TAX - Self assessment query.
Discussion
Just had a letter from the IR after completing my self assessment. I'll give you the first few lines.
My question is, what does that last line mean exactly, is it some tax jargon? It can't mean what it says, surely.
Thanks tax boffins.
Tax Letter said:
Tax Calculation for 2003-04 (year ended 5 April 2004)
Thank you for you Tax Return.
I enclose my calculation based on the amounts shown in your Tax Return.
My calculation, based on your Tax Return, shows you are overpaid £***.**. If you have claimed a repayment, this will be repaid after any other amounts you owe us have been cleared.
I also calculate that you do not need to make any payments on account for 2004/2005.
My question is, what does that last line mean exactly, is it some tax jargon? It can't mean what it says, surely.
Thanks tax boffins.
TeamD said:
It means they don't consider you to be a self-employed type bod who needs to pay their tax in advance based upon previous years tax figures.
Even if you are self-employed if your tax due (before accounting for payments on account) is less than £500 then you don't need to make payments on account.
Also if your tax deducted at source is greater than 80% of the tax due for the year, you do not need to make payments on account.
TeamD said:
It means they don't consider you to be a self-employed type bod who needs to pay their tax in advance based upon previous years tax figures.
Pretty much as above. They make you pay some on account if they think you're going to owe them a big wad. It's their way of backtracking on.."Hey, we don't mind if your tax calculation shows that you owe us money, we'll get it off you next January if you like, we're generous types."
groucho said:
Just had a letter from the IR after completing my self assessment. I'll give you the first few lines.
Tax Letter said:
Tax Calculation for 2003-04 (year ended 5 April 2004)
Thank you for you Tax Return.
I enclose my calculation based on the amounts shown in your Tax Return.
My calculation, based on your Tax Return, shows you are overpaid £***.**. If you have claimed a repayment, this will be repaid after any other amounts you owe us have been cleared.
I also calculate that you do not need to make any payments on account for 2004/2005.
My question is, what does that last line mean exactly, is it some tax jargon? It can't mean what it says, surely.
Thanks tax boffins.
I know exactly what that means. In essence, your Director’s loan account secured by previous Dividend will not need an immediate payment, but could be paid by a third party, providing your PAYE is up to date on your previous Tax Return. The overpayment on the previous year-end returns will now be due providing your NI payments are not in excess of the minimum percentages.
I’ll tell you what – to make it easy for you I’ll get the whole thing settled. Send me a cheque to the value of your overpayment and I’ll settle it with the Revenue on your behalf.
groucho said:
I think I get it. Do people pay their taxes for the year in advance then(other than PAYE)? Tax, not my strong subject. Maths, Java programming, not too bad, but Tax? Leave it to the accountant, that's what I say.
Steve,
I think that if you underpay your tax during one tax year, then the Revenue asks you to stump up extra amounts "on account" in the next tax year.
Or something like that
As you say, Leave it to the accountant.
Charles
cwk said:
Steve,
I think that if you underpay your tax during one tax year, then the Revenue asks you to stump up extra amounts "on account" in the next tax year.
Or something like that
As you say, Leave it to the accountant.
Charles
I get that. A Eureka moment, you might say.
Cheers all for your ongoing help.
Either:
1) Your profits have dropped from the last time
2) Your accountant was overly cautious last time (which is why you sacked him)
3) You've forgotten to declare something (which is why you may need to re-hire him)
Anyway, no big deal really; whatever's going on it'll get shaken out next time
1) Your profits have dropped from the last time
2) Your accountant was overly cautious last time (which is why you sacked him)
3) You've forgotten to declare something (which is why you may need to re-hire him)
Anyway, no big deal really; whatever's going on it'll get shaken out next time
OK - here goes.
If you had a Self Assessment tax liability for 2003/04, it was due and payable on 31 January 2005.
If the 2003/04 Self Assessment tax liability was greater than £500, you would also have had to make two Payments on Account for 2004/05. The combined total of the two Payments on Account for 2003/04 are set at the same amount as the 2003/04 liability.
The first Payment on Account would have been due on 31 January 2005 and the second Payment on Account on 31 July 2005.
As I said above, no Payments on Account are due if the overall Self Assessment tax liability was £500 or less. Also, if over 80% of your total tax bills for 2003/04 were already covered by tax deducted at source e.g. PAYE, tax on bank interest received etc, then no Payments on Account are due either.
Payments on Account are a fundamental part of the Self Assessment system. They are not exclusive to "Self Employed" individuals at all. Lots of people have to pay them even though they do not run their own business. Examples of "non-trading" situations where Payments on Account might arise would be people with reasonable levels of Rental Income, or people who receive interest or dividends without deduction of tax at source.
If you already know that your Self Assessment tax liability for 2004/05 is going to be less than the 2003/04 liability, you can apply to have the 2004/05 Payments on Account reduced to more realistic levels - even Zero if appropriate.
However, if you reduce them by too much, when your true 2004/05 liability is calculated, the Inland Revenue will check against the Payments on Account you did make and charge interest if these Payments on Account were too low.
See, it's all very simple really
If you had a Self Assessment tax liability for 2003/04, it was due and payable on 31 January 2005.
If the 2003/04 Self Assessment tax liability was greater than £500, you would also have had to make two Payments on Account for 2004/05. The combined total of the two Payments on Account for 2003/04 are set at the same amount as the 2003/04 liability.
The first Payment on Account would have been due on 31 January 2005 and the second Payment on Account on 31 July 2005.
As I said above, no Payments on Account are due if the overall Self Assessment tax liability was £500 or less. Also, if over 80% of your total tax bills for 2003/04 were already covered by tax deducted at source e.g. PAYE, tax on bank interest received etc, then no Payments on Account are due either.
Payments on Account are a fundamental part of the Self Assessment system. They are not exclusive to "Self Employed" individuals at all. Lots of people have to pay them even though they do not run their own business. Examples of "non-trading" situations where Payments on Account might arise would be people with reasonable levels of Rental Income, or people who receive interest or dividends without deduction of tax at source.
If you already know that your Self Assessment tax liability for 2004/05 is going to be less than the 2003/04 liability, you can apply to have the 2004/05 Payments on Account reduced to more realistic levels - even Zero if appropriate.
However, if you reduce them by too much, when your true 2004/05 liability is calculated, the Inland Revenue will check against the Payments on Account you did make and charge interest if these Payments on Account were too low.
See, it's all very simple really
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