Self assessment tax

[Felstmiester]

Been self employed all my working life. Last few years I’ve had to pay a payment in jan for obviously the last years tax but I now have to pay a payment in advance for next year at end of July. None of the other self employed fellas I work around have herd of this. Why is this?

 

[Benzowner]

Was self employed my self and had the same. I was told that the advance payment was based on previous years and would be reconciled when you put in your next return More ways to get extra money out of the self employed. Never heard of PAYE paying in advance.

 

[Peter103]

I seem to remember in the building industry we were always a year behind when paying our tax twice a year, Jan. and July, then about twenty years ago they decided we should all catch up, and what you describe happened for us, but as benzowner says you will catch it up, it's just a pain to start.

 

[Felstmiester]

I pay the inland revenue direct so I know it’s all above board and it’s not just my accountant taking the money. They explained to me like benzowner said. The payment in July goes towards your next years payment and if say that year is a catastrophic year and hardly any money is earned you get it back. I’m just wondering why I seem to be the only one on building sites that has to pay the July payment.

 

[Dryce]

Was self employed my self and had the same. I was told that the advance payment was based on previous years and would be reconciled when you put in your next return More ways to get extra money out of the self employed. Never heard of PAYE paying in advance.

PAYE - you don't get their money immediately - they normally get their money 3 to 4 weeks from your employer after you didn't get it - along with over 13% employers' NI.

 

[markjay]

If you don't think you will earn this year as much as you earned last year, then you can ask HMRC to reduce the on-account payment amount to a level that is in line with your ecpected earnings for this tax year.

 

[E53AMG]

PAYE - you don't get their money immediately - they normally get their money 3 to 4 weeks from your employer after you didn't get it - along with over 13% employers' NI.

A lot of self employed set up Ltd companies and pay themselves a salary under PAYE topped up by dividends as it's tax efficient. At the correct level they can reclaim the employers NI in rebate and can top up in good years by paying into a pension.

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[Monkeylegend]

I was self employed for 20 years up to 3 years ago when I retired and it was always like that for me so not sure it's anything new.

 

[Felstmiester]

I was self employed for 20 years up to 3 years ago when I retired and it was always like that for me so not sure it's anything new.

Would it make a difference on how accountants deal with it as i was with the same accountant for over 20 years until he passed away and this started when I went with the new firm he passed all his clients to.

 

[Piff]

Set up a Ltd Co.
Pay yourself a wage just below tax & NI thresholds. Take the rest in "dividends"
Accountant squares the calculations at the end of your financial year & tax due is paid the following January

edit
Don't know your age or number of years of qualifying NI payments. You would need to make sure you have sufficient years for full state pension.

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You currently need 35 years NI for full state pension

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You don't even need to do PAYE. My accountant just does a single pay slip in April & a P60 (I think thats the right P number).

 

[Handydave]

The tax you pay in January 2018 is for the previous financial year 2016-17. The tax you pay in July 2018 is a payment on account for the tax year to April 2018.

 

[andybond]

Set up a Ltd Co.
Pay yourself a wage just below tax & NI thresholds. Take the rest in "dividends"
Accountant squares the calculations at the end of your financial year & tax due is paid the following January

edit
Don't know your age or number of years of qualifying NI payments. You would need to make sure you have sufficient years for full state pension.

edit
You currently need 35 years NI for full state pension

edit
You don't even need to do PAYE. My accountant just does a single pay slip in April & a P60 (I think thats the right P number).

You have to be so careful doing this HMRC are starting to look into disproportionate basic + dividends

 

[E53AMG]

You have to be so careful doing this HMRC are starting to look into disproportionate basic + dividends

They can look all they want, only Parliament can change the rules as they have been doing by reducing the tax free amounts and increasing the Dividend tax bands. Don't forget Dividend or not Corporation Tax is still payable.

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[kianok]

If you don't think you will earn this year as much as you earned last year, then you can ask HMRC to reduce the on-account payment amount to a level that is in line with your ecpected earnings for this tax year.

Worth remembering that if you do end up earning the same or more you will be charged interest on the on account amount if you asked to reduce it.

Funny how HMRC don’t pay interest on money you pay on account which isn’t technically due!

 

[aquanaut]

Been self employed for 20 years and always had to pay twice a year...

 

[Major774]

I thought July’s payment is the remaining balance for the previous tax year and not an advance payment?

Any accountant here to clarify

 

[Petrol Pete]

Been self employed for 20 years and always had to pay twice a year...

Ive been self employed for 12 years and this is the first year it has happened to me ?? HMRC is a bloody mystery to me.

 

[Monkeylegend]

Would it make a difference on how accountants deal with it as i was with the same accountant for over 20 years until he passed away and this started when I went with the new firm he passed all his clients to.

Presumably your ex accountant submitted your returns online?

 

[Deleted member 6183]

I have a payment to make today which will cover off most of H2 2018 tax.

I am unsure what will happen in January next, will I only have H1 2019 to pay?

 

[markjay]

BTW, for any late payers out there, HMRC interest rates are quite reasonable, actually... cheaper than a bank loan anyway. And if you overpaid, they also give you higher interest rates than most banks would......:

Interest rates for late and early payments