How do I calculate my tax reduction?

FeistyFidget

As a self employed sole trader I have to pay my first installment for the financial year 2015-16 by the 31/01/2016.

This has been estimated by HMRC taking my annual earnings 2014/15 into account and just dividing last years tax bill in half. My circumstances have however greatly changed and I have just started maternity leave, which along with a downturn in trading over the last few months will effect my net earnings.

I have predicted my net takings for 15/16 to be approximately £7k less than 14/15 which should mean that my tax payable is reduced. However, when I phoned HM customs this morning to ask how this could be calculated I was told that the only option was to use the 'reduce payment on accounts' option on my tax dashboard. This is fine in theory, but I was told that they cannot advise me of how much tax would be payable on my estimate and that I would just have to work it out. I was warned that if I claim too much of a deduction I would be liable to interest payments on the discrepancy :eek:

Can anyone help? I pay my NIC separately every 6 months and just need to know how much tax would be payable on my estimate so I can reduce the amount they are requesting.

My estimated net is [FONT=Times New Roman, serif]£20459[/FONT]


[FONT=Times New Roman, serif]Or can someone point me in the direction of an accurate calculator to figure it out. HM Revenue and customs solution was to just employ an accountant, but I'm the only earner in our house and I can't justify the expense when this has been the first year we have had a problem doing the accounts ourselves.[/FONT]


[FONT=Times New Roman, serif]Thanking you in advance![/FONT]

Darksparkle

https://www.gov.uk/income-tax-rates/current-rates-and-allowances

Generally, it's profits less personal allowance x appropriate tax rate.

If £20,459 is your total taxable income for 2015/16 and your entitled to the standard personal allowance:

£20,459 - £10,600 = £9,859

£9,859 x 20% = £1971.80

FeistyFidget

Darksparkle wrote: »

https://www.gov.uk/income-tax-rates/current-rates-and-allowances

Generally, it's profits less personal allowance x appropriate tax rate.

If £20,459 is your total taxable income for 2015/16 and your entitled to the standard personal allowance:

£20,459 - £10,600 = £9,859

£9,859 x 20% = £1971.80

Thank you so much! I had a feeling it was something like that, but wasn't sure

Dazed_and_confused

You may want.to give this some more thought as Darksparkle's post only mentions the tax and Self Assessment amounts are made up of tax, class4 national insurance, student loan, high income child benefit charge and, for 2015/16 which is the year you need to calculate figures for, class 2 national insurance.

Darksparkle

Dazed_and_confused wrote: »

You may want.to give this some more thought as Darksparkle's post only mentions the tax and Self Assessment amounts are made up of tax, class4 national insurance, student loan, high income child benefit charge and, for 2015/16 which is the year you need to calculate figures for, class 2 national insurance.

I only mentioned tax as this is all that was requested.

Student loans are not included on payments on account. Child benefit wouldn't apply to income of £20K

FeistyFidget

Thanks lovelies, I did realize after my post that NI would also be needed, I managed to find a concise calculator online that advised combined tax and NI would be £3087.71 so have based my calculations on that.

As far as I am aware child benefit isn't taxed on household earnings below 50k.

I am fully aware that as these calculations are based on predictions for business takings January to April (a family member is running my businesses free of charge) they will not be 100% accurate, but I am fairly confident they will be close. I have obviously taken maternity allowance into account with these predictions

sheramber

If you submit your 2015/16 as soon a possible after 6 April you will get an accurate figure for your payments on account.
If you have reduced your bill too much you will have interest charges on the missing amount from 1 February to the date you pay it. Your July payment will be correct and if paid on time there will be no interest due.

If you have not reduced the payments enough then the overpayment from January will be set off against the reduced payment due in July.

The later you submit your return the higher the potential interest charges will be.