Self Asessment - tax for next year

shebbar

Hi,

I am trying to do self assessment. The tax I need to pay for FY2015-16 looks correct. But I have been added another line in the calculation for 2016-17 saying I need to pay by July 31st 2017.

The amount for 2016-17 is half the pending tax amount for 2015-16. Any reason why I need to pay 2016-17 tax as part of 2015-16 tax return?
[Changed the numbers below; but illustration shows tax for last FY and half amount already for next FY]

Estimated payment due by 31 January 2017
You must pay the total of any tax and class 4 NIC due for 2015-16 plus first payment on account due for 2016-17 by 31 January 2017.
2015-16 balancing payment £10,000.00
1st payment on account for 2016-17 due 31 January 2017
(Note: 2nd payment of £5,000.00 due 31 July 2017) £5,000.00
Total due by 31 January 2017 £15,000.00
This amount does not take into account any 2015-16 payments on account you may have already made

Dazed_and_confused

To start with it isn't tax for "next year", we are already well into the 2016:17 tax year and by January 2018 it will be nearly finished.

The payments you are questioning are called payments on account and if your circumstances warrant it (often but not exclusively the self employed) you need to make payments on account of your tax liability.

I'm guessing you either haven't been in self assessment before or your ta situation never met the position where payments on account were required.

In your example you have 2 payments to make but they consist of 3 elements

31:01:2017 balancing payment for 15:16 = £10000
31:01:3017 1st payment on account for 16:17 = £5000
31:07:2017 2nd payment on account for 16:17 = £5000

Now think ahead to a year from now, you are completing your 2016:17 self assessment return and the amount due on that return is £12000 (remembering payments on account have NOTHING whatsoever to do with the amount due on your self assessment return).

When it comes to January 2018 you will only have £2000 to pay for 2016:17 as you have already paid £10000 (£5000 in Jan 2017 and £5000 in July 2017).

In January 2018 you will also have a payment on account for 2017:18 of £6000 to pay.

If, by January 2017 you believe your tax bill for 2016:17 will be less than £10000 then you can make a claim to reduce the payments on account for 2016:17. For example if you think your bill for 2016:17 is going to be £7500 then you could reduce your payments on account from £5000 to £3750.

shebbar

thank you. So, I am kind of making advance payment for 2016-17 tax year with the assumption that I will have lot to pay next year as well. In My case, I wont have any; just had only in 2015-16 where I had some unpaid tax. I guess I still have to pay the 2016-17 advance amount and claim it back when I file next year.

booksurr

have you not heard of the Payment on Account rules?
https://www.gov.uk/understand-self-assessment-bill/payments-on-account

it is the means by which those who do not pay tax via PAYE are made to pay some tax for the year in which they earned the income. Even then it is still vastly preferential to being on PAYE as it means you still get to pay much of your tax well after you received your income

Dazed_and_confused

No, you wouldn't be making any "advance" payment as the 2016:17 tax year will almost be over by January 2017

I have amended my original post to explain more about your options if you expect your tax due for 2016:17 to be lower than 2015:16.