and go self employed for lots of reasons.
Have to say I'm not regretting it.

Still, I've been to see an accountant with a view to being a good boy and paying my tax on time. My accountant suggests that I set up a second account and put at least 20% of my income away so that I don't ever struggle to pay the tax bill (and don't get fines either)

but then I did something dangerous and started thinking......

until he reaches out his vulture like claws and takes a firm grip, the taxman doesn't really care where I put the money as long as I pay his bill at the end of the year.
So why not earn something out of it through high interest savings?

so I thought I'd ask about and see if anyone had any suggestions .do 90 day high interest accounts still exist? I'll have at least that much notice from the taxman since my accountant intends to file in July.

and yes I am very new at this.

ChopperST

Might be reading the context of your post in the wrong light having come back from the hospital where my wife is seriously ill 17 weeks pregnant being cared for by skilled professionals provided by a health care system which is free at the point of care for everyone no matter their social standing or wealth so excuse me if my reply comes across in the wrong manor.

Today she has easily had over £2000 worth of treatment and investigations based on what the private sector would charge. Cost to us at our local NHS hospital £0.

It is your moral obligation to pay your tax on time and in full, it pays for services such as the NHS, the police, the armed forces and all those things we take for granted. 20% of your wage to live in a democratic nation that affords you security and freedom of expression and will look after you if you are ill for free? It's a bargain.

I am fortunate enough to have been afforded an education (all state funded) that allowed me to achieve my potential in life and personally I have to pay 40% tax and I pay my SA in full and on time in January.

In answer to your question the best place to leave the money is the high paying current accounts out there at present TSB, Nationwide et al. Where you will earn 5% while you wait to pay your tax bill in January next, also budget for potential advance payments for the subsequent years and a balancing payment in July.

Please don't take my post as being preachy as I'm not that kind of guy but stop and think what your tax really pays for...

Spidernick

ChopperST wrote: »

Might be reading the context of your post in the wrong light....

It would seem so. From my reading of it at least, the OP just wants a separate account for his tax bill that will earn a bit of interest until it is due. I cannot read anything that would suggest he is trying anything on. I think perhaps your wife's situation (and I hope that works out by the way) has stressed you out more than you think.

To the OP I would say watch out for the 'double whammy' come 31 January 2016, as you will most likely have to pay your 14/15 liability in full then, as well as half again as a 'payment on account for 15/16 at the same time.

redux

I agree with the above post - this is someone asking about savings accounts, not trying to decry or evade paying tax.

Look up regular savings accounts.

Some banks have high rates on certain balances and with regular monthly income, which some people work around by sending money back and forth, and there are also some building society regular savers, some allowing one or two withdrawals per year. You may need a number of accounts as they have limits per month, depending on how much you need to set aside.

NoMore

@ChoppersST The op is not trying to avoid paying tax, if anything his accountant has given him sensible advice so that he doesn't get caught out by his tax bill at the end of the year.

I'm guessing you have never been self employed and always paid your income tax via PAYE, so its automatic to you and you don't have to think about it.

Self employed means, due to possible varying income, you will need to declare your earnings at the end of the financial year in order for the amount of tax due to be calculated. So the OP is saving 20% of his income to cover this tax bill so just wanted advice on where he could save this money to make a little bit of interest (which he will also be taxed on) before he pays the taxman.

Gadfium

ChopperST wrote: »

Might be reading the context of your post in the wrong light

As per the other responses, IMHO you are reading it in the wrong light.

I hope that your wife improves soon....it must be a worrying time for you both.

@the OP: I personally would consider multiple accounts. One for tax, one for VAT, one for the main business finances and set one up for corporation tax (assuming that you are a Ltd company?). The corp. tax wont happen until year two (at earliest) but it helps to have separate accounts for each.

Due to the low interest rates you won't get that much in the way of payments over a year, but hey-ho...every little helps.

gkerr4

i just have an everyday savings account called "taxman account" on my online banking - it doesn't pay much interest - remember the interest earned itself is also taxable!

There's no such thing as "high interest savings accounts" any more - over any time scale, let alone to service the annual tax regime - so its not worth much thought really, unless you are going to be putting 100's of thousands in it.

Polk

hi Everyone,

Thanks for the advice. And yes - this is so I DON'T get in trouble with the taxman. If I wanted to evade tax I certainly wouldn't be posting on a public forum asking how best to evade it!

However, considering the stress of the gentleman's situation, I couldn't possibly take offence. I hope the situation resolves itself soon.

so I shall just go and find the account with the best interest rate.

thanks for your advice

NoMore

Here you go:

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts#credit

gkerr4

personally i don't think you want to even be messing about with the highest paying account - which is a current account - a "working account" - you have to pay in and you have to have direct debits,

you just want a 'pot' where you put the money - in my case, when it goes in there it even goes "off book" - i.e. it doesn't feature in my financial spreadsheets which i keep track of everything with - its not there, it isn't missed or counted - its like it has gone already and so when the taxbill comes in january, it isn't a shock to the system at all - i simply logon to the SA system and pay what i owe.

You don't want to be thinking too much about this IMO - its the 'darker' side of personal finance and it just has to serve a function - which is to make sure you can pay your tax each year!

DiggerUK

No brainer, Premium Bonds, and who knows......
..._