Self-assessment confusion

[Deleted User]

I don’t think anyone is questioning your savings skills - just trying to help you to understand the rules which have not changed at all since April 1996. What you may have overlooked is the fact that, at commencement, you may not have paid any tax for some time. For example, had you started in April 2020, not one penny would be payable until January 2022 - a full 22 months later!

Still - hopefully you now understand the mechanism if not the reasoning.

sheramber

Saving form the current year to pay tax for last year only works if your income in the current year is equal or greater than the previous year.

What happens when you have an income of £20,000 for year 1. But only £10000 for year 2?  

Many have been caught out by  that when paying last year's tax out of this year's income.

unholyangel

kazzamunga said:

Thanks, that *is* what I've been trying to do. I do set aside a percentage as I earn it. But the pattern I'm in, as I keep saying, is to pay for the previous tax year. I mean, there's been no year where I've had last year's tax and this year's tax set aside at the same time, because I'm not that rich. So the money I have been setting aside from this year's tax has been going toward's last year's tax. That does make sense, right? I don't really see that the issue here is my skills in saving! It's the vague and spurious self-assessment rules! It won't be an issue after January, because I will now have to set aside another couple of thousand to bring myself up to date, after which the money I set aside will go towards this year's tax. As I say, I don't have an issue with saving, or how to save. I have an issue with the fact that I have not been ASKED to save in this way until now. Yes I've whacked what I was going to pay now in my premium bonds - they're not having a penny of it until 3pm on 31st January.

I wasnt saying that the issue here is your savings skills. Rather that your current approach could potentially cause you major problems down the line (in other words my aim wasn't to criticise but hopefully help you get yourself in a better position). I've seen people have to take lump sums out of their pensions (thereby reducing the amount they'll receive in retirement), having to sell/remortgage property or personal belongings etc, having to continue working when they're really not able to.....all because they're doing it in arrears. 

kazzamunga

Ok thanks all - as I say, I'm quite amazed that I could have done this for so long, submitted multiple returns, spoken to HMRC multiple times without any complaints, etc. etc., without anyone saying any of this. But I'm fine with this mechanism, it suits my usual practices better. I like to save as I go along. Once i've found the extra money for January I guess it'll all go smoothly.