Self Assessment and Payment

[alisonpeters]

Hi, new here but hope someone can help me.

I am submitting my Self-assessment online for the first time (its actually my first self assessment ever) for 2008-2009.

I am self employed and pay my NIC monthly. I know there will be a income tax liability of around £2000. Do I pay this straightaway as soon as I have submitted my return?

I read the HMRC site but got a bit confused because they started saying I will also have to pay monies on account for the following year. Do i have to calculate this and add it to my payment? I would welcome any advice as I dont want to do anything wrong!!

Many thanks

[elainec100@cheapaccounting]

You need to pay the tax due for 2008 / 2009 by 31/01/10 plus your first payment on account.

For the second and subsequent years that you are self employed, you may be required to make a payment of Income Tax on account.
A payment on account is an estimate of what your tax bill will be at the end of your accounting year, based on your previous year's profits.
Payments on account are usually made in two instalments on 31 January and 31 July.
In practice this could mean that on 31 January in your second year of trading you will need to pay:


the tax due on your profit from your first year of trading plus
half of the estimated tax due on your profit for the second year of trading

So it will be really important to make sure that you know what your tax liability is as you incur it, so that you can set aside the appropriate amount from the profit you are making in your business.



When you submitted your ta return the calculation should show what is due by 31/01/10.


How to pay it can be found here:


http://www.hmrc.gov.uk/payinghmrc/selfassessment.htm

[alisonpeters]

Thank you Elaine.

So, for the period 2008-2009 which is due by 31/01/10, I assume the return will calculate my tax due for that period, do I then add 50% for my payment on account?

[elainec100@cheapaccounting]

The tax calculation should show this but yes it would be 50% of the total due for 2008 / 2009.

If the tax bill for 2008 / 2009 is less than £1000 HMRC will not ask for a POA.

Read this:

Payments on account

You'll usually have to make 'payments on account' of the current year's tax. You'll have to make two payments, one by 31 January in the current year and the other by the following 31 July. Each payment is half of the tax due for the previous year.
For example, for the tax year 2009-10 (6 April 2009 to 5 April 2010) the first payment on account will be due on 31 January 2010. The second payment on account will be due on 31 July 2010.
You'll have to make payments on account if your previous year's tax was over £500 for 2007-08 and earlier tax years or £1,000 for 2008-09 onwards - unless more than 80 per cent of the previous year's liability was covered by tax taken off at source.
For example, if your liability is under £1,000 in 2008-09 you will not have to make payments on account on 31 January and 31 July 2010 towards your 2009-10 liability, but will instead make a single payment on 31 January 2011.


From here:


http://www.hmrc.gov.uk/sa/understand-statement.htm