Payment on account (tax)
 

Dear All

Ok I know I should speak to an accountant (and I will) but this is doing my head in. Will some self-employed person please put my mind at rest please !!!

Firstly some info ...

1) I have a full time job on PAYE
2) I also am self employed
3) I started the self employed work for the first time on the 6 April 2002
4) I started self assessment and sent my form in on the 31 January 2004 for the period April 2002 to 31 March 2003. This was the first self assessment I had to do....

Right, I paid the tax I owed for the 2002-2003 period. (lets say it was £3000)

I did NOT need to pay on account (i.e. make balance payment in January) and I did NOT need to make a second payment this July ...because the tax from my self-employed work was less than 20% of the PAYE tax ?

with me so far? :naughty:

So far so good - I am happy .....

Now I have looked at my accounts for the period 2003 - 2004 (which will end 31 March 2004).

It looks like that when I come to do my self assessment in January 2005 I will owe self -employed tax which will be more than 20% of the total tax I owe (i.e. from PAYE tax).

Therefore I will need to pay on account .......

Now this is the bit I Do not get - but I'm sure I am missing the point !!!!!

Suppose my Self Employed tax was £3000 (for 31 January 2005). As I understand it I will have to :

a) Pay £3000 in January 2005 (for the tax for the last year)
b) Also £1500 on account
c) And then pay the other £1500 in July 2005

SO???? what the hell happens in January 2006. Cos If the same thing happens I seem to constantly be ahead of my self and paying twice the tax (from self assessment) that I owe ????? (e.g. £6000 and no £3000).

CAn someone enlighten me please !

thanks

MArk
:eek:

p.s. I think the problem is that at the moment I pay in arrears (by some margin) but next January I will suddenly be pushed into paying in advance. I think I tend to forget this fact. So I suppose one option is that I need to ensure that my accounts from April 2004 this year onwards already start to 'put away' tax as if I were paying via PAYE???

Re: Payment on account (tax)
 

I think the Inland Revenue like you to pay a year in advance based on the previous years earnings, so maybe thats why ?

I stand to be corrected

Re: Payment on account (tax)
 

That sounds really stupid!

Why the heck should you pay in advance for something that you have not got yet?
Surely it should be either paid at the time or after you have recieved it?

Re: Payment on account (tax)
 

glad i'm not the only one that does not get this ... I'm sure there IS an answer - staring me in the face - but I can not see it ...

thing is, as the moment I am at an advantage over PAYE - in that I will not pay tax on 2003-2004 until January 2005 - so I guess someone say thats also stupid ?

Re: Payment on account (tax)
 

Taken from the Inland Revenue website .