Can anyone help with really basic tax calculation?

Seaxwyn

HI there,

I'm self-employed and for the tax year ending next month, my profit will be approx £27,000. I have already paid £1600 on account for this year.

Can anyone tell me how much (approximately) I will need to pay out in July 08 and January 09, including income tax, class whatever National Insurance, and payments on account for next year?

Thank you!

System

£27,000 - £5225 tax free = £21775 taxable income

First £2230 taxable at 10% = £223

£21775 - £2230 = £19545 taxable at 22% = £4299

Total tax liability = £223 + £4299 = £4522

Balance due = £4522 - £1600 already paid = £2922


Class 4 NI contributions at 8% on £21775 = £1742


Tax and NI contributions balance due by 31/01/09 = £2922 + £1742 = £4664

If you completed an 06/07 tax return you should already have been told what your payments on account due 31/01/08 and 31/07/08 are.

Seaxwyn

Thanks Pam! I'm really grateful for that.

I can't find anything in my Inland Revenue papers about payments on account due this year, however. Do you usually pay half the projected amount for the following year?

System

Generally HMRC look at the tax due on the last completed tax return before any payments on account are included.

So say your tax calculation for 06/07 was £3000 then you would have had to pay all that £3000 by 31/01/2008. They would then assume that your liablity for 07/08 would be something similar and ask you to pay

31/01/08 £3000 + 1st POA for 07/08 of £1500 = £4500

31/07/08 2nd POA of £1500

This means that by the time your 07/08 liability is due on 31/01/09 you would already have paid 2 POA of £1500 = £3000

If your 07/08 liability is then calculated to be say £3400 then you would pay

31/01/09 £400 (£3400- £3000) + 1st POA for 08/09 of £1700 = £2100

31/07/09 2nd POA £1700

Seaxwyn

Thanks Pam, I really appreciate your explaining that.

I've looked through my files and I received a statement in Oct 2006 explaining the payments due in 07, but I didn't receive any such statement in Oct 2007. I will ring them tomorrow and ask if I should have.

Thanks again