Tax and confused about it all?

larmy16

Hi

For the year 2006-2007 I filed my tax return and on having a net income of £11,816.03 I had to pay at the beginning of this year £1481.00.

On my tax return printed off the internet it says at no.18.7 that my first payment on account for 2007-2008 is £740.50. I seem to remember I have to pay this in August of this year. They did send me a bill for the £1481.00 so will they send me a bill for the £740.50 too.

Sorry to be so dense I just never really have the time to go to visit the tax office to find out what its about.

Can anyone explain what this is for? Is it paying half towards the following tax year? I have not filed my 2007-2008 as yet - I keep putting it off!

I do pay the class 2 contributions separately every month. Do you think this £740 is the class 4 contributions??

Any help really appreciated.

PasturesNew

Once your income from self-employed is greater than a certain percentage of all your income, you start paying your tax differently.

Instead of working April 2007 to April 2008 then filling in a form in January 2009 and sending them the cheque, they're asking for:

Working April 2007 to April 2008, guessing you will earn the same as the previous year, they now want you to pay two sums (mine were Jan 08 and Jul 08) towards what they're guessing your tax bill will be.

They only start doing this to you once your self-employed earnings are quite a bit of your overall income (I think it might be 30%)

saturdays_child

Your 2007/08 payments on account are each based on one half of the previous years liability ie your 2006/07 liability was £1481 so you will need to pay £740 in January 2008 and the same again by 31/7/08. These are provisional payments - your exact liability will be determined by your 2008 tax return which needs submitting by 31/1/09.

The payments on account cover both tax & Class 4 NIC which is due.

Any clearer?

tyllwyd

The HMRC will send you a bill for July's payment.

When you fill in your next tax return, they will calculate the exact amount of tax due. You will have already paid £740+£740 towards it, so if it is more they will ask you to pay the extra when you pay your bill in January 09, or if you have paid too much they will take it off the bill.

(If you think you earned less last year than the year before, it would be worth doing your tax return before July because I think they would adjust your payment on account to the right amount, although I'm not certain.)